Seeking Alpha

ljsquid's  Instablog

ljsquid
Send Message
For the 15 years through 2012, Laurent has outperformed the market with 16% annual returns, compared to 5% for the market. Laurent's international career has stretched through US and Europe. He earned an MBA from Boston University and an MS in Engineering from RPI.
My company:
Longs, Shorts, and Mini-Skirts
  • Negative Outlook On Direxion Emerging Markets 3x Bear Fund 0 comments
    Dec 17, 2013 11:54 PM | about stocks: EDZ, EDC

    We are going to add to our international holdings. We have a nice 67% profit on our shorts of Direxion Emerging Markets 3x Bear Fund (NYSEARCA:EDZ) since we took the short position in November 2011. It has now declined to an insignificant portion of our portfolio and has bounced up a bit. So, we will add another short position equivalent to 15% of a holding our portfolio. If you don't have a position in EDZ, since it is a triple leverage stock, you want to take only 1/3 of a position.

    Leveraged funds decay in value over a long period of time due to volatility and the mathematical compounding of these results. For instance, if the underlying emerging markets rise 10%, EDZ falls 30%. Then, if the markets fall 11%, the markets will have declined from 1.1 times their original value back to where they started. Meanwhile, EDZ would rise 33% from 70% of their value to 93% of their original value. This continues over time and makes leveraged funds a most unfavorable holding over long periods. For the same reasons, short positions are favorable over the long-term.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Back To ljsquid's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Most Commented
  1. QE To Continue (2 Comments)
  2. Gold Is Set For A Correction. (1 Comment)
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.