Friday, January , 2009
(Cont'd from above)...

Jim:     Now I had always figured that the pros know what a hoax these products are… and know that these ProShare UltraShort ETFs just don’t deliver what people expect from them.. but today on TheStreet.com, where I am chairman, I read an article by a fellow by the name of Eric Oldberg, I have mentioned him before… he is a contributor who is a managing director at Goldman Sachs in commodities, currencies, and fixed income for 17 years… and that article by Oldberg made me feel completely shocked, and dismayed, and betrayed by our government…. it seems that even the most wise and wizened investment pros get fooled by these ridiculous ProShort ultra nonsense instruments… in this weekends Barons Roundtable, Oldberg reports that Mark Favour, a very smart guy… made a very huge bet last year against China. It was an amazing call… China was down gigantically.. anybody who shorted China made a fortune… Favour recommended two ways to do it… shorting the best Chinese ETF, known as the iShares FTSE/Xinhua 25 Index… okay, you know it is a long thing… or he said buy the ProShares Ultra FTSE XINHUA China 25... that would give you double the shorting power if you use the ProShares Ultra… okay, both were obviously meant to capture on the downside… but guess what.. you would have had a 46% gain if you just shorted the index.. but if you bought the ProShares Ultra which was meant to really make a big bet against China… you lost 57%… this stupid piece of nonsense went from 82 to 35 even as the index that it was supposed to be shorting with double the fire power was down huge.. you lost huge money on a gigantic short bet against one of the worst performing stock markets in the world of all time.

I think that is completely outrageous… these things just don’t work the way people think they do… they generate catastrophic loses even when you are right about the direction of the underlying index.. this has got to be stopped… the public must be protected from these marketing gimmicky ETFs… they simply don’t work the way the public thinks they do… they are a trap… and the issuers, Oldberg says, are careless negligent and reckless… I could not agree more… if I were Mary Shapiro, who is Obama’s incoming SEC chair, I would after restoring the up took rule… ban these preposterous products… I hope that she will go to TheStreet.com and read this article… I believe the SEC had no idea what these were really about when they approved them… it isn’t enough that they are repeatedly used to manipulate many sectors… by knocking them down with rapid fire speed… they also just don’t work.

The SEC must at least attempt to protect you… from repetitious products that, like these, mislead you… and also get around the margin rules. By allowing too much power to be used by uninformed individuals… both the amateurs and the pros… who haven’t got on to the absurdity of these instruments… they must be stopped… repealed… removed from the exchanges… they just approved some triple ultras… these are like cigarettes… they are just way to hazardous to the financial health of your portfolio… if you don’t believe me, go read Oldberg’s piece… he knows more about the rivets than anyone I have ever read… he knows that these instruments are an abomination… I am with Oldberg… madam soon to be chairman… ban the Pro bear UltraShort funds… they are a travesty that your predecessor the reprehensible Chris Cox, should never have approved… and I am betting that he didn’t even understand them… as they were way over the head of the worst Chairman this once great commission has ever seen.

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