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Strategies & Market Trends : Value Investing
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To: Elroy who wrote (55982)8/29/2015 12:59:42 PM
From: Graham Osborn   of 78802
 
My read was that the liquidity of ETF was once again overestimated. In some cases circuit breakers were hit and the shares just weren't tradable. That created a chain reaction whereby the ETF MMs just assumed they weren't liquid and stopped buying or low balled their offers. So even though the NAVs were much higher the ETFs couldn't make redemptions on all the stop loss orders except at significant discounts. It was a bit like after hours trading, the bid/ asks on the table just weren't real.

It reminds me of Buffett's saying that Wall Street is a mechanism for transfer of wealth from the inpatient to the patient. Mechanisms (ETFs, stop loss orders, ETF derivatives) that were mass marketed for risk mitigation proved once again a wolf in sheep's clothing.
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