Xyrus

UNG Trading 101

With the premium on this "ETF" you'd be better off finding something else to play with.

~Shawn

Will the Efficient Markets Hypothesis Survive This Crisis?

I don't think there's an either or. I think it is spectrum ranging from a completely inefficient market to an efficient market.

An efficient market would essentially look like brownian motion. In a perfectly efficient market, timing would be nothing but a matter of luck. There would be no way to beat the market.

However, that is not the market we have. The question isn't whether the markets are inefficient or not. The question is are the inefficiencies prominent enough for one to be able to take advantage of them.

Most of the inefficiencies in the market are short duration and/or small discrepancies. Only well connected or deep pocketed investors would be able to play these well. But more importantly, a lot of them are random as well.

So another question is, if a market has inefficiencies that a short, small, and/or random, at what point does it become indistinguishable from an efficient market? In other words, can there exist a market that has inefficiencies that you can't time?

It's my opinion that we do have a mostly efficient market for MOST investors, i.e. the inefficiencies are either too small, too short, too random, or some combination of the three that really only the big players can truly take advantage of them.

~X~

Not All Commodity ETFs Are Created Equal

It might make more sense to do two ratios with a common base. I'd do a ratio of gas to gold and oil to gold and plot those. I think that would paint a clearer picture.

~X~

Spread the Wealth with Gold: Three Longer Term GLD Option Strategies

Except gold doesn't really increase in value. Gold is a store of value. There are few industrial uses of gold, and a relatively small amount of gold is dug up every year. This keeps the amount of gold fairly stable.

Other commodities such as silver, platinum, and oil, on the other hand really do increase and decrease in value since they have wide industrial uses and, at least in the case of oil, it is being depleted and cannot be replaced easily.

Chances are when gold goes up in price in your currency, your currency has weakened yielding a low (if any) gain in your pocket. So you may have bought gold at $500 and sold at $1000, but that does little good when the currency depreciated by 50% during that timeframe (and now you've got to pay taxes on the gain, though in real terms you've gained nothing).

Gold is a good hedge against inflation, but it isn't the best investment if you're looking to grow your money.

~X~

Why Everything You've Heard About Leveraged ETFs Is Wrong

A small correction. These ETFs only perform well when the market is trending continuously. If it only trends in fits and spurts, these still aren't a good hold.

Even in a low volatility market if the market isn't trending for any length of time these ETFs will lose value. Even if the index is wobbling by only fractional percents a day.

The instruments are day trading and at best swing trading tools. Holding them for weeks or months at a time isn't wise unless you're going to be watching it every day (or have stop losses in place), or you know for a fact the markets are going to be in a continuous trend for a long time.

~X~

Silver ETFs: Inaccurate Inventory Records

From apmex site: 1 oz rounds 15.63 for quantities < 100

New York spot price for silver is 14.21 according to kitco.

That's a 10% markup, and that's not even for a solid name like Engelhard. If you want Engelhard that's a whopping 18% markup.

There is not a single dealer (other than idiots on E-bay maybe) that don't sell their metals at a significant markup, and yes 10% is significant.

I've got better things to do with 10% of my money than giving to middlemen.

~X~


On Aug 03 06:12 PM snoopy2 wrote:

> The spread between the buy and sell prices of physical gold in even
> small volumes (source APMEX.COM) is generally about 2-3%? You need
> to change dealers (or at least start buying from me - I'll only charge
> you 10-20% extra, LOL)

Silver ETFs: Inaccurate Inventory Records

Yeah, buy physical gold and silver where dealers can rip you off for a 20%-40% markup. Good investing sense right there.

Unless you're buying vast quantities, the markup on physical bullion is ludicrous. This article sounds more like a shill commercial than anything else.

~X~

Leveraged ETF Ban Spreading Like the Flu

To Ryan Freund: The only way you can hold these for weeks or months and expect anything reasonable is in a low volatility trending market. Good luck with that.

In any other market the daily churn will destroy you eventually, as is demonstrated by the chart. So you better have your timing right an KNOW were the market is heading or you're going to be left holding the bag if you're hanging on to these as a long term investment.

And for missing_link:

"Months-long graphs like the ones you show here only prove that you're intentionally trying to mislead people about their performance..."

I see no misleading here. They were pointing out that this instruments aren't suitable for long term. They're not. They are not arguing short term performance, or daily performace (though those also haven't always been the best either).

MOST people don't trade, they invest. IRAs, 401Ks, PRAs, all of these types of accounts are opening up to ETFs, if they aren't already. These are not suitable investment vehicles, but they're great trading vehicles.

Banning them outright is silly, however banning them from long term investment accounts or retirement accounts is more reasonable.

~X~

Holy Cow! Look at the Treasury Auction Schedule

Come on people, please try and educate yourself.

THE US CANNOT DEFAULT ON ITS DEBT.

There's no way it could. A default is a failure to make payment, and we can ALWAYS make the payment since all the debt is denominated in US dollars. All that needs to happen to make the payment is to print more dollars (inflation).

This, of course, isn't a good thing. And sure the countries holding the debt won't be happy, since we'd be paying them with weaker currency. But we can ALWAYS make the payments.

Until our debt is denominated in other currencies, the US has a 0% chance of default. Inflation, yep. Hyperinflation, you bet. Default, not gonna happen.

~X~

Why Leveraged ETFs Are Bound to Deteriorate

Widestrides said:
"But wouldn't ANY volatile stock be subject to the same "decay?" If a biotech stock goes up 10% one day and down 10% the next, it also is not back to even. It has decayed 1%"

Only if you sold it.

