Random Thoughts
February 22, 2018
By Exponential ETFs

“They” say cleanliness is next to godliness.  “They” are suckers.  Neat and orderly isn’t the way 2018 (or the world in general) has decided to roll, so in that spirit, I wanted to put out some random thoughts on the first 7 weeks of the year.  These are my own personal mental meanderings and opinions and do not necessarily reflect the thoughts of the rest of Team Exponential.  They are all welcome to be as wrong as they want.

Blockchain technology is a real thing.  It has broad utilization and applications across a host of different industries in helping streamline facilitating transactions. With that said, bitcoin is not the same thing as blockchain. Bitcoin is Alexa to blockchain’s Amazon. I’ve never thought to myself “you know what sucks? Cash.  Cash sucks.  I wish I had a weird cryptocurrency that no one really understands instead.” On a related note, if bitcoin’s strength is that it is “unplugged from the system”, isn’t creating an exchange-traded product plugging it back into the very system it is meant to evade? Blockchain in, bitcoin out.

We will never know why Belichick sat Butler.  That is the toll you pay for being a Pats fan.  It’s like being a Yankees fan and having to listen to Suzy Waldman and John Sterling.  The good parts are worth it.  In the absence of real information, my theory is that Belichick was done in by his pride (or, as George Costanza would say, “he flew too close to the sun on wings of pastrami”).  Bill made the bet that Brady would bail him out, and until 2:25 in the 4th quarter, he was right.  The Eagles beat the Patriots fair and square, but I will never get over the feeling they let one get away.

“Capitalism” and “Democracy” are complementary systems and, for the most part, they exist ideally together.  The reason for this is they provide perfect checks and balances because the goal of each are fundamentally opposed.  The goal of capitalism is to acquire all the capital and the power that comes with it.  Democracy, on the other hand, is designed to divide the power equally amongst all people.  Additionally, we practice neither pure “democracy” nor pure “capitalism” but rather evolving versions of both.  The reason this thought came to mind was Amazon.  Bezos is as close to “winning” the Game of Capitalism as anyone has been in quite awhile. It isn’t so much his wealth (Gates has been wealthy longer) but rather the breadth of control Amazon has in the market and its future potential to spread into even more areas. How is democracy going to deal with that?

I’m fairly confident that given 12-16 months to train I could be an Olympic bobsledder.  Not the guy in the front or back (I think they steer and brake) but one of the guys in the middle along for the ride.  I’m pretty sure the combination of running on ice and pushing a 200lb sled would offset my lack of speed. Plus, I have tons of experience sledding as a kid.  In fact, here is the exhaustive list of winter Olympic sports I could definitely compete in given the 12-16 month window; bobsled, curling, luge, short track speed skating (I might actually medal in this), skeleton.

I do NOT think ETFs are the cause of any market “event” (flash crash, volatility, etc) nor do I think they pose any “systematic risk” to the markets.  With that said, I do think the rise in indexing (in all its forms) combined with the increased role of technology in trading will lead to more periods of volatility.  This is exacerbated by the number of people who have access to the equity markets (via brokerage platforms).  This is not a bad thing, it is just a thing.  More people having access to the markets is good.  More people buying low cost, diversified products is good.  The business end may be more volatility.

Posted by: Kevin Quigg 02/22/2018

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