April 15, 2009

Heads you lose. Tails you lose. Here's SKF and FAS, the ultralong and ultrashort financial plays, BOTH down 50% over the past three months

Gotta love Wall Street. They just keep coming up with new and innovative ways to take your money.

Invest wisely. And if you're in the casino, know what you're buying.

Good luck.


on the sideline said...

Ouch! That seriously stings of grift and corruption.

wallstreetveteran said...

These are leveraged objects. They seem to be working in my book. If you owned them thru the 100% move up in many financial stocks....well what did you expect? They worked as a hedge against financial exposure well for extended periods of time.

danm said...

Those things are crap. As soon as you have volatility you lose.

You can't sit on them, you've got to trade the constantly if you want to make money.

Anonymous said...

wow, good point.

Anonymous said...

If there is one share of SKF out there that qualifies for long term capital gains (held for 1 year), I would be shocked. I have traded this 5 times, all for profit, and all held for very short periods of time.

Also, UYG would be the correct Ultralong counterpart to SKF. FAS is a triple long financials from Direxion, whereas SKF is a double short from ProShares.

Your advice is accurate however. These are not funds to be taken lightly.

bank dick said...

The return on any levered instrument like these ETFs will tend to zero over the long haul, and especially in choppy markets like we've seen lately. These are trading vehicles designed to pull big returns out of daily moves, not buy and hold investments.

Mammoth said...

While half-dozing during this morning’s commute (using Public Transportation) it dawned on me what this country has truly become.

We are a ‘Flipper - Nation!

It used to be that you purchased stocks in a good, solid company and watched them grow in value and pay dividends over the long-term. But now, Wall Street is one big casino. We buy a stock or fund and then flip it in a few days, as soon as it increases in value.

Take GM stock, for example – the company's ultimate endpoint is written on the wall for all to see, yet the savvy flippers were able to make a mint by buying & then reselling over a short period a while back.

And we all know here on S&A, about flipping real estate over the past few years. The people who knew what they were doing really cleaned up, while those who came late to the party ended up with an upside-down property.

But what about the employer-employee relationship? Firms hire when business is booming; when they can make money for themselves hand over fist – and then the moment the downturn begins – out come the pink slips. No qualms about flipping Human Beings, is there?

This really encourages employee loyalty, doesn’t it? Yep – when your employer has no qualms about dumping someone who has given the firm 30 years of their life, and then your boss asks you to come in early and work late – to help the company, in the back of your mind you’re thinking, “no fvcking way!”

We have truly sacrificed the future of this nation for short-term gain.

(Then again, the next time Gold crosses the $1,000 mark, consider my stash flipped.)


Anonymous said...

No wonder Gordon Brown is so desperate selling the carbon tax Ponzi scheme and NWO scheme to transfer American taxpayer money to the European empty coffers. All that we hear from his fat mouth is the global warming scam and NWO.

Buh buh I thought that we should all be socialists, we should envy the European model...What happened? If the UK is bankrupt, why should we hear ANY ideas from Gordon Brown? Should we follow the socialist Europeans to end up broke like them, living like Keith in a POS 300 sf flat and paying $3,000 rent, and a sh!tload of taxes to support NWO big wigs? Oh, you Europeans are sooooo sophisticated! Don't come immigrating here either, do you hear us??? Stay there with your beloved socialism and intellectual grumpy waiters. And what's up with the phony pound valuation that it's always higher than the dollar? Hilarious!

NYT -- Speculation that Britain may once again seek monetary fund assistance — and become the first major western European country to do so in this financial crisis — rests upon a crucial, uncertain assumption: that the combination of its steep debt and wounded banking sector will put too much pressure on the already wobbly pound.

The numbers are worrisome. Britain’s budget deficit is 11 percent of its gross domestic product, compared with 13 percent forecast for the United States this year. Analysts say that without severe spending cuts and tax increases, government debt will jump to 80 percent of the overall economy in the coming years, from today’s level of about 40 percent, a ratio that approaches that of troubled economies like Greece and Italy.

Anonymous said...

Your argument is marred by the fact that the two ETFs you use are from two different fund companies.

But your argument still holds, and I recently saw an article (on msnmoney.com, I think) that shows the horrors of holding ultra-long, short, or ultra-short ETFs, long-ish term, through volatility. Too lazy to post a link--go look for it, it was easy to find.

If you just use Proshares financials ETFs for 3 months, I think the comparison is 0% versus -50%, which is still a bad non-mirror-image performance.

Anonymous said...

A warning sign should be posted before entering the Wall Street Casino.

When entering the W.S.Casino via door, net or guided, please note that children, the faint of hearth or honest people should be discouraged.

In this Casino we have it all, tricks (dirty and clean), smoke screens and giant mirrors. We tailor to the extreme vain, braggers and blow out of their behind players.

This Casino will take your money faster then lightning speed, make you a winner to get you hocked and give you a big BooYaa when you are slaughtered.

Once a fine instrument to finance, fine honest companies who pay dividends, providing smoke free balance sheets and were represented by proud, loyal workers and management. BUT..
This was back then …….Boring!!.. when one could not pimp the show BUT now we can…YES we CAN!!so step up to the plate………and play, play, play…..

Thank you very much!

Anonymous said...

Yep, avoid the casino and hold US Dollars. No chance of getting hurt there. What could possibly go wrong holding paper dollars, created as needed by the push of a button?

Anonymous said...

Remember there is a lot of money sloshing around out there and it will rotate in and out of stocks and bonds depending on which way the wind is blowing.

We are a long way from the DOW top and we'll probably be in a trading range for some time to come as investors try to figure the what the newest trader (U.S. Gov't) is going to do.

The stock market is a casino for making money and you have to pump before you can dump.

Look out for much more volatility especially in the financials inlcuding shorts.