VALUE: After Hours (S08 E17): Why Market Flows Are Distorting Valuations

During their episode, Taylor, Carlisle, and Tweedy Browne’s John Spears And Jay Hill discussed Why Market Flows Are Distorting Valuations. Here’s an excerpt from the episode:

[John] Well, I think it’s got to have an impact. Yeah. I mean, the active, as you know, actively managed funds are bleeding.

Redemptions are rampant. It’s not just from what I’ve read. This is not something I’ve studied, but from what I’ve read, it’s across the board.

It isn’t just people who have a reputation for a value style of investing, but just active in general. And also, as we know, from a tax standpoint for tax paying investors, the structure of an exchange traded fund allows you to really have less realised capital gains. You can distribute out your appreciated securities.

If you want to sell them, you can get them out of the portfolio and there goes the unrealized gain on those stocks. So, it’s an amazing thing, as long as it lasts.

[Tobias] You think there’s some regulatory risk to having that removed?

[John] I think there’s a political risk. Sure. Absolutely.

Absolutely. I mean, our friends in the Democratic Party, some people that have very strong opinions about what tax rates should be, and they’re generally higher rates, of course, for affluence, for capital gains, etc., including proposals to tax unrealized gains. So, we shall see.

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VALUE: After Hours (S08 E17): Why Market Flows Are Distorting Valuations

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