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Leveraged ETFs On The Ropes

The world of one-day wonders is under serious fire. Enough people stayed on the leveraged ETF roller coaster too long and wondered how a theoretical 30%+ gain turned into a small loss that the class action lawsuit wave has started. And what better place to start than the ETF that most folks who expected at least part of last year's bonus to be paid in stock had to hedge their employers, the SKF. ProShares will have a fun time reliving and explaining away performance track records such as one six week period last fall.

For example, in a six week period from September 15, 2008 through October 31, 2008, the DJFI declined by over 17%. Despite a reasonable expectation based upon Defendants' disclosures that SKF would rise by up to 34% during this period, SKF actually fell by nearly 6%.

If anything, regulators should be throwing ProShares a party. If all those evil short sellers who allegedly caused the market to free fall wound up losing money by doing what they do best, isn't that what the masses have been waiting for all along?


(Trump image courtesy Flickr user Gage Skidmore)

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