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This and That: Leveraged ETFs, Credit Card Legislation and More…

May 22nd, 2009 · 8 Comments

  1. Jon Chevreau highlighted a report warning investors of the dangers of double leveraged ETFs. In a report titled Heads You Lose, Tails You Lose: The Strange Case of Leveraged ETFs, FAIR Canada highlighted how four of nine pairs of leveraged ETFs lost money (i.e. both the bull and bear versions lost money) when held for a year and calls for more regulation to protect investors.
  2. The sweeping credit card legislation passed in the U.S. Senate might have a downside for dead-beat customers who pay their balance in full every month. Credit card companied are threatening to cut rewards programs sharply.
  3. Larry MacDonald gets nostalgic over media appearances by some of Canada’s best-known financial gurus from 1979 to 2009 archived on the CBC Digital website.
  4. A new personal finance blog written by Chaya Cooperberg for the Globe and Mail called Home Cents is worth reading. The RSS Feed is available here.
  5. Million Dollar Journey on the options available for a 60-year old with lots of cash and no portfolio.
  6. With savings accounts paying not-so-high-interest and GICs offering meagre returns, what should an investor do in a low interest environment? Thicken My Wallet finds out.
  7. Michael James has one more reason to avoid leveraged ETFs: these products seem to have expenses that are much higher than advertised.
  8. Four Pillars on why you should never underestimate (or overestimate) small savings or income opportunities.
  9. Canadian Personal Finance posted his thoughts on garage sales.
  10. Canadian Financial DIY reviewed and is giving away a copy of The Cost of Capitalism.

Have a great weekend everyone!

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8 responses so far ↓

  • 1 Phil S // May 22, 2009 at 8:45 am

    I like the CONCEPT of Horizon BetaPro’s Bear ETFs, being a mutual fund of short positions, because it limits our liability if things go horribly wrong in a short position… An investor’s liability would be limited to 100% of whatever we put into it, not the theoretical INFINITE amount – kind of like what happened to Porsche shares several months ago when people trying to cover their short positions were caught in a squeeze as there were more shares sold short than what was in circulation. I don’t know if anybody remembers, but for one brief moment, Porsche became the largest cap company in the world – much more valuable than even General Electric, the largest corporation in the world.

    But just like the article states, when I looked into their fees, it was really punishing! Back when I checked it out, I think it was about 7%! You had to make 7% on a bear position just to break even. I didn’t like the economics of that, so I stayed away, which is unfortunate because I think the market tumbled 30% since I looked at it. Oh well.

  • 2 Michael James // May 22, 2009 at 9:44 am

    Thanks for the mention! Have a great weekend.

  • 3 Thicken My Wallet // May 22, 2009 at 9:58 am

    Thanks for the mention. I also blogged on leveraged ETFs and the structural issues of the constant leverage trap makes the produce undesirable for most retail investors.

  • 4 Bon Homme Cajun // May 22, 2009 at 10:05 am

    Thanks for the mention, enjoy the warm weather!

  • 5 Squawkfox // May 22, 2009 at 10:13 pm

    I checked out Chaya Cooperberg’s blog, but she only gives a partial (ok, one sentence) feed. What’s the point of subscribing to get one sentence? :|

  • 6 Fred (ETF2X.com) // May 23, 2009 at 7:06 am

    How many times will financial journalists and bloggers regurgitate what has been reported on ad nauseum about 2X ETF’s I wonder. If you haven’t realized that leveraged ETF’s aren’t designed and aren’t advertised as buy-and-hold products then you should come out from under your rock.

    I use HBP’s product and I have beat the TSX by 34% over the past one year period.

    Near the end of his article, Jonathon Chevreau notes a statement by Kirby that you may be better off shorting a leveraged bull ETF than buying the leveraged bear ETF. If Chevreau had put more effort into the article, he would have discovered that when you call a broker and try to place an order to short one of HBP’s ETF’s the broker will likely inform you that they don’t have any available for shorting. This is one of those great investment ideas that works in theory but not in execution unfortunately. Jonathon is very capable of writing more informative articles than this one.

  • 7 Canadian Capitalist // May 23, 2009 at 6:58 pm

    Squawkfox: Many blogs provide very short feeds. I still subscribe because I follow the posts and decide when I want to click through :) It sucks but considering the number of spam blogs that are out there, I’m sympathetic.

  • 8 Matt // May 25, 2009 at 11:14 am

    Phil S, don’t you mean VW???

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