quanta Posted August 24, 2009 Report Share Posted August 24, 2009 Noticed some posts on IDS today about Leveraged ETFs Here is how to trade them: A prime example of the evils of leveraged ETFs is the cumulative performance of the ProShares SKF fund, which tracks double the inverse returns of the Dow Jones U.S. Financials Index. Through July 2nd, the cumulative performance of the SKF since its inception in February 2007 is -33%, despite the underlying index, tracked by the IYF, being down by -63%. This sort of example has lead many to scream that leveraged ETFs "don't work." While these results aren't intuitive, this is more-or-less a caveat emptor situation, and there is a rebalancing strategy that will keep the cumulative performance of the SKF near -2x that of the IYF. First, the divergence is not principally caused by the daily returns of the SKF straying from -2x those of the IYF. Error in daily return replication is not the main issue. The answer is more basic. If you start with $100, make 10% and then lose 10%, you are left with $99. If you make 20% and then lose 19% you are left with than $97.20 even though the sum of your returns was positive. The more volatile the returns are, the more likely it is that you will have a situation where the sum of daily returns is positive but your cumulative return is negative. Higher leverage multipliers will also aggravate this effect. Fortunately, this "volatility premium" problem is avoided by periodically rebalancing the position. Also as an inverse explanation is a CME pdf on how to manage this crap on a daily basis... Link to comment Share on other sites More sharing options...
cwd Posted August 24, 2009 Report Share Posted August 24, 2009 I still say we are topping,gonna take some time though. I have a few guesses for the next 6 months: 1.SPX to 800 or less 2.Bond yields hit NEW LOWS. 3.Oil to 25 or less 4.Muni's RALLY another 20%+ from here My only position is Muni's....Lots of em. Who is going to buy all those T-bonds beside Ben? Link to comment Share on other sites More sharing options...
shorty Posted August 24, 2009 Report Share Posted August 24, 2009 My only position is Muni's....Lots of em. hopefully not CA cities I think they're all gonna default Link to comment Share on other sites More sharing options...
Jorma Posted August 25, 2009 Report Share Posted August 25, 2009 gappin' down almost another full pernt in the night session gov't needs to step in here quickly to prevent blood in the streets they'll probably force cramdowns on the margin man underwater stockowners will git their loan principal reduced, tax-free, down to the current markit value of their common it's the right thing to do, they're innocent victims this way everybody wins NYNY: (story developing) With S&P futures down more than 2 points mobs of Pigmen, brokers and Crapvison personalities have appeared at the steps of the NY Fed building demanding immediate intervention in the futures markets. Link to comment Share on other sites More sharing options...
kiwibear Posted August 25, 2009 Report Share Posted August 25, 2009 hopefully not CA cities I think they're all gonna default Me too. First a drop. Then a trickle. Stream. Flood. All good though. Uncle Sam will make good on the debts. He has unlimited wealth you know. Some of the current stimulus money had better be going on research and development of super high diameter/pressure hoses so they can deliver the volumes of cash needed in short order. Link to comment Share on other sites More sharing options...
Rationalize Posted August 25, 2009 Report Share Posted August 25, 2009 "There is the plain fool, who does all the wrong things everywhere, but there is the Wall Street fool, who thinks that he must trade all the time. No man can can always have adequate reasons for buying and selling stocks daily -- or sufficient knowledge to make his play a successful play." From Edwin Lefevre, Reminiscences of a Stock Operator Yeah, well, I try not to take advice from ppl like Mr Lefevre, who shot himself to death after massive multi-year mojo destroying losses. Edit: Also .. tell that to the program trading pootas. Link to comment Share on other sites More sharing options...
Rationalize Posted August 25, 2009 Report Share Posted August 25, 2009 Noticed some posts on IDS today about Leveraged ETFs... A prime example of the evils of leveraged ETFs is the cumulative performance of the ProShares SKF fund, which tracks double the inverse returns of the Dow Jones U.S. Financials Index. Through July 2nd, the cumulative performance of the SKF since its inception in February 2007 is -33%, despite the underlying index, tracked by the IYF, being down by -63%. This sort of example has lead many to scream that leveraged ETFs "don't work." While these results aren't intuitive, this is more-or-less a caveat emptor situation, and there is a rebalancing strategy that will keep the cumulative performance of the SKF near -2x that of the IYF. First, the divergence is not principally caused by the daily returns of the SKF straying from -2x those of the IYF. Error in daily return replication is not the main issue. The answer is more basic. If you start with $100, make 10% and then lose 10%, you are left with $99. If you make 20% and then lose 19% you are left with than $97.20 even though the sum of your returns was positive. The more volatile the returns are, the more likely it is that you will have a situation where the sum of daily returns is positive but your cumulative return is negative. Higher leverage multipliers will also aggravate this effect. Fortunately, this "volatility premium" problem is avoided by periodically rebalancing the position. ... True for levered stock ETFs [and for dudes trading on margin]. Not so true for Commod ETFs rolling futures. [interest and storage costs]. Link to comment Share on other sites More sharing options...
Charmin Posted August 25, 2009 Report Share Posted August 25, 2009 NEW YORK (CNNMoney.com) -- Shares of bailed-out mortgage finance giants Fannie Mae and Freddie Mac soared Monday, as investors try to piggyback on a rally in shares of government-backed financial companies. Fannie (FNM, Fortune 500) shares rose nearly 50% in afternoon trading, while Freddie (FRE, Fortune 500) jumped almost 30%. The mortgage giants' Monday rally was sparked in large part by a jump in the shares of companies like AIG (AIG, Fortune 500) and Citigroup (C, Fortune 500), said Paul Miller, anal cyst at FBR Capital Markets and Co. hope=words Ben is buying debt Andy Gause audio segment Andy_gause_august_19_09.mp3 Link to comment Share on other sites More sharing options...
TenaciousG Posted August 25, 2009 Report Share Posted August 25, 2009 Okay, something is up for Obama to reappoint Benny and the Jets early. Certainly provides a catalyst to move the market higher. Feels very much like 9/15/2008.... Obama to Reappoint Ben Bernanke Link to comment Share on other sites More sharing options...
Speakeasy Posted August 25, 2009 Report Share Posted August 25, 2009 gappin' down almost another full pernt in the night session gov't needs to step in here quickly to prevent blood in the streets they'll probably force cramdowns on the margin man underwater stockowners will git their loan principal reduced, tax-free, down to the current markit value of their common it's the right thing to do, they're innocent victims this way everybody wins Oh Joy! They've heard our screams. We are SAVED! Link to comment Share on other sites More sharing options...
Jimi Posted August 25, 2009 Report Share Posted August 25, 2009 Okay, something is up for Obama to reappoint Benny and the Jets early. Certainly provides a catalyst to move the market higher. Feels very much like 9/15/2008.... Obama to Reappoint Ben Bernanke :angry2: Link to comment Share on other sites More sharing options...
DrStool Posted August 25, 2009 Author Report Share Posted August 25, 2009 Market Update 8/24/09- Professional Edition by Lee Adler, Monday, August 24, 2009, in Professional Edition, Today's Markets | Permalink |Comments (0) Edit Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information. Link to comment Share on other sites More sharing options...
shorty Posted August 25, 2009 Report Share Posted August 25, 2009 Me too. First a drop. Then a trickle. Stream. Flood. All good though. Uncle Sam will make good on the debts. He has unlimited wealth you know. Some of the current stimulus money had better be going on research and development of super high diameter/pressure hoses so they can deliver the volumes of cash needed in short order. wealth money funny money, that is FRN's soon to be obsolete and devoid of all worth "when the Fed falls down, boom boom, when the Fed falls down........." Link to comment Share on other sites More sharing options...
shorty Posted August 25, 2009 Report Share Posted August 25, 2009 aSS can be seen below, aSS of turday I've changed my perpruratory indicator setting from utk to dtc according my system now time sell everything at markit git out and git short this simple yet powerful mechanistic system backtests 105% accuracte Link to comment Share on other sites More sharing options...
Lesser Fool Posted August 25, 2009 Report Share Posted August 25, 2009 Yeah, well, I try not to take advice from ppl like Mr Lefevre, who shot himself to death after massive multi-year mojo destroying losses. Edit: Also .. tell that to the program trading pootas. I think you are confusing Mr. Lefevre, who lived into his seventies, with the subject of his most famous book, the fictionalized account of Jesse Livermore. Link to comment Share on other sites More sharing options...
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