Understanding The Buzz About BUZZ

Yesterday was the first day of trading for the Van Eck Vectors Social Sentiment ETF (BUZZ). The fund will be a large-cap proxy with holdings culled from chatter on Twitter, Reddit, and other social media platforms. This is not the first go at this sort of thing. A while back the Sprott Buzz Social Media Insights ETF traded with symbol BUZ, just one Z. It had a similar strategy and did very well but failed to gain traction with enough assets and closed after a short time. BUZZ seems unlikely to have the same problem. Eric Balchunas from Bloomberg has been all over this as it has unfolded, reporting that on day one, BUZZ took in $281 million. BUZZ has gotten a lot of attention from David Portnoy from Barstool Sports who is involved with both the ETF and the fund's index provider.

Part of the conversation is whether or not "scraping" social media for investment ideas is following so-called "dumb money". On the other end of the spectrum might be the ARK Innovation ETF (ARKK) which could be thought of as smart money or at least has been viewed as such until recently and maybe still is, not sure. ARKK fund manager Cathie Wood has of course been transformed into a star for hanging seemingly absurd price targets on Tesla (TSLA) and Bitcoin and being kind of right. ARKK holding Crispr Therapeutics (CRSP) is down 47% and Lending Tree (TREE) is down 37% and of course, TSLA has also been punished with a 30% hit, all in very short order and that's just three of the ETF's holdings. The ARKK fund itself is down about 25%.

So who's the smart money and who is the dumb money? I have no idea and that is less important than the clear willingness of market participants to speculate. Regardless of whether BUZZ is dumb or smart, it is chasing collective sentiments expressed on the internet without much emphasis on fundamentals. The Twitter account @ARKDaily which is not affiliated with ARK sent out an image yesterday showing that the ARK suite of funds placed 57 trades yesterday in reaction to volatility in many of its holdings. ARK runs concentrated portfolios so 57 trades seems like an enormous number. Fund manager Wood regularly talks about this sort of trading to take advantage of volatility. This is clearly a form of speculation and she has injected it into her funds.

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