Two More War Crime ETFs on the Way

Presented without comment…

From Brendan Conway at Barron’s:

NYSE Arca put out a notice yesterday about two unusual-sounding fund launches slated for Wednesday. I say “unusual sounding” because I can’t actually find a prospectus for either at the website of UBS AG’s ETRACS, the company Arca says is running them.

The names suggest that they’re leveraged dividend exchange traded notes:

  • ETRACS Monthly Pay 2xLeveraged Dow Jones Select Dividend Index ETN (DVYL)
  • ETRACS Monthly Pay 2xLeveraged S&P Dividend ETN (SDYL)

We’ll have more on this as we get the information. But imagine that: If your dividend payout is too small, well, leverage it up!

Okay, I can’t resist, one comment: Leverage and the long-term holding periods that are germane to dividend investing don’t mix.  It’s like octopusses and sandwiches.  Leveraged funds erode over time because of negative compounding (they reset each day) and dividend strategies only work IF YOU HOLD THE FUCKING THING LONG ENOUGH TO RECEIVE THE DIVIDENDS.

Everyone involved with this should be forced to apologize, in advance, for the stupidity inherent in these.

AND they’re ETN’s – vastly inferior to ETFs in that they are essentially a note backed by the full faith and credit of the issuer – in this case UBS).  These products are unsuitable for anyone, in my view.  As a long-term investment they are absurd and as a shorter-term trading vehicle they are unnecessary.

I’ve said some harsh things about UBS before.  I felt bad afterwards.  Not anymore.

Just go away.


Now This: Leveraged Dividends? (Barron’s)



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