XIV IS GOING TO ZERO
Please read what we believe is the most important investment news in the history of America’s stock market. If what we contend should happen, innocent investors in the near future will receive more clarity, disclosure and investment advisor integrity. The only thing worse than this bad investment we want to alert you to would be the bad advisor putting it in client accounts.
An inappropriate investment has harmed investor’s savings. Be aware now. This is real.
The “XIV,” a popular bet on market calm in the stock market and investor complacency imploded. It capsized mom-and-pop investors and institutional investors alike at Monday’s market close (February 5). It declined 93% on Tuesday. Now calls for stronger disclosures of the dangers inherent in some Wall Street products have intensified. Brad Chilton, a former commissioner at the Commodity Futures Trading Commission from 2007 to 2014, said warnings for risky volatility bets should be in “big, bold 24-point font and in red letters.” “Issuers need to tell investors that you could lose more money than in any other equity product.” To be fair, the issuer of the investment did disclose that the XIV ETN (Exchange Traded Note) could go to zero. It stated in its near 200 page prospectus that if a specific market event occurred, the XIV could become worthless if an “Event Acceleration” by the issuer happened. That event was triggered. The XIV ETN will be ZERO on February 21, 2018.
What is it?
The VelocityShares Daily Inverse VIX Short Term ETN, is better known by the symbol XIV. It had ballooned to a value of about $2 billion, but coughed up nearly all of it, sinking to around $15 million when the measure of volatility that it tracks, the CBOE Volatility Index VIX saw a record spike.
INVERSE ETN’s are horrible. And so are LEVERAGED ETF’s. They are not prudent or suitable for most individual investors, and in the case of the XIV ETN, even the “Pro’s” got hurt. A number of high-profile investors, such as activist investor Carl Icahn have described the inverse-VIX (which is the XIV) vehicles as dangerous.
Maybe you were fortunate to not have XIV in your investment account. But, do you have another ETN? Or, do you have LEVERAGED ETF’s in your account?
Please call anytime you have a question or I may be of help. I am always happy to be of service.
Sincerely,
John Gardner, CFP, CIO