[MadeInTaiwan]

[quote=stockstradr]MadeInTaiwan,

I do agree with the implied message of your post, that I need to look carefully at UCO and understand better how they mimic 2X that Dow Jones Index, and I need to better understand what that DJ index itself is.

Good points. Let me look into it.[/quote]

I actually had no implied message. With the current credit bubble bursting, I’ve been conditioned to question anything that claims to beat an index long term with the exception of Berkshire and a few like it.

In my simple mind, the only way the fund can accomplish this is either leverage or hedge. Leverage increases you gains when you win, but also increases your losses when you loose. Hedging when done right protects you against loss, but it comes at a price. You must use some capital to bet the other way, which would lessen your gain compared to “all in”.

Also, the maintenance cost of “rolling” futures should be higher than a fund that holds equity and only adjust to reflect composition change in the index it tracks. The fund has to continuously buy futures contracts, and sell or collect on the matured contract. Gains – losses will also be continuously calculated and any tax burden will be passed to the individual investor.

Still, a rolling fund like this seems to be the only way for an individual to bet on commodities without being a day trader. Without knowing more, I would lean towards a “vanilla” tracking fund without any “multipliers”.

Very cool information. Thanks again for educating the list (and me in particular)

MadeInTaiwan

[MadeInTaiwan]

[quote=stockstradr]MadeInTaiwan,

I do agree with the implied message of your post, that I need to look carefully at UCO and understand better how they mimic 2X that Dow Jones Index, and I need to better understand what that DJ index itself is.

Good points. Let me look into it.[/quote]

I actually had no implied message. With the current credit bubble bursting, I’ve been conditioned to question anything that claims to beat an index long term with the exception of Berkshire and a few like it.

In my simple mind, the only way the fund can accomplish this is either leverage or hedge. Leverage increases you gains when you win, but also increases your losses when you loose. Hedging when done right protects you against loss, but it comes at a price. You must use some capital to bet the other way, which would lessen your gain compared to “all in”.

Also, the maintenance cost of “rolling” futures should be higher than a fund that holds equity and only adjust to reflect composition change in the index it tracks. The fund has to continuously buy futures contracts, and sell or collect on the matured contract. Gains – losses will also be continuously calculated and any tax burden will be passed to the individual investor.

Still, a rolling fund like this seems to be the only way for an individual to bet on commodities without being a day trader. Without knowing more, I would lean towards a “vanilla” tracking fund without any “multipliers”.

Very cool information. Thanks again for educating the list (and me in particular)

MadeInTaiwan

[MadeInTaiwan]

[quote=stockstradr]MadeInTaiwan,

I do agree with the implied message of your post, that I need to look carefully at UCO and understand better how they mimic 2X that Dow Jones Index, and I need to better understand what that DJ index itself is.

Good points. Let me look into it.[/quote]

I actually had no implied message. With the current credit bubble bursting, I’ve been conditioned to question anything that claims to beat an index long term with the exception of Berkshire and a few like it.

In my simple mind, the only way the fund can accomplish this is either leverage or hedge. Leverage increases you gains when you win, but also increases your losses when you loose. Hedging when done right protects you against loss, but it comes at a price. You must use some capital to bet the other way, which would lessen your gain compared to “all in”.

Also, the maintenance cost of “rolling” futures should be higher than a fund that holds equity and only adjust to reflect composition change in the index it tracks. The fund has to continuously buy futures contracts, and sell or collect on the matured contract. Gains – losses will also be continuously calculated and any tax burden will be passed to the individual investor.

Still, a rolling fund like this seems to be the only way for an individual to bet on commodities without being a day trader. Without knowing more, I would lean towards a “vanilla” tracking fund without any “multipliers”.

Very cool information. Thanks again for educating the list (and me in particular)

MadeInTaiwan

[MadeInTaiwan]

[quote=stockstradr]MadeInTaiwan,

I do agree with the implied message of your post, that I need to look carefully at UCO and understand better how they mimic 2X that Dow Jones Index, and I need to better understand what that DJ index itself is.

Good points. Let me look into it.[/quote]

I actually had no implied message. With the current credit bubble bursting, I’ve been conditioned to question anything that claims to beat an index long term with the exception of Berkshire and a few like it.

In my simple mind, the only way the fund can accomplish this is either leverage or hedge. Leverage increases you gains when you win, but also increases your losses when you loose. Hedging when done right protects you against loss, but it comes at a price. You must use some capital to bet the other way, which would lessen your gain compared to “all in”.

Also, the maintenance cost of “rolling” futures should be higher than a fund that holds equity and only adjust to reflect composition change in the index it tracks. The fund has to continuously buy futures contracts, and sell or collect on the matured contract. Gains – losses will also be continuously calculated and any tax burden will be passed to the individual investor.

Still, a rolling fund like this seems to be the only way for an individual to bet on commodities without being a day trader. Without knowing more, I would lean towards a “vanilla” tracking fund without any “multipliers”.

Very cool information. Thanks again for educating the list (and me in particular)

MadeInTaiwan

[MadeInTaiwan]

[quote=stockstradr]MadeInTaiwan,

I do agree with the implied message of your post, that I need to look carefully at UCO and understand better how they mimic 2X that Dow Jones Index, and I need to better understand what that DJ index itself is.

Good points. Let me look into it.[/quote]

I actually had no implied message. With the current credit bubble bursting, I’ve been conditioned to question anything that claims to beat an index long term with the exception of Berkshire and a few like it.

In my simple mind, the only way the fund can accomplish this is either leverage or hedge. Leverage increases you gains when you win, but also increases your losses when you loose. Hedging when done right protects you against loss, but it comes at a price. You must use some capital to bet the other way, which would lessen your gain compared to “all in”.

Also, the maintenance cost of “rolling” futures should be higher than a fund that holds equity and only adjust to reflect composition change in the index it tracks. The fund has to continuously buy futures contracts, and sell or collect on the matured contract. Gains – losses will also be continuously calculated and any tax burden will be passed to the individual investor.

Still, a rolling fund like this seems to be the only way for an individual to bet on commodities without being a day trader. Without knowing more, I would lean towards a “vanilla” tracking fund without any “multipliers”.

Very cool information. Thanks again for educating the list (and me in particular)

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]MadeInTaiwan

Just as a heads up. Rather than contributing 100 a month and being the owner of the account you may want to consider having your parents open the college savings paln in their name and send them the money to contribute. This way it does not show up anywhere in the calculations for financial aid.

Safe Harbor

Need to have a good relationship with family to do this. [/quote]

I have the money in either Educational IRA or 529. I am pretty the money is actually in each kid’s name and I am the custodian. The idea being better tax treatment until time for withdrawal. Don’t know how this might affect the financial aid situation but I don’t think sending the money to grands would help, unless they set up a completely separate account and hang the tax advantage.

The good relationship part might be problematic as well. My side is certainly no good. My wife’s side, depends when you ask.

Interesting idea non the less; I will look into it.

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]MadeInTaiwan

Just as a heads up. Rather than contributing 100 a month and being the owner of the account you may want to consider having your parents open the college savings paln in their name and send them the money to contribute. This way it does not show up anywhere in the calculations for financial aid.

Safe Harbor

Need to have a good relationship with family to do this. [/quote]

I have the money in either Educational IRA or 529. I am pretty the money is actually in each kid’s name and I am the custodian. The idea being better tax treatment until time for withdrawal. Don’t know how this might affect the financial aid situation but I don’t think sending the money to grands would help, unless they set up a completely separate account and hang the tax advantage.

The good relationship part might be problematic as well. My side is certainly no good. My wife’s side, depends when you ask.

Interesting idea non the less; I will look into it.

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]MadeInTaiwan

Just as a heads up. Rather than contributing 100 a month and being the owner of the account you may want to consider having your parents open the college savings paln in their name and send them the money to contribute. This way it does not show up anywhere in the calculations for financial aid.

Safe Harbor

Need to have a good relationship with family to do this. [/quote]

I have the money in either Educational IRA or 529. I am pretty the money is actually in each kid’s name and I am the custodian. The idea being better tax treatment until time for withdrawal. Don’t know how this might affect the financial aid situation but I don’t think sending the money to grands would help, unless they set up a completely separate account and hang the tax advantage.

The good relationship part might be problematic as well. My side is certainly no good. My wife’s side, depends when you ask.

Interesting idea non the less; I will look into it.

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]MadeInTaiwan

Just as a heads up. Rather than contributing 100 a month and being the owner of the account you may want to consider having your parents open the college savings paln in their name and send them the money to contribute. This way it does not show up anywhere in the calculations for financial aid.

Safe Harbor

Need to have a good relationship with family to do this. [/quote]

I have the money in either Educational IRA or 529. I am pretty the money is actually in each kid’s name and I am the custodian. The idea being better tax treatment until time for withdrawal. Don’t know how this might affect the financial aid situation but I don’t think sending the money to grands would help, unless they set up a completely separate account and hang the tax advantage.

The good relationship part might be problematic as well. My side is certainly no good. My wife’s side, depends when you ask.

Interesting idea non the less; I will look into it.

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]MadeInTaiwan

Just as a heads up. Rather than contributing 100 a month and being the owner of the account you may want to consider having your parents open the college savings paln in their name and send them the money to contribute. This way it does not show up anywhere in the calculations for financial aid.

Safe Harbor

Need to have a good relationship with family to do this. [/quote]

I have the money in either Educational IRA or 529. I am pretty the money is actually in each kid’s name and I am the custodian. The idea being better tax treatment until time for withdrawal. Don’t know how this might affect the financial aid situation but I don’t think sending the money to grands would help, unless they set up a completely separate account and hang the tax advantage.

The good relationship part might be problematic as well. My side is certainly no good. My wife’s side, depends when you ask.

Interesting idea non the less; I will look into it.

MadeInTaiwan

[MadeInTaiwan]

[quote=HLS]MIT,
…
I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.
…
Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.
… HLS[/quote]

Thanks for your comments HLS. Here is some more info. We don’t carry consumer debt, we pay off the credit card in full each month, we have no car loans. I took a look at our last mortgage statement last night, 104K principal and 4% interest with I think 10 years left at 1160 a month. The current “paper value” of the house is probably 600K. Can I even refi without adding to the principal? I am not sure what I would do with the extra cash if the refi took out equity. I’d be temped to just plunk in a Vanguard stock index fund and hope for the best. I have little confidence in my ability to sort out all the investment strategy and timing, and certainly my wife would not trust my judgment in this area (even though we have done pretty well so far, but that is as much luck as anything else). The other part says now that leveraged investing is out of fashion, take advantage of the last “cheap money” while it lasts.

I talked it over with my wife last night. She is opposed to a equity line, preferring to count on her parents in case of an emergency (We have never asked them for help).

The reason I am thinking refi is it would improve our savings cushion as my wife stays home with the kids until Aug 2010. I think we go from the current few hundred negative to either positive or neutral.

So, does this make sense?

[MadeInTaiwan]

[quote=HLS]MIT,
…
I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.
…
Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.
… HLS[/quote]

Thanks for your comments HLS. Here is some more info. We don’t carry consumer debt, we pay off the credit card in full each month, we have no car loans. I took a look at our last mortgage statement last night, 104K principal and 4% interest with I think 10 years left at 1160 a month. The current “paper value” of the house is probably 600K. Can I even refi without adding to the principal? I am not sure what I would do with the extra cash if the refi took out equity. I’d be temped to just plunk in a Vanguard stock index fund and hope for the best. I have little confidence in my ability to sort out all the investment strategy and timing, and certainly my wife would not trust my judgment in this area (even though we have done pretty well so far, but that is as much luck as anything else). The other part says now that leveraged investing is out of fashion, take advantage of the last “cheap money” while it lasts.

I talked it over with my wife last night. She is opposed to a equity line, preferring to count on her parents in case of an emergency (We have never asked them for help).

The reason I am thinking refi is it would improve our savings cushion as my wife stays home with the kids until Aug 2010. I think we go from the current few hundred negative to either positive or neutral.

So, does this make sense?

[MadeInTaiwan]

[quote=HLS]MIT,
…
I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.
…
Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.
… HLS[/quote]

Thanks for your comments HLS. Here is some more info. We don’t carry consumer debt, we pay off the credit card in full each month, we have no car loans. I took a look at our last mortgage statement last night, 104K principal and 4% interest with I think 10 years left at 1160 a month. The current “paper value” of the house is probably 600K. Can I even refi without adding to the principal? I am not sure what I would do with the extra cash if the refi took out equity. I’d be temped to just plunk in a Vanguard stock index fund and hope for the best. I have little confidence in my ability to sort out all the investment strategy and timing, and certainly my wife would not trust my judgment in this area (even though we have done pretty well so far, but that is as much luck as anything else). The other part says now that leveraged investing is out of fashion, take advantage of the last “cheap money” while it lasts.

I talked it over with my wife last night. She is opposed to a equity line, preferring to count on her parents in case of an emergency (We have never asked them for help).

The reason I am thinking refi is it would improve our savings cushion as my wife stays home with the kids until Aug 2010. I think we go from the current few hundred negative to either positive or neutral.

So, does this make sense?

[MadeInTaiwan]

[quote=HLS]MIT,
…
I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.
…
Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.
… HLS[/quote]

Thanks for your comments HLS. Here is some more info. We don’t carry consumer debt, we pay off the credit card in full each month, we have no car loans. I took a look at our last mortgage statement last night, 104K principal and 4% interest with I think 10 years left at 1160 a month. The current “paper value” of the house is probably 600K. Can I even refi without adding to the principal? I am not sure what I would do with the extra cash if the refi took out equity. I’d be temped to just plunk in a Vanguard stock index fund and hope for the best. I have little confidence in my ability to sort out all the investment strategy and timing, and certainly my wife would not trust my judgment in this area (even though we have done pretty well so far, but that is as much luck as anything else). The other part says now that leveraged investing is out of fashion, take advantage of the last “cheap money” while it lasts.

I talked it over with my wife last night. She is opposed to a equity line, preferring to count on her parents in case of an emergency (We have never asked them for help).

The reason I am thinking refi is it would improve our savings cushion as my wife stays home with the kids until Aug 2010. I think we go from the current few hundred negative to either positive or neutral.

So, does this make sense?

[MadeInTaiwan]

[quote=HLS]MIT,
…
I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.
…
Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.
… HLS[/quote]

Thanks for your comments HLS. Here is some more info. We don’t carry consumer debt, we pay off the credit card in full each month, we have no car loans. I took a look at our last mortgage statement last night, 104K principal and 4% interest with I think 10 years left at 1160 a month. The current “paper value” of the house is probably 600K. Can I even refi without adding to the principal? I am not sure what I would do with the extra cash if the refi took out equity. I’d be temped to just plunk in a Vanguard stock index fund and hope for the best. I have little confidence in my ability to sort out all the investment strategy and timing, and certainly my wife would not trust my judgment in this area (even though we have done pretty well so far, but that is as much luck as anything else). The other part says now that leveraged investing is out of fashion, take advantage of the last “cheap money” while it lasts.

I talked it over with my wife last night. She is opposed to a equity line, preferring to count on her parents in case of an emergency (We have never asked them for help).

The reason I am thinking refi is it would improve our savings cushion as my wife stays home with the kids until Aug 2010. I think we go from the current few hundred negative to either positive or neutral.

So, does this make sense?

[Author]

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