You Ask, Oberg Answers

On Stockpickr Answers today, Eric Oberg responded to questions and comments posed members of the Stockpickr community.

Anybody can ask, respond or comment on Stockpickr Answers; the top responders get ranked in our "Top Analysts" section. Here are the questions and comments to which Oberg responded.

  • Oberg is back to bust the myth of short ETFs with "The Perils of the ProSharesUltra Shorts"...

    "I believe the purveyors of these products were careless, reckless and perhapseven grossly negligent in disclosing the risks. Either they were a) completelyclueless as to how dramatically these could underperform due to volatility... orb) they knew that performance looked horrendous at high volatilities but chosenot to disclose... To be fair, I have no idea which is the case, but this raisesmy eyebrows a bit."

    Is Oberg on to something here?
  • These are 1 day intraday trades.
  • Oberg's response:

    Now, the counterarguments I hear most often for the usage of these run along thefollowing:

    1) These allow me to short in accounts that I otherwise could not, such as anIRA (which is kind of like saying, "I do not wish to ban antihistamines becausenow I can't mask steroids..."),

    2) You need to know how to trade them -- they are for day trades only (ifeveryone went home flat at the end of the day, the fund company would have noassets under management... so the subtext to that argument is that you are hopingfor a greater fool to hang on to these -- this isn't the price of wheat or theprice of Citi ( C); the product has fatal flaws, so this argument is basicallysaying you want to benefit not from your investment acumen, but by foisting aflawed product on others)

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