A stock doesn't decay. The price of the stock is always the price of the stock. Your return is whatever you sell it at minus whatever you bought it for, regardless of any volatility in the price.

The problem with these ETFs is that they don't hold their positions. Every day they reset. In other words, they are directly exposed to the daily volatility of their underlying assets. That's where the decay happens. The more volatility in day to day price, the worse the decay gets.

Normal index tracking ETFs don't suffer these issues much since most of them don't rebalance that often. But any ETF, or more to the point, any investment strategy that moves in and out of the market "quickly" will end up suffering from decay if they aren't exceptionally careful. And since these ETFs operate "blindly" (no active management) then they will undoubtedly bleed dry over time, especially in markets like we've been having lately.

~X~


On Jul 13 12:40 PM widestrides wrote:

> But wouldn't ANY volatile stock be subject to the same "decay?" If
> a biotech stock goes up 10% one day and down 10% the next, it also
> is not back to even. It has decayed 1%.
>
> So it is the volatility that creates the danger, and true these leveraged
> ETFs are leveraged by design, but they aren't necessarily volatile.
> True, they have been this past year, but this has been a volatile
> year and a "perfect" storm to decay these ETFs. But if they trend
> your way or if you "rebalance" them yourself, you can take the decay
> out of them.
>
> GL

Boston Fed: We Don't Understand Foreclosures

I'd be interested in the number of people who are just walking away from properties, even if they can continue to make payments.

After the last big crash in real estate in the early 90's, it took some areas more than ten years to recover (and some of that recovery was the new bubble).

So what I think a number of people are doing are looking at how underwater they are and whether or not their home will recover in 7 years (when a foreclosure falls off your credit history).

For someone who has lost 20-30% of their equity so far, having a foreclosure on their record for 7 years might appear to be the better deal, especially when it seems clear that the home prices won't recover in that period.

A foreclosure is bad, but if you otherwise have stellar credit you can recover from it quickly enough. In a couple of years, you could buy a home for a lot less.

I'm not saying that this is a good thing. But if you had a home in Vegas or Florida that has lost 50%+ of it's value, then walking away might not sound like such a bad idea.

~X~

On Justin Fox and the Efficient Markets Hypothesis

What I'd like to see is a discussion on how one could tell the difference between an efficient market and an inefficient market with short and/or unpredictable inefficiencies.

I don't think that this is a black and white issue. In my opinion, there is a spectrum from efficient to inefficient. If inefficiences are short/random enough that it becomes difficult or impossible to take advantage of for 99.9999% of investors then there is really little difference between an efficient and inefficient market. However, if the inefficiencies are more predictable/longer lasting then it becomes more plausible that an investor can beat the market.

~X~

The U.S.'s Aaa Credit Rating Doesn't Add Up

The US, by definition, cannot default on its debt since all the debt is in dollars. The US always has the option to inflate the currency to pay the debt.

If our debt were denominated in Euros, then we would be in trouble. Instead, we can go the way of the Weimar republic.

We will ALWAYS be able to pay our debts. Whether or not we repay it with anything of worth is different matter altogether.

~X~

A Return to the Gold Standard? Forget About It!

Anyone who talks of commodity backed currencies and stability is either an idiot or ignorant.

Even when gold and silver were the primary currencies, recessions and depressions occurred and were often quite long and painful. The Great Depression still managed occurred, despite being on gold standards. The recession/depression of the late 19th century still occurred. Britain faced more than one financial crisis throughout it's long history despite being on a "gold standard" for most of it. The Roman Empire still managed to suffer a terminal financial collapse despite using gold and silver.

There is nothing magical about at commodity backed currency. It is just as prone to financial disaster, and in some cases can make them more pronounced.

There is also nothing inherently valuable about gold or silver. They're just metals. You might as well have a currency based on quartz or lead. The only value in those metals is what people agree to, which is the same principle as fiat currency. The only difference between gold and a fiat currency in this regard is that it's harder to manufacture gold (mining vs. printing).

Any money is just a convenient standardized way of expressing value, not value itself. Whether its metal or paper makes no difference, except when it comes to financial policy (in which case it's easier to deal with paper).

~X~

Barney Frank Wants to Regulate Your Pay

If humans were moral creatures by nature, then reforms like the ones Frank seems to favor would be laughable (and indeed unnecessary).

However, as humans have demonstrated time and time again, we are not moral creatures. When large amounts of money and/or power come into play, it's amazing how far people will twist their moral compass in order to justify their actions.

While perhaps the policies themselves may not be the best thought out, they are trying to address a fundamental problem: How do you stop companies and the people who run them from being...well...a$$holes.

If you get compensated for the number of sales you bring in, you're going to do anything you can to increase sales. Similarly, if you get compensated for the performance of stock price, you're going to do what it takes to get the stock price up.

The problems start when morality gets pushed into a distant second relative to profits. That's when things like sweatshops and poisoning third world shanty towns with toxic waste and destroying the world financial system start showing up.

A free market is amoral. It does not work for the greater good, nor does it work for the greater evil. It works for profits, and anything that doesn't affect the bottom line negatively is fair game. If running your own third world nation of slaves improves that bottom line and keeps the customers and investors lining up, then so much the better.

So how do you keep the markets (and people in general) moral? By removing regulations? Hardly. By adding more? Slippery slope. It has been, and always will be, a careful balancing act.

~X~