There is a big difference between betting and investing. Investing in inverse ETF’s equates to betting. This article talks about the demise of XIV. People investing in products such as XIV should be given a lobotomy sponsored by the NHS. This is starting to bring back memories of 2008. The culprit was Hedge Funds then. Today it is ETF’s. That time one person I spoke to that worked for a bank that was heavily marketing Hedge Funds admitted that they did not read the fine print and did not know about gating. Another person told me that he was told hedge funds would never lose money. I wonder what that person’s view would be on ETF’s today. I am not a betting man but if I was then I would say that he would cease investing in ETF’s for the next one year. I would be telling him to keep his wallet out.
The active versus passive debate has been skinned so many times that there is nothing left to skin. The answer is that there is a place for both. However, in neither should there be a place for inverse ETF’s. There is nothing wrong with shorting stocks or ETF’s. You cannot crucify the undertaker for making money when people die. Investing in inverse ETF’s is like injecting yourself with a lethal substance hoping that you will make money off the insurance. The reality though is that action of your will probably leave your health beyond repair and cause heartbreak to the ones closest to you.
Except for two people; everyone else I know who passed through the gates of Credit Suisse has been glorified cold calling salespeople. Their structured products are so beautifully created that the client will not even realise that the only people making money are the banks themselves. Of those two people, one died and the other is a gem of a person who is thankfully working for another institution. I have told him that leaving Credit Suisse was the best thing that he did. It has been some time since I spoke to him. Maybe I should now.