edwar77

Leveraged ETFs: A Value Destruction Trap?

One additional question: What is the perceived advantage of a 2X ETF vs buying or shorting the underlying index ETF (unlevergaed) on 50% margin? Example: Instead of buying a double short ETF (SDS) I short SPY on 50% margin. I still get double the daily return minus margin loan interest. Isn't this a cleaner way to achieve the desired result?

Leveraged ETFs: A Value Destruction Trap?

I appreciate your layout of the issue but I believe your example is incomplete as to the mechanics of rebalancing. Assuming that it's all done with shares and margin ( no derivatives) how then when the market falls do they fund the equity component of the additional share purchase? Example: Index has decreased by 10% that day and therefore the outstanding loan now exceeds 50% of fmv of portfolio. The fund needs to buy enough shares to bring the fmv back to par at beginning of the day. Wouldn't they have to fund those additional purchases with 100% equity to maintain a constant leverage ratio? Also how do they adjust for overall purchases and redmptions ( fund size) ?

Will Rohm & Haas Beat Dow in Court? Not So Fast

Clearly the two companies currently have significantly smaller market opportunities/earning capacities and lesser financial metrics of all kinds compared with when the deal was originally struck. The rationale that burdening the merged company with too much debt to finance the cash buyout is compelling. However the calls for the court to lower the purchase price or cancel the deal entirely based on a theory of equity are half baked. As pointed out in other posts there is no equitable reason to protect DOW shareholders from a bad bargain. Reducing the total debt of the merged entity could be accomplished by giving more equity ownership to ROH shareholders instead of all cash. It seems to me that if the court seeks an equitable remedy it will likely include significant dilution to DOW holders but will be good for the merged entity going forward.

Four Reasons to Own Dow Chemical

There are so many things wrong with Jamaican in Africa's analysis I hardly know where to start. To begin with the P/E ratio is an indication of relative value of the stock price. It does not as you suggest tell you that DOW earns more than it's competitors but only that the market has put a low multiple on DOW's earnings. So it tells you nothing of the efficiencies of the operations.

I do agree with you that without the anchor of ROH DOW would otherwise be able to endure the recession and prepare to take advantage of the next up cycle. Alas ROH is real and in one way or another it will cost DOW dearly. That's what an incompetent cowboy CEO and weak BOD gets you these days in corporate America. Once I read the merger agreement carefully and researched the problems with the Kuwait fiasco I realized that the dividend would be soon toast. So I took my loss at $16.10 and ran "like a thief". The odds for a truly positive outcome for DOW in 2009 are very low in my humble estimation.