Jack Pitcher
Appearances
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
Part of the reason for that is investors looking to get rich quick, people who are attracted to gambling with their money. Some of these ETFs can have huge gains and losses in a single day. And for most of the last two years, it's been huge gains. People have flocked to these products and they make it easy to make really large bets on a single stock or a stock index.
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
There's plenty of investors who bought these last year and now some of them, depending on the ETF they're in, are down 80 percent from highs. We can look at the inflows and outflows from these funds and we're actually still looking at net inflows for the year, meaning people have put more money into them than they've taken out of them.
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
Granted, there could be lots of people holding these funds that are sitting on huge paper losses. They just haven't sold and realized those yet because they're probably hoping they go back up.
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
A thing about these funds that not everybody understands at first is they use borrowed money to create a leveraged return over a period of one day. A problem with these funds is that if you hold them for a longer period, which they say that they're not intended to be held. The performance can start to diverge pretty substantially from their stated daily goal.
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
That's because if it starts going down a lot, say you had $10 and the leverage ETF fell by half in a day and now you have $5, even if there's a big rise the next day, your investment has already gone down so much that the percentage gain is having less of an impact on the way up.
WSJ What’s News
Boeing Wins Contract For Next-Generation Jet Fighter
There can come a point where these go down so much that if an investor held them the whole time, it's going to be very hard for them to ever recover to their original investment, even if the stock is going up quite a bit again.