Taxpayers and employers deserve to know where tax spending and regulatory policy are going after this horrid financial fallout, and this renewed push for total transparency could be to the benefit of exchange traded funds (ETFs).
Challenges Ahead. President Barack Obama has a lot of re-working to do within his administration, and long-term goals and economic policy must be at the forefront of the agenda to get people to start spending again, so they stop putting off decisions and the economy can repair itself. As Michael Boskin for The Wall Street Journal explains, the changing explanations, ad hoc bailouts, massive special-interest spending, and references to the once-in-a-lifetime nature of this event convey a sense that policy makers do not have one.
How We Got Burned. The regulation that was absent within the markets has led many investors to get burned. Some of the behind-the-scenes footage included:
- Rapid growth of leverage
- Opaque and technically deficient derivatives
- Lax investor diligence and bank supervision
And the list goes on.
ETFs Are Transparent. This is a time where investors will grow to appreciate a transparent investment tool like ETFs. The actively managed mutual fund is going to have to do some work to gain back investor confidence. Most of all, the massive outflows that follow these funds are going to leave their mark at income tax time, when many will be hit with capital gains taxes. The ETF is a much more tax efficient vehicle as well.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.