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We got a lot of mail and comments regarding what appeared as some poor tracking issues with a few leveraged inverse products. ProShares has been responsive to this issue. ETF Digest friend and colleague Greg Newton [NakedShorts.typepad.com] took the information the issuer sent us and reworked it to account for a dividend which skewered results. Greg took the time to produce the following table showing the results. You can see once the dividend adjustment is made, the result from the previous week made tracking smoother and acceptably efficient.



Additionally, I’ll repeat my observations made Thursday evening that investors should not expect precise intraday tracking and need to give some of these issues time to work out whatever perceived inefficiencies may exist. This might mean waiting a few days dependent on how exotic, illiquid and new the leveraged issue might be. Finally, investors should take care when placing orders to ascertain where the leveraged issue is trading versus the comparable index and/or unleveraged issue.

The month of June ends with a whimper and without any significant fireworks. Goldman Sachs stating to buy puts on euro stocks was impressive. How much clout they have remains to be seen.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SDS, MZZ, QID, TWM, IYR, SRS, SIJ, SCC, DBA, DAG, EFA, EFU, EEM, EEV, EWZ, FXI and FXP.

• A Russian Perspective on the Rise of the U.S. Dollar  »
• From an Age of Exuberance to an Age of Despondency  »
• U.S. vs. the World: Sectors Matter  »
• Emerging Markets Crash and Burn: Look to Africa & Middle East Frontier Instead  »
• Friday Outlook: Commodities, Emerging Markets  »

David Fry

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