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Re: SEC Proposing to block leveraged ETF!

Posted: Fri Jan 31, 2020 2:53 pm
by butricksaid
willthrill81 wrote: Thu Jan 30, 2020 5:35 pm Trying to protect people from themselves is a very slippery slope that basically says 'I know what you need better than you do.'
Overly bullish mindset.This can also avoid hysteria and hyper-valuation by smoothing out growth curves.

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Jan 31, 2020 3:42 pm
by willthrill81
butricksaid wrote: Fri Jan 31, 2020 2:53 pm
willthrill81 wrote: Thu Jan 30, 2020 5:35 pm Trying to protect people from themselves is a very slippery slope that basically says 'I know what you need better than you do.'
Overly bullish mindset.This can also avoid hysteria and hyper-valuation by smoothing out growth curves.
It has nothing to do about being bullish or bearish. It's about letting adults do what they want as long as it isn't explicitly hurting others (i.e. freedom).

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 3:30 pm
by butricksaid
willthrill81 wrote: Fri Jan 31, 2020 3:42 pm
butricksaid wrote: Fri Jan 31, 2020 2:53 pm
willthrill81 wrote: Thu Jan 30, 2020 5:35 pm Trying to protect people from themselves is a very slippery slope that basically says 'I know what you need better than you do.'
Overly bullish mindset.This can also avoid hysteria and hyper-valuation by smoothing out growth curves.
It has nothing to do about being bullish or bearish. It's about letting adults do what they want as long as it isn't explicitly hurting others (i.e. freedom).
Letting people do what is individually in their best interest can still lead to harm for the general population, a tragedy of the commons scenario.

From the way it is described, only asking individual to checkbox a risk disclosure, it seems pretty tempered. This isn't any different from forcing stock exchanges to have circuit breakers or some regulation to prevent panic selling or vicious cycles due to herd mentality. SEC doesn't want an equivalent crypto crash of 2018 to take place in the stock market by preventing things from going exponential when it should be more linearly progressing upwards.

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 3:38 pm
by dave_k
butricksaid wrote: Fri Feb 07, 2020 3:30 pm
willthrill81 wrote: Fri Jan 31, 2020 3:42 pm
butricksaid wrote: Fri Jan 31, 2020 2:53 pm
willthrill81 wrote: Thu Jan 30, 2020 5:35 pm Trying to protect people from themselves is a very slippery slope that basically says 'I know what you need better than you do.'
Overly bullish mindset.This can also avoid hysteria and hyper-valuation by smoothing out growth curves.
It has nothing to do about being bullish or bearish. It's about letting adults do what they want as long as it isn't explicitly hurting others (i.e. freedom).
Letting people do what is individually in their best interest can still lead to harm for the general population, a tragedy of the commons scenario.

From the way it is described, only asking individual to checkbox a risk disclosure, it seems pretty tempered. This isn't any different from forcing stock exchanges to have circuit breakers or some regulation to prevent panic selling or vicious cycles due to herd mentality. SEC doesn't want an equivalent crypto crash of 2018 to take place in the stock market by preventing things from going exponential when it should be more linearly progressing upwards.
Leveraged funds are hardly a tragedy of the commons scenario though. I asked above if anyone could reference studies showing that allowing ordinary investors to use them has caused any significant harm, but I have yet to see anything.

A bit of a technical nitpick, since I don't think you meant it literally, but isn't the overall growth trend of the stock market expected to be exponential, not linear?

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 5:02 pm
by watchnerd
dave_k wrote: Fri Feb 07, 2020 3:38 pm

Leveraged funds are hardly a tragedy of the commons scenario though. I asked above if anyone could reference studies showing that allowing ordinary investors to use them has caused any significant harm, but I have yet to see anything.
Perhaps you are unfamiliar with the system-wide damage that Long-Term Capital Management caused?

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 5:25 pm
by dave_k
watchnerd wrote: Fri Feb 07, 2020 5:02 pm
dave_k wrote: Fri Feb 07, 2020 3:38 pm

Leveraged funds are hardly a tragedy of the commons scenario though. I asked above if anyone could reference studies showing that allowing ordinary investors to use them has caused any significant harm, but I have yet to see anything.
Perhaps you are unfamiliar with the system-wide damage that Long-Term Capital Management caused?
Wasn't that a hedge fund that was not open to ordinary investors, and that was actively managed, with concentrated risks and unusually high leverage? That's not the same as a leveraged/inverse ETF that tracks an index. I'm not advocating that everyone be allowed into hedge funds.

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 5:34 pm
by watchnerd
dave_k wrote: Fri Feb 07, 2020 5:25 pm
watchnerd wrote: Fri Feb 07, 2020 5:02 pm
dave_k wrote: Fri Feb 07, 2020 3:38 pm

Leveraged funds are hardly a tragedy of the commons scenario though. I asked above if anyone could reference studies showing that allowing ordinary investors to use them has caused any significant harm, but I have yet to see anything.
Perhaps you are unfamiliar with the system-wide damage that Long-Term Capital Management caused?
Wasn't that a hedge fund that was not open to ordinary investors, and that was actively managed, with concentrated risks and unusually high leverage? That's not the same as a leveraged/inverse ETF that tracks an index. I'm not advocating that everyone be allowed into hedge funds.
Yes.

But it was a "leveraged fund".

And it caused a massive tragedy of the commons.

Re: SEC Proposing to block leveraged ETF!

Posted: Fri Feb 07, 2020 6:03 pm
by pepys
Swaps and futures help companies manage risk, keeping the economy more stable. Those of us taking the additional risk are doing a great service to the economy. Hedgefundie may be the greatest hero of our age.

All joking aside, anecdotes of negative externalities are not enough, because there are also positive externalities and potential benefits to the investors themselves. The SEC should provide an evidence-based cost benefit analysis before they force companies to write new software putting hurdles in the way of investors wanting to invest in these. Instead the proposal is so vague that it would be impossible to make one. If the hurdles are small, I doubt this is going to change anything, except waste time and resources, since they already give warnings. And if the hurdles are large, it will severely limit investors' freedom and might hurt the economy over all.