In the post Bernstein shares part of an email from Jim Wiandt in which the two enjoyed a chuckle over some of the funds that were then in the pipeline;
"a 'Dynamic Brand-Name Products Portfolio,' an Inverse Materials ETF, a Healthy Lifestyle fund, an Ellioit Wave ETF, a Georgia (the state) ETF and, my favorite, an 'Ultra-Short S&P 400 MidCap 400 Citigroup Growth' ETF."
I believe there is a typo in the word Ellioit above but I pasted the quote in and chose to leave it as I pasted it.
No doubt there have been a lot of ETFs listed that on the surface seem questionable. Some of those however do offer some tangible benefit as a secondary effect or maybe something else. I would also add that I think the short and double short ETFs are targeted more for professionals than individuals; the focus of the Bernstein article, as I read it, is the effect of these funds on individuals.
The article mentions the incredibly narrow HealthShares fund. I wrote about these for the Street.com a while back and did spell out a possible use for them in a small proportion but I don't use any personally or for clients. Bernstein wonders whether in the future the market for these funds could be pushed around in such a manner that the ETF structure effectively breaks down. If he is right then yes, holders of these funds would be hurt.
He gets a laugh from the Georgia Fund that is in the works; there are funds from a lot of states that could list like the California Fund and the Colorado Fund as other examples. I am unlikely to try to take anyone to the hole in defending this concept but the Georgia Fund, what do you think that will be? Anyone else besides me think it will have 15-20% each in Coca Cola (KO) and Home Depot (HD)? If correct the fund may still be useless but hardly a concoction of evil intended to separate unsuspecting mom and pops from their money either.
I think a more realistic take is that a lot of funds that have listed or will list soon will close up shop after three or four years with only $30 million invested regardless of performance. This is a point I have made several times in the past.