Not all ETFs are ridden with toxic assets. A lot of them are "a bunch of equities." But the thing you're buying and the thing you think you're buying aren't the same.

Even at the purest level, when you buy an ETF you're buying it because you think it will go up, the same reason you'd buy a mutual fund. But with a mutual fund, the fund managers are also thinking it will go up and are doing their level best to make sure that it does - they may not be right, they may not be good, but they're looking at everything they own and picking the good stuff and eschewing the bad stuff. A clean energy mutual fund would probably buy First Solar but would not have held Sun Edison. It may or may not have been exposed to SolarCity.

But a clean energy ETF is going to own First Solar, Sun Edison and Solar City because it's buying the sector. And there's no incentive for the creation units holder to buy FSLR over SUNE because his whole job is to HFT the underlying securities to make pennies at a time so that at the end of the day, he holds 10% SUNE, 10% FSLR and 10% SCTY. He doesn't give a fuck when SUNE goes tits up other than that he's gotta sell FSLR and SCTY along with it.

With a mutual fund you're buying the active management of the components in the fund. With an ETF you're buying the convenience of not thinking about it by actually not thinking about it. You're buying winners and losers.

And sure - over the long run, we're all winners. There is no beta unless equities are fundamentally a worthwhile investment. Burton Malkiel popularized the notion that if you miss the 10 best days in the stock market over the past 90 years you'd have given up on something like 13000% returns... but nobody talks about how missing the 10 worst days in the past 90 years would have saved you something like 90,000% losses.

But if you ain't at "Always Be Investing" they don't get to make the pennies forming artificial funds for you.

How to benefit from it? Yeah. Million dollar question. This is one of the reasons I follow aiwierdness.com so avidly. 85% of the trades out there right now are algorithmic... and those bots do fine so long as they stick to their lane.

I am not confident that there's enough agile AI out there to deal with a downturn in a logical manner. And I am not confident that there's enough money out there that's independent of buy/sell agreements necessary to build up a $3T ETF industry without invoking a lot of chaos on organic investment.