From the a picture is worth 1000 words file, I offer this chart. Clearly the Up Shares (UCR) and the Down Shares (DCR) are intended to move inversely of each other.
I think UCR moves with oil and DCR moves inversely to oil, both on a one to one basis.
The two funds will pay interest by virtue of capturing the energy effect in the derivatives market thereby having money left over for short term treasuries.
Conceptually there is probably utility with these but I need to look further to learn the ins and outs. If you know something please leave a comment.
7 comments:
A little more info in this article at IndexUniverse.com
http://www.indexuniverse.com/index.php?section=6&id=1718
It's the addition of a sector specific short that seems to be its value. But, the expense ratio is high, 1.7. The long part may have value in the absence of anyother etf. For example, there is not a lumber specific etf. When the boat is filled with choices, then you can go long top third momentum choices and go short bottom third. Oh boy or oyhhve? Without doing our own backtesting and having a degree in finacial enginering, the diy investor could be out on a limb with some very seductive products.
http://worldbeta.blogspot.com/2006/11/intro-reading.html
Roger, It's all your fault. More stuff out there to decide if there is a better mouse trap, or if there's no free lunch. I think you have a talent for sniffing out this dilemma. Such is the price of an open mind and curiosity. Two of the listed articles at the above link suggest a whole new process in allocation. You can get lower volatility and keep good returns. The key is to leverage a low risk asset class, like bonds. This way the risk of equities has parity with the risk of bonds. Or, you de-lever equities to capture the same parity. In this case I suppose you could get a leveraged position of equities with half the usual allocation and then give the surplus to beef up the usual bond allocation.
I've really dumbed it down and there's a lot "meat" as you say on the bone that remains mystery (meat) to me. A theme of your blog, I think, has been to keep looking for the vehicle that offers steady performance where the tortoise wins the race. Have a look, set me straight. Is there a building block that takes us closer to the ideal portfolio?
I read the first B-water doc and I think I understand their Beta, All-Weather approach. I'd sure like to see an example of how an individual investor could enact this concept.
I was totally lost when the paper turned to discussing alpha. Keep in mind I don't have a degree in finance, but isn't alpha a result, not something to choose?
Sure I want alpha! Give me alpha from as many sources as possible.
It's something to dangle out in front of us, make us want but can't have. Was it Chevy Chase that described one of his females leads as, "like sucking a lifesaver with the wraper still on." I was hoping Roger could help with a practical interpretation and actionable steps within our grasp. Otherwise, the baliwick of institional products.
OT
I pulled up a three yr chart of technology etfs and the usd. Amazing to see how little tech has helped the investor. I guess a lot of bubble to work off. Are we done. Is there value? Could a weaker dollar trigger software upgrade...vista.
TomK..keep reading the other two primers..fairly short. Let us know if you see a practical nugget.
Claymore is also the name of a mine.
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