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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Webster Groves who wrote (91262)	12/6/2008 4:16:53 PM
From: maxncompany	Read Replies (1) \| Respond to of 116555

I believe these leveraged inverse ETFs are meant to 2X (or 3X as the case may be) the daily return not 2X the annual return. You noted that, but missed that that is the key. Mathwise, it won't add up to even close to 2X the annual because it isn't based on the annual. Based on the daily makes it a whole 'nother ballgame. Anyway, that's my understanding.

To: Webster Groves who wrote (91262)	12/6/2008 6:32:53 PM
From: The Reaper	3 Recommendations Respond to of 116555

I saw the same issue and did a little analysis. Message 25204758 Also a Seeking Alpha tutorial. Pretty good about the leveraged ETF's seekingalpha.com Volatility is the leveraged ETF's enemy.

To: Webster Groves who wrote (91262)	12/6/2008 7:04:01 PM
From: Mike M2	Respond to of 116555

I like ETFs for trading. I definitely see times when the price movement does not correlate with the market. In mid Oct. ETF DUG more than doubled in a week - I remember it trading around 54 late thurs and it hit 86 friday ( mid oct.). I bought SRS late Friday. I expect a big move on Monday - not sure which direction though -g- On severe market decline days some ETFs seem to get bid up more than warranted by the underlying move in the underlying index. I am very quick to sell such moves.

To: Webster Groves who wrote (91262)	12/6/2008 7:16:59 PM
From: mishedlo	1 Recommendation Read Replies (1) \| Respond to of 116555

The problem is slippage. Every freaking night they rebalance to maintain 100% or 200% short. Let's say you short and horray the stock 5%. The next day the stock rises back to where it was and you break even. With an inverse etf you are in the hole when that happens because to maintain 200% short or even 100% they had to short more! As shares decline you are getting more and more and more short. And a rally will hurt profits big big time. With shorting yourself, as stocks decline you are getting less short every day! I think these ETF strategies suck but we use them because we have to in Absolute Return strategy as a hedge. There are reasons we cannot short or buy PUTs in that strategy. Hedged Growth, our long short strategy has no such problems. Mish