Comments on: Claymore’s Bond ETF Comes Up Short

By: Willy

Willy — Fri, 21 Jan 2011 18:38:54 +0000

thanks. I spent some hours researching short bond etfs after reading a recommendation to buy and your analysis was the only comprehensive, intelligent article I found. I have decided NOT to invest, and I thank you for your thoughts.

By: Canadian Personal Finance & Investing Carnival : Investing Thesis

Canadian Personal Finance & Investing Carnival : Investing Thesis — Sat, 17 Jul 2010 20:04:29 +0000

[...] Couch Potato reviews Claymore’s Bond ETF and lays out the reasons why it doesn’t make the [...]

By: Inverse ETFs: Pros & Cons | Balance Junkie

Inverse ETFs: Pros & Cons | Balance Junkie — Wed, 14 Jul 2010 09:43:03 +0000

[...] short the 10 Year Government of Canada Bond – a bet that interest rates will go higher. Canadian Couch Potato recently offered a critique of this new [...]

By: Financial Cents

Financial Cents — Mon, 12 Jul 2010 23:24:22 +0000

Yikes! I’ve heard of inverse products and you’ve confirmed I should remain far away from them…thanks!

By: This and That: Generic advice, debt worries and more… | Canadian Capitalist

Thu, 08 Jul 2010 21:25:45 +0000

[...] Canadian Couch Potato shows why the new Claymore Bond ETF is an instrument for short-term gambling. [...]

By: Canadian Couch Potato

Canadian Couch Potato — Thu, 08 Jul 2010 14:51:09 +0000

@Charles: I have heard others suggest the same thing, but I’d be concerned for a couple of reasons: First, the worst that can happen with this ETF is that you lose your initial investment; if you short something, you can end up losing your initial investment and still owing more. The downside risk is theoretically infinite. Second, hat happens if the ETF provider decides the fund is a dud and liquidates it at an inopportune time?

By: Charles in Vancouver

Charles in Vancouver — Thu, 08 Jul 2010 14:20:38 +0000

I wonder if shorting *this* ETF would make sense, seeing as it is guaranteed to have some serious drag…

By: Hot and Humid LinkStuff

Hot and Humid LinkStuff — Thu, 08 Jul 2010 04:59:21 +0000

[...] Couch Potato wrote that the new new Claymore inverse bond ETF comes up short. Read the article to find out why that title is funny, in case you didn’t [...]

By: Canadian Couch Potato

Canadian Couch Potato — Tue, 06 Jul 2010 14:26:47 +0000

The idea that an inverse bond fund could provide inflation protection is actually absurd. Inflation is a long-term concern: most people don’t worry about how inflation will affect them in the next six to 12 months. Yet, as we’ve seen, holding an inverse ETF like this for any longer than that almost guarantees you’ll lose money. A well constructed portfolio hedges long-term inflation with stocks, as CC points out, and maybe some real estate and real-return bonds.

By: Canadian Capitalist

Canadian Capitalist — Tue, 06 Jul 2010 14:02:53 +0000

I like the warning. I would personally also avoid all 2x and 3x ETFs.

The stock portion of an investor’s portfolio already provides a long-term inflation hedge. Also, Canadian stock markets with their huge exposure to commodities will do well in an inflationary environment. If investors keep their bond duration short, they already have a degree of protection against rising inflation. For all these reasons, I think inverse bonds are a terrible idea for investors.