Fed Cuts Rates by Quarter Point, Some ETFs up 12%, 70% on Year. Is it all in the Software?

After a quarter-point reduction in the federal funds discount rate, stocks closed lower. Before today, financial stocks rose on the expectation of decisive Fed action to resolve the credit-market crisis. Financial stocks declined today, and stocks of companies closely tied to economic growth, such as transportation firms, retailers, and industrial companies.

Smaller stocks suffered more than big ones, on the theory that they are less stable in times of economic trouble. Technology stocks closed lower also. The Nasdaq Composite Index dropped 2.5% Tuesday.
However, an Exchange Traded Fund (ETF) that shorts real-estate values was up nearly 12% on the day, and an ETF based on the Brazilian economy is up 70% for the year. International markets and selective investment instruments that are betting on the devaluation of real estate have performed well this year. This is compared to an ETF that is tied to an index in selected tech stocks, which is only up approximately 12% for the year.
ETFs, which trade on exchanges like a stock and generally track various stock and bond indexes, already had lower expenses on average than traditional mutual funds. So now investors can find razor-thin expense ratios for some ETFs that track broad-based indexes of market sectors like international stocks, U.S. growth stocks, or municipal bonds. But investors’ infatuation with ETFs has also prompted several firms to introduce much pricier versions that seek higher returns by following offbeat and narrow indexes, such as tracking European drug companies or using computer-based algorithms to pick stocks. Such algorithms might be described visually, in their simple form as a flow chart using a lamp scenario to illustrate (see below):

Essentially, investors are paying for the quality of software, programmed with scenarios (or, as above, algorithms) and the added value of the managers who review the investments indicated by the algorithm that simulate market conditions.

No World Borders can help you assess the value of intellectual property (IP) that is in the form of software.



Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

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