Chapter 4
Jeffee's Luck Even Rubs Off on the Poor Investors I Try to Help!!
I have several of my investors in some bear ETF's, mostly from Direxion that are very low in price. I recommended them to my investors because they were very cheap and near their 52 – week lows.
So one day I'm looking in Yahoo to see what the latest stock and ETF prices are because I monitor my investor’s stocks and ETF's everyday when I see that a couple of the Direxion bear ETF's have shot up double or triple or quadruple what their price was a day before. I am overjoyed and think I finally really have helped my investors which is the whole reason I got into the giving investing advice business.
I thought some terrible event like Middle East unrest or maybe the Libyan dictator nuked the rebels or some other awful event had caused investors worldwide to panic and when investors panic in the market drops. The Direxion bear ETF's will go up and maybe go way up when the news of the world is bad because they're leveraged at three times the market index rate. So for example, FAZ which is a bear play against the financial industry would go up 15% if the financial market index went down 5% to give you an idea.
Naturally I immediately send an e-mail to all my investors saying hey several of these Direxion bear ETF have doubled, tripled or quadrupled, here are the sell recommendations I recommend under my AIM system. I get an e-mail back from one of my investors and he said sorry Jeff, the reason the Direxion bear ETF's went up is because there was a reverse split in the shares.
So Direxion did a reverse split where they would give you one share for every 2, 3, 4 you held so naturally the price would quadruple on the bear ETFs that they did have a reverse stock split for example like one for four stock split. So that meant instead of owning 400 shares that were worth $5 each, now you own 100 shares that were worth $20 each but an investor didn't really gain or lose any money.
I really felt bad for my poor investors and thought I guess I'm transferring some of my bad luck to them and I vowed in the future I would always check very carefully when I see something go way up the make sure it's not because of something like a reverse stock split.