Man is it ever! What a POS this has been! They need Ben Bernanke to go down there and juice their markets big time.
The MSCI Latin America Index rose more than 1000% between March 2003 and May 2008, but really hasn't done much since 2009. When are Latin American stocks finally going to rise for good? LBJ is so frustrating!
The FED is essentially devaluing the currency. The stock market will continue to roar, but eventually the devalued currency will be felt in the form of higher prices and inflationary pressures. When you add in that awful Marxist Obamacare program, this is a recipe for pain for the American economy and the middle class for years to come. The stupidity of the typical American voter never ceases to amaze me.
Sorry, I meant that TZA would have lost, on average, about 40% during any 12-month period between June 1995 and today. However, its return would not have been -40% on an annualized basis.
My current strategy for shorting TZA is to short equal dollar amounts every month and as the value of TZA decreases, money is released from margin that I will use to purchase something else, such as SVXY or even LBJ, TQQQ, ror UPRO.
You are referring to a return on your entire portfolio. I was referring to a return just on the segment dedicated to TZA. If I didn't use my buying power to short TZA, I wouldn't use it for anything else anyway.
I obtained daily total return closing values for the Russell 2000 Index dating back to June 1, 1995. Based on my calculations and on the closing value for TZA of $22.63 on 9/18/13, if TZA had been in existence as of June 1, 1995, it would have closed at a value of $2,887,609 on that day! It is a fantastic short and would have lost close to 40% per year on an annualized basis since June 1995.
It ties up your buying power.
If you have a 100K account on Jan 1 and you short 100K worth of TZA, that takes 90K of buying power. At the end of the year you profited 37K so you have 137K. Your account value has increased 37%, not 36,000% or whatever. Of course you could also add to the position all the way down as TZA drops.
The one caveat is another crash is possible and in that event TZA could triple or more.
LBJ has increased by nearly 30% so far during September. It is about time LBJ rallied strongly, although I certainly am not yet ready to declare that LBJ's slumber has finally ended.
You have never shorted something before?
If I short TZA, my return relative to the costs incurred by me would actually be far greater than 37% per year. If TZA drops steadily in value from the day I sell it short, my only cost is going to be the transaction costs of the trade. I use Ameritrade and pay $5/trade. If I were to sell short $10,000 worth of TZA and cover a year later, if TZA lost 37% during the year, I would need to pay $6,300 to cover the short position. Subtracting off $5 for the two commissions and around $0.20 in exchange fees, the net gain would be ($10,000 - $6,300 - $5 - $5 - $0.20), or $3689.80. The actual costs incurred by me would by the two commissions and the exchange fee, or about $10.20. So my % gain would actually be $3689.80/$10.20, or 36,174.51%.
Very nice. Just short it with 75% of your money and that's 25% per year. Sweet. Double your money every 3 years!
According to my calculations, a -3x ETF tracking the Russell 2000 dating back to 1987 would have lost about 37% on an annualized basis between 1987 and today.