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Monday, March 2, 2009

ETF madness

In today's WSJ, we had another article on the triple short ETF's. Look what the "designers" of these ETF's have to say about them:

The funds "are not a buy-and-hold vehicle," warns Michael Sapir, chairman of ProShare Advisors. "These products are designed for trading use, not to be hedging tools," insists Carl Resnick, vice president at Rydex Investments. Holding a leveraged ETF for longer than a day, says Andy O'Rourke, marketing chief at Direxion Funds, is "like using a toaster to cook a turkey."
http://online.wsj.com/article/SB123578237239398181.html

So if these ETF's aren't designed to hedge your portfolio, what is their use? If you can't hold them for more than a day, how to you use them to hedge a portfolio of stocks?

You don't!

These ETF's are just used to increase selling pressure.

And until these ETF's are reigned in, our markets will continually melt, and our pension liabilities will continually increase.

But now the melting is at the acceleration stage!

December's $409 billion pension shortfall for the S&P 1500 , is now close to a half a trillion dollars, and that's with the generous assumptions that these companies make.
http://globalpensions.com/showPage.html?page=gp_display_news&tempPageId=833592

Throw in the pension shortfalls for the states, and now you are talking real money, but no-one is talking about it.

Yet.

But the market is. Look at the insurance companies with their GIC's..

These ETF's are accelerating their demise!

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