Tuesday Outlook: Commodities, Emerging Markets

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We got a lot of mail and comments regarding what appeared as some poor tracking issues with a few leveraged inverse products. ProShares has been responsive to this issue. ETF Digest friend and colleague Greg Newton [NakedShorts.typepad.com] took the information the issuer sent us and reworked it to account for a dividend which skewered results. Greg took the time to produce the following table showing the results. You can see once the dividend adjustment is made, the result from the previous week made tracking smoother and acceptably efficient.



Additionally, I’ll repeat my observations made Thursday evening that investors should not expect precise intraday tracking and need to give some of these issues time to work out whatever perceived inefficiencies may exist. This might mean waiting a few days dependent on how exotic, illiquid and new the leveraged issue might be. Finally, investors should take care when placing orders to ascertain where the leveraged issue is trading versus the comparable index and/or unleveraged issue.

The month of June ends with a whimper and without any significant fireworks. Goldman Sachs stating to buy puts on euro stocks was impressive. How much clout they have remains to be seen.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SDS, MZZ, QID, TWM, IYR, SRS, SIJ, SCC, DBA, DAG, EFA, EFU, EEM, EEV, EWZ, FXI and FXP.

Comments

[Crudeman:]

Hey Dave...Love your charts and comments. You use Stock Charts for your analysis. I use both Stock Charts and Big Charts. The trouble with Big Charts is their indexes, especially the DOW are way off in price range. I've seen their daily prices vary as much as 100 points from reality (their daily charts will show the true price). For example their Jan low shows 11,500 verses about 11690. Is there a reason for this or do they use Yahoo's numbers man for that as well!! Thanks, John

2008 Jul 01 08:49 AM

[parnelli96:]

Thanks for the tracking info!

2008 Jul 01 10:19 AM

[johnthebear:]

David, I am still hoping for an explanation of how ProShares actually makes the 2:1 SRS/FXP work. I love it and I am not complaining, it is just that I keep adding to my positions in both and I would like to be able to explain it to my wife!

Thanks, love your charts and comments on each.

John

2008 Jul 02 12:18 AM