I was a relatively early investor in Exchange Traded Funds (ETFs) which Annie Lowery in the Atlantic thinks may be dangerous to capitalism (along with index based mutual funds).
If I understand the concerns: in the good old days of individual stock ownership and actively managed mutual funds people, fund managers and investors, were actively concerned about the performance of companies. They bought and sold stock based on that information, resulting in a an efficient sharing of information related to performance via financial markets. But with ETFs and index funds dominating the scene these days, many fewer people are tracking performance and incentives for managers to perform are less.
It sounds okay to me. Although I would point to Billy Hwang's financial distress to observe that financiers can be pretty stupid; they seem to be chasing returns through ingenuity rather than hard work.
Another aspect is the rise of global financial markets. Back in the days of actively managed funds we had much less in the way of global financial flows. Over time I've diversified our investments away from Spdrs and QQQ (the early ETFs tracking the S&P 500 and the Russell index) to include several with foreign investments. While fewer people may be tracking GM and Ford against each other, the competition between US car manufacturers and foreign manufacturers is being tracked.
At any rate, I expect the current setup will outlast me; at least I hope so.
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