Replies to post #256173 on Amarin Corp Plc (AMRN)

[sts66]

I thought people in the EU were prevented from owning US ETFs because the issuers refused to translate the prospectuses into every EU language? Oh, if you bought them prior to 2018 you're allowed to own them, just can't open new positions or add to existing ones:

https://www.justetf.com/uk/news/etf/us-domiciled-etfs.html


P.S. It's your money, but if I were you I'd exit all of my ETFs and exchange them for CEFs or individual stocks - over here they're referred to as "weapons of mass destruction", and as I just wrote in another post they are a big reason why the stock market collapsed, forced redemptions in a market downtrend snowballed and fed on itself.

https://www.investopedia.com/investing/are-etfs-weapons-mass-destruction/

Boy, were those guys right or what - biggest issue is that while ETFs are liquid, what they own many times are not - that means selling assets at depressed prices to fund redemptions, the ultimate buy high sell low scenario:

ETF Weapons and Their Risks

According to a report by Seeking Alpha, Ahitov and Bryan point to ETF "weapons of mass destruction" as those funds that have the potential to distort stock prices and to inspire a large-scale market sell-off. For JPMorgan's Nikolaos Panigirtzoglou, the rise of ETFs suggests several other risks as well. First, he suggests that markets become riskier the larger that the ETF space becomes. He says that "the shift towards passive funds has the potential to concentrate investments to a few large products. This concentration potentially increases systemic risk, making markets more susceptible to the flows of a few large passive products." (For more, see: The Biggest ETF Risks.)

Panigirtzoglou also suggests that the rise in prominence of ETFs favors large caps as a result of equity indices tending to be market cap weighted. He adds that "this could exacerbate the flow into large companies beyond to what is justified by fundamentals, creating potential misallocation of capital away from smaller companies ... the risk of bubbles being formed in large companies, at the same time crowding out investments from smaller firms, would significantly increase."

Furthermore, crashes could become more extreme. Panigirtzoglou adds that "the shift towards passive funds tends to intensify following periods of strong market performance as active managers underperform in such periods ... in turn, this shift exacerbates the market uptrend creating more protracted periods of low volatility and momentum. When markets eventually reverse, the correction becomes deeper and volatility rises." (See also: ETFs: A Derivative by Any Other Name.)
Systemic Risk

Seeking Alpha points out that the stock market has not yet experienced a major downturn since ETFs have occupied their current position of prominence. While it's very difficult to anticipate how the growth of the passive investing area could play into such a market movement, analysts agree that there are meaningful and serious systemic risks.

One of the major concerns about ETFs during a market pullback is that investors will all be drawing from the same basket of stocks when they sell. Equity index flows will reverse, and investors will come to the realization that they are not at all diversified.