And the 100% synthetic exposure only holds for a given day. The ultra ETFs reset every day.

Consider: Portfolio A has $50 in SSO and $50 in cash. Portfolio B has $100 in SPY.
SPY goes down 10%, therefore SSO goes down 20%.
Portfolio A loses 20% of $50, so -$10, final value $90.
Portfolio B loses 10% of $100, final value $90.

What if the next day market goes up 10%?
Portfolio A gains 20% of $40, so +$8, final value $98.
Portfolio B gains 10% of $90, final value $99.

Hey where did my dollar go?

It will let you catch huge intraday moves, however. But over time it costs more and is more volatile.

Specifically re: the 2x ETF’s. This individual hates them–”haven’t people learned about leverage!”. My argument, which he/she disagreed with until we walked through two opposing scenarios and then begrudgingly conceded victory, was that if someone wanted to, say, get long the S and P 500 by $X. One could buy $ X of SPY OR buy 1. $x/2 of SSO and invest x/2 in cash; or a slightly more complex approach, 2. $x/2 in SSO, at the remaining 45% in cash, and 5% say in s and p out of the money puts.

The best thing Barry pointed out in the interview was the idea that sometimes it’s best not to really have a trade on or have a view for that day. Very often, there are simply no great risk/reward trades. There’s a tendency to always want to trade or have a view about things. It’s difficult to fight those temptations that causes one to ‘overtrade.’

- AT

also, pulling the curtain, back a bit, on the ‘Font of the Perpetual Bid’, should really help those who bother to think about it.

as an aside U$D 50 000 x 2%= U$D 1 ooo

U$D 40 x 12 months= U$D ~500/YR.

150lb Beef Quarter @ U$D ~3/lb.= U$D ~500

LSS: Peep should wonder why they’re not ‘rolling their own’

At what point though can you just look at a chart like total credit/GDP, see it is at unsustainable levels, and so LMNOPQ make total sense? Don’t miss the REALLY big picture.

The story about Janus was funny to me…a couple of years ago, a famous legendary “value” investor’s fund company owned 25% of Amazon.com. You are right that this is ridiculous, as the market has not been too kind to Bill Miller the last year or so.

That’s what I was thinking gregh. At some point everybody is going to come up with some sort of move like Barry’s. Especially if it keeps working for him. So who is taking the other side of that trade?. It reminds me of the Janus example above. At some point a bunch of people who have piled in on one side will want to get out on the other.

As a matter of fact, the trade on those ETFs might be towards the predictable black swan event. Funds like that are bound to draw in a huge amount of traders seeking easy money. Maybe you could find a way to lose a little at a time and hit it huge when the thing implodes from the sheer trading counterweight it creates

I think I have changed my mind. The cafe is definitely your star player now. I’m getting waterlogged from all the coffee. It is good java too!

I’m getting a really bad vibe from you talking about and trading the levered ETFs. Objectively I have to sit back and say that no one can trade a 150% position without it creating a huge skew somewhere in the market. It has been my limited experience that those skews don’t last forever and the whipsaw can be deadly or as many of us already know can disappear altogether. If you are taking 50% chunks out of someone with these funds, that has to be some pretty dumb money that is getting smacked around. So how long can a trade like that last before we are hearing the same screams we just went through or people start defaulting on the trade owing to you? Have you taken the counterparty risk in that trade into consideration?