leveraged ETFs are for gambling

Now I'm just a little blog over here, but I've said several times in the past that ETFs are very wonky in how they work. They don't buy stocks they do things with warrants, futures and options and force other people to go buy or sell. Its stripped the PURPOSE OF INFORMATION out of the market.

The purpose of trading is to determine the correct pricing for an equity. Traders buy and sell the thing and keep the price accurate and realistic (theoretically) or at least go probe the depths and heights of prices to see where people are going to freak out.

Think about the tape during the day. Those aren't all individuals making decisions. Most of those trades are machine driven, and most of THOSE aren't related to the immediately occurring price "discussion". They are to cover options, or as part of pair trades and vastly more exotic trading strategies. They are to cover warrants, to refill market makers' inventories, and in some cases to just swoop up a bunch of shares and hide them until later. Shares trade in dark pools of liquidity (cue eerie black metal soundtrack here — I suggest Burzum)

This is why the stock market is broken. Its not investing, its gambling, and the derivatives have selfishly removed the information component from the main market. Of course right now the information is this: we're fucked, its all over valued, sell sell sell !! Which is correct and as it should be. Would've been better if it had started a few years ago.

The Fly (as much he wouldn't admit it) has morals too:

While it’s true, being long 10,000 SRS on a 9 point day can be fun; it also can twist your stomach into knots when the opposite occurs, going up. For the love of large intestines and sanity, in 2009, “The Fly” will “go old school” and start short selling individual names directly, rather than through proxies.

http://www.ibankcoin.com/flyblog/index.php/2008/12/19/no-more-volatility/

Of course I made loot off SKF 3 times this week, so ...