Friday, March 23, 2012

TVIX Last Word (for today)

FT Alphaville's Izabella Kaminska (she of our earlier link, "A Virtuoso Discusssion of the Recent Action in the VelocityShares Daily 2x VIX Short-Term ETN (TVIX)") was on CNBC this afternoon, talking with Herb Greenberg about the 'Disaster du Jour'. Here's the rush transcript:

Disaster du Jour: TVIX

Fri 23 Mar 12 | 02:51 PM ET

The following transcript has not been checked for accuracy.
together for your future. ♪♪ ♪♪ yesterday herb told us about trouble with tvex. the value was cut in half. yesterday it plunged 29% or something. it's raised a lot of questions. indeed. a big part of that latest leg of that decline is down about 50% over the past few days. as i was started to talk about this as yesterday's disaster dejour. tvix is a traded note, not fund, but note. that trades on not the conviction which measures the implied volatility but the fures. confused? well, those derivatives of derivatives are not meant for ma and pa. and very sophisticated investors have learned the hard way in recent days it may be t risky for them. but you cannot say that you were not warned. here's what they display in their prospectus. the long-term value of your etn is 0. if you hold it as a long-term investment, it's likely that you will lose large or a portion of your investment. makes you wonder why does the s.e.c. approve these. i asked them and their bottom line is it is not their job to weigh the merits of an investment. so what's the bottom line for the exchanges, the exchange products and the investor and should be doing about it? isabella, great to have you on the set with us for today. what do you feel their role ought to be in this? i don't see why in this case they shouldn't move as well and there are things going on as well. there are disruptions and people upset. these things -- we don't know what is happening behind the scenes. isabella, how do you prevent to herb's point people from getting burned? is there a way to firewall that? or perhaps it's not even allowed. well, i think the professional investors would get upset if you told them, well, you can't trade this because retail investors might not understand it. but -- so that wouldn't be fair on them. again, we nd to protect the retail investor. perhaps there should be a firewall. when i talk about these in the past, i've talked about, is the tail wagging the dog? the pros tell me that is not the case. exactly and when you look at what has been going on in the vix futures, not