$Direxion Daily Small Cap Bull 3X ETF (TNA.US)$ the exciteme...
$Direxion Daily Small Cap Bull 3X ETF(TNA.US$ the excitement over the small caps has only to do with one thing.. and that's called reversion to the mean. it has little to do with earnings because about 70% of the Russell are companies losing money. it has little to do with the benefit of an actual rate cut more the anticipation of a series of rate cuts. and the reason is very simple most of these companies are highly debt laden and if they have had to borrow in the recent several years it's been at 11 12 13%. any ideas when rates fall they can refinance that debt at lower rates and that marginal savings is money they can deploy elsewhere. the negative so that everybody understands a quarter point half point rate cut will not benefit any of these companies because you're not going to refinance a quarter point half point just as if you own a house and interest rates fall quarter point half point you're not going to run out to refinance there's little to no savings you would need to see a hundred basis points to 150 basis points so that's one to one and a half percent minimum to make any type of fundamental difference to refinance your debt. but just looking at a multi-month chart so that everybody can see low 60s is very realistic for this basket and if there is an acceleration of profits in the next 12 to 18 months you probably could see it 85-90
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35+ yrs in the trenches, raised tens of millions for start ups, syndicate ipo's, yrs on trading desk mkt maker.
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10baggerbamm OP : as a follow-up below is an 11-year chart that's a long long time most people think nowadays of investments that will last a lunch time let alone a year so here's 11 years. we've also had some fall starts what you see is a range bound index you can clearly see the define lows and the defined highs and if we get a reversion to the mean it puts it in a low 60 6364 you can pretty much take that to the bank. what you need to understand also is with the Russell you get a lot of substitutions so the companies that do well say super micro for example they get removed from the Russell and they're going to the NASDAQ 100 and now in place of it is going to be another small cap company that's losing a tremendous amount of money and that's why you tend to see this index very range bound over an extended period of time because the winners get purged and the the losers tend to stay in the index and then the companies that are added are generally companies losing money. so the Russell is a stepping stone from a basket of stocks you go from the Russell to the NASDAQ 100 or similar. also understand just as a cautionary note we're down a dollar today which is trivial compared to what the gain was just yesterday there's a lot of profits in the past week in this basket if there's any economic shock any bad news story any global event you could see 25 30% of the gains just from yesterday erased on profit taking nothing less. so you have to ask yourself are you comfortable being down three four points in this basket of stocks. because if you don't buy into the big picture which is an 11-year chart below and that this reversion to the mean can take 12 to 18 months you probably should not be looking at this basket of stocks.
71879485 : sell