Comments on Caveman Forecaster: Data Analysis, Graphing, and Forecasting: Leveraged ETF's Can Reduce Risk? Yes, really they...

When do you see things improving for Leveraged Nat...

2010-03-17T21:58:55.133-05:00

When do you see things improving for Leveraged Natural Gas prices? and if so then When?

Mark, I said leverage CAN reduce risk if employed...

2009-06-24T11:00:57.244-05:00

Mark,

I said leverage CAN reduce risk if employed in this fashion. But there is a big difference in using standard leverage in an account (by using margin or borrowing) and using leverage via a leveraged ETF which does not by definition put any more capital at risk.

So maybe we are talking apples and oranges here but I still think this concept is valuable to risk downside risk. I think of it like this, rather than invest 100% of an account in a market ETF like SPY, if you invest 50% of it in SSO and leave the rest in cash you limit your downside significantly but the upside stays the same.

Leverage reduces risk? Nonsense. What you did is ...

2009-06-23T19:28:15.088-05:00

Leverage reduces risk? Nonsense.

What you did is to REDUCE leverage by using a very poor performing asset.

Believe me: using leverage that way limits your maximum loss, but it also incurs losses almost certainly over longer timeframes. And over shorter timeframes, the loss probability is MUCH higher. So you end up with limited risk, but also with guaranteed limited profitability....

Ah yes, the barbell, but cash rates are so low now...

2009-06-10T08:21:21.815-05:00

Ah yes, the barbell, but cash rates are so low now. One idea i've been toying with is to keep most of an account in the high yield etf HYG (11% yield) and a smaller percentage in some combination of 2x S&P inverse (SDS) or 2x Treasuries inverse (TBT) to hedge against risk aversion or general yield blow-out.