07 November 2008

The Party Rages On - Zumpano

- The Party Rages On

I first heard Zumpano posthumously, digging up their two records after hearing the New Pornographers' Mass Romantic and reading about Carl Newman's previous Sub Pop band. The video is circa 1994, and is shot in the style of Koreatown karaoke videos, with sing-along lyrics running in front of some generic sorta-romantic narrative.

Why did I pick a song like this, and not Tom Petty's Free Fallin', Toad's Fall Down, or R.E.M.'s Fall on Me?

I was well-prepared for this market pullback--my portfolio is packed with ultra-short ETFs, and a 10% drop over two days means the party is raging on for me.

Bespoke points out the two-day 10% temper tantrum has put the market in with some rarified company:

Worst Two Day Decline Since The '87 Crash

While the declines we saw in October seemed extreme, one landmark we failed to reach during that period was a two-day decline of 10% or more. Well, we can check that one off the list. With two 5% declines in a row, the S&P 500 is now down 10.02% since election day.

What if ultra-short (or ultra-long) 2X ETFs aren't juicing your returns enough in this volatile market environment?

How about triple-leveraged ETFs! 3X!

If I were to name 'em, I'd call them uber-long and uber-short.

Maybe it's a good thing I'm not in marketing.

If these funds ever take off, generate some trading volume, and become an attractive trading vehicle, I'll be sure to use the 'uber' modifier.

Eight uber-leveraged funds started trading already:

Direxion says that the eight 3x leveraged ETFs should launch on Wednesday. They're part of some 36 in the works.

"Do you have an opinion on the direction of the market? Maybe you are interested in overweighting or under-weighting a certain sector. Direxion Shares powerful 3x leverage (the highest in the ETF and mutual fund industry) seeks to amplify the performance (positively or negatively) of your investment capital by 300%," said the company in recent marketing material made available to investors.

For example, if the Russell 1000 Index gains 1% in a trading session, the Direxion Large Cap Bull 3x ETF is designed to gain 3%. On the other hand, the Direxion Large Cap Bear 3x ETF would move in just the opposite direction. If the same Russell index fell 1%, the ETF's goal would be to gain about 3%.

I linked the tickers to stockcharts.com's charts for these newly-hatched ETFs. And here they are:

3x Russell 1000 Index Long/Short - BGU/BGZ
3x Russell 2000 Index Long/Short - TNA/TZA
3x Russell 1000 Energy Long/Short - ERX/ERY
3x Russell 1000 Financials Long/Short - FAS/FAZ

No comments: