Postcards - 1993 - Part Six - The Decision that Handed BlackRock, Vanguard, and State Street Way Too Much Power

The debate over passive investing has been VERY hostile for 30 years - but there's no doubt that ETFs have reached a point of unintended consequences. What comes next is what's more troubling.

Dear Fellow Investor:

Two exchange-traded funds (ETFs) capture most of my attention each trading day...

Our Equity Strength Signals are largely based on the momentum oscillators surrounding the SPDR S&P 500 ETF (SPY) and the iShares Russell 2000 ETF (IWM) and the flow of stocks and capital in those underlying indices.

The SPY has been around for 30 years….

… the SPDR S&P 500 ETF (SPY), a basket of stocks that tracks the S&P 500 Index performance, debuted in 1993.

It was the first U.S.-based ETF.

The prospect of ETFs - an essential form of passive investing - offers investors diversified market access and a set-it-and-forget-it approach.

Even Warren Buffett once won a bet against a hedge fund manager by owning a passive fund against being committed to “active management.”

I’ve largely been a proponent of mutual funds and other passive investments (and, especially, private equity).

However, unintended consequences of ETFs and this form of investing include more fuel for economic inequal…