In the first week of December, the annual IMN Super Bowl of Indexing conference took place in Phoenix. I had the opportunity to speak at the event once again as an IMN ETF advisory board member. I also used the opportunity to take some time away from the conference and explore the Phoenix and Scottsdale area. Here are some of my observations from the conference and my trip to Phoenix.
Over the course of the last two years, I have spoken at several conferences and outlined the growing problems with leveraged and inverse-leveraged exchange-traded funds. I had a rather hotly contested conversation -- argument, perhaps -- with the attorneys who represented one of these leveraged promoters while participating in a Coral Gables, Fla., conference panel this year. I've written various articles on the subject of leveraged and inverse-leveraged ETFs, now archived on my Web sites, and contributors such as Eric Oberg have also written about the dangers of these products.
Our efforts have begun to pay off. Many brokers have taken the initiative to curtail trading in leveraged and inverse ETFs. On Dec. 1, Finra instituted new margin rules for leveraged ETFs. At the 2008 Super Bowl of Indexing, purveyors of leveraged and inverse ETFs were flouting their products and discussing aggressive plans for the future. Both ProShares and Direxion were sponsors or exhibitors at that event. At the 2009 event, Direxion, the firm whose three-times products were all the rage in 2008 was conspicuously absent. Remember, you can't spell Direxion without the word "dire."