Big Flashing Market Top Signal
GraniteShares has listed 18 ETPs offering three-times leveraged and inverse exposures to popular US-listed stocks.
The 18 leveraged and inverse ETPs are listed on the London Stock Exchange (LSE) with a total expense ratio of 0.99%.
The stocks covered include most of the momentum Robinhood favorites, including Tesla, Uber, and Apple. Nothing says "top of the market" like investing in the "GraniteShares 3x Long Tesla Daily ETP (3LTS)" whose underlying stock has a PE of like 1200 or even better in the "GraniteShares 3x Long Uber Daily ETP (3LUB)" whose underlying stock has never even come close to being able to calculate a PE.
This was my favorite line, "The ETPs enable sophisticated investors..." LOL, I am pretty sure that sophisticated investors are able to much more efficiently leverage their trades if they want this much leverage (in any market, but particularly a volatile one, the math of the daily resets means not only a lot of fees, but also a steady value leakage from the fund -- see postscript).
The game is given away in the next line which says, "The range of ETPs is listed at $5.00 per share while most of the underlying stocks trade at prices in excess of $200". Right, because sophisticated investors can't come up with $200 for a single share. This product is obviously aimed, entirely inappropriately, at new Robinhood style NOOBS day-trading with their unemployment check and who grew up in an era when stocks only go up (and whose value is, like Bitcoin, untethered to any fundamental).
This is sleazy as hell -- avoid it at all costs.
Postscript: Here is an example of the result of the leakage math that just gets worse in a volatile market like we have had this year. Consider two existing S&P500 3x leveraged funds, SPXS is triple short and SPXL is triple long. The S&P is up 8% for the year, so the average investor would think, "so, SPXS is down 24% and SPXL is up 24%"? But that is not right, because of the daily recalculation in a volatile market. We will ignore the math (sometime I might post a spreadsheet) but the result is this: With the S&P500 up 8% YTD, the SPXS is down a whopping 60% and the SPXL is DOWN (not up) but down almost 9% -- you can see this right on their web site. You would have been better off in either case just to buy or short SPXX with leverage. You might have even been better with options -- making leveraged bets on momentum stocks generally means one expects volatility, and at least options increase rather than decrease in value with volatility. You have to deal with expiration and theta in options, but as we have seen these leveraged funds have their own theta-like behavior over time.
Warning: I am not, not, not an expert nor a licensed investment advisor or any other sort of advisor. But take my word for it -- don't buy these.
