King of Wrong Timing

That would be me.

On the 31st of March 2020 I wrote a post, how to play the comeback, https://lifeandequities.wordpress.com/2020/03/21/how-to-play-the-comeback-in-equity/ and in June 2020 No More Fear – https://lifeandequities.wordpress.com/2020/06/08/no-more-fear/

In life, I am quite averse to leverage, loans and such. But recommended taking a leveraged bet on reversal of certain ETFs in certain industries (many months later after until September 2020- Dr. Fauci was saying – we may never make a medicine/vaccine). In fact, the normality was so certain to me that I thought of buying ETFs that would grow 3X the normal ETF. They work by buying underlying swaps. If the index goes 1x per day the ETFs go 3X. They tend to work best when there isn’t daily ups-downs – i.e. volatility drag – but they work remarkably well when there are 70-80% up days and 20%-30% down days. And they tend to work for short term – few months. My recommendations were $TPOR $BNKU $FAS $NAIL $DFEN $FNGU, $DPST

These 3X ETFs – leveraged ETFs – were new to me – they can lose 50% value in a week or gain 100% in very volatile week. In fact DPST ETF went from 50$ to 100$ about 8 times from March – September. I held them only for 5 months from March – July, but most of the gains were made from October 2020 – Feb 2021.

Whilst I did not make outsized gains of 400-500% that could have been made its a good tool (3X ETF) in future industry specific cycles.

800% up

500% up

50$ to 100$ about 8 times, then 500%

1000% up

But now is exactly NOT the time to buy the 3X Industry Long ETFs. As Munger said, “have an assorted collection of tools to be used at the right time”. Leveraged industry specific ETFs are attractive tool in the arsenal when a specific industry is reflective of despondent sentiment.