One of the dangers of being a generalist is that you get spread too thin. Another is that you overplay your abilities. I probably did a little of both in my recent post on ETNs (and blogging while tired). The fine folks at Index Universe took umbrage at my post, and for good reason. I wrote a sloppy post without enough research.
Here’s what I intended, even though it came out wrong. I liked the post that came from Index Universe, because it highlighted an issue with ETNs that I had been talking about for two years — you have a significant credit risk there. In the two years since I wrote the piece that I cited in my article, I have read dozens of articles on ETNs, and not one of them mentioned credit risk. So, I was glad that someone had taken up my point. Or, at least, I thought it was my point.
Now, how was I to know that some writers at Index Universe had already written on the issue of credit risk? I read pretty broadly, but I can’t dig for everything. Also, they took it as a poke/jab; that was not my intent. I don’t think that way, and I genuinely like Index Universe, even though I don’t read it daily.
I offered my apologies at their site, and I offer my apologies to readers here. I apologize for my mistakes; I am not like some writers on the web that can never be wrong.
One final note: I have been dealing with credit issues since 1992 in the insurance, mortgage bond, and corporate bond businesses. My experience is very relevant here. You would be amazed at the panoply of products resembling ETNs that got trotted out since the mid-1980s, though I ran into them in the 1990s.
In any case, hail Index Universe, and investors remember, ETNs carry credit risk.