Gold ETF – Gold ETF Funds

The Kauffman Foundation has released a sixty page report detailing what they think are problems with the way ETFs work.  Among the claims the report makes include:

• The large number of ETFs trading today could be responsible for a “flash crash” type of event.
• ETFs discourage companies from filing IPOs (initial public offerings).
• The ETF industry requires more SEC oversight to limit systemic risk.

The Kauffman Foundation report goes so far as to compare the ETF universe with the mortgage crisis. However, the ETFs that concern the creators of the report the most are those with high short interest. The concern arises over what would happen in a short squeeze and the Kauffman report lays out a scenario where ETFs would collapse.

Of course not everyone agrees with this report and David Nadig of IndexUniverse goes so far as to say the report is full of holes and the authors of the report simply don’t understand how ETFs work.

I’m sure there will be more debate and headlines about the Kauffman report in the future.