There is a crack epidemic on the stock market. It trades by a variety of street names, FAZ, FAS, SRS, TZA & QID being just a few. Like crack cocaine these vehicles promise fast and stunning highs, one small hit can take you to the top. Occasionally they even succeed, but like crack cocaine these vehicles are doomed to collapse, each successive hit providing ever diminishing returns, lower lows that an addict believes they can only escape from via another hit.
Unlike crack there is nothing illegal about these things, they are short and/or leveraged ETF s. Exchange Traded Funds designed to replicate the effects of shorting various industries and trading with high amounts of leverage like the big boys do. ETF s are a very new concept to finance, they are basically mutual fund like entities that trade on the stock market, making them more liquid and more accessible to investors than mutual funds. They've been around for about two decades, but it's only in the last f
In 2008 leveraged bear etfs like FAZ were tickets to riches, as the stock market crashed they erupted in value, possibly making a few clever operators insanely rich. But that initial success quickly turned nasty. These ETF s are all flawed to the core, they are designed in a way that they decay over time, their values fluctuate up in down, but the overall tend is mathematically almost guaranteed to be down. The easiest way to see this flaw is the look at chart of a leveraged Bull and Bear pair over time. FA
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