Wall Street Free Thinker

A Skeptic on Leveraged ETFs

sorry, thought my first comment got lost on the internet :)

A Skeptic on Leveraged ETFs

You mean they should do as well as T-bills because the assets are usually parked in t-bills as collateral for the swaps. This is fact that may be lost on many of these readers who may not understand what you're getting at. What would be more interesting to me is what the cost of the swaps are and how they change with the market. Like you say, if you remove the performance from the index you should get the friction, and that would be the swap cost plus fees. I don't imagine they pay the swap costs out of the advisor fee. It also may be interesting to see if some providers get better swaps than others. If it's better to short and etf of use a levered product.

A Skeptic on Leveraged ETFs

Interesting idea, if what you mean is that levered ETFs park 100% of their money in T-bills and use it as collateral to buy the swaps. So, like you say, if you remove the return you should get the t-bill rate. The question is, do the advisors pay for the swaps out of their advisor fees or the fund assets. I'd imagine the latter. So another interesting question is, doing your analysis, would you discover the cost of these contracts and how they change over time.

In the Midst of an Extreme Black Swan (Part II)

You're right, this is the derivitives meltdown many smart people predicted. It's too bad that we don't see it for what it is. If the simple S&L took 6 years to untangle this is a decades long problem. But life will go on.

The Great Consumer Crash of 2009

Credit, on the scale discussed in this article, is how productivity is measured for large societies. If we get another boost in productivity, perhaps robots that follow us around and do our mundane chores, the credit/debt crisis will disappear, as it did in the late 90s, when the slow down in productivity (from PCs) was given another boost with the Internet (communications). I don't see that technological advance, but that doesn't mean it won't happen. If it doesn't, then yes, as the article excellently points out, everyone will have to adjust to stagnant productivity. But as some commentators have pointed out. America has always been a magnet for the world's greatest talent. That talented people now move to Australia or Canada is what should really worry us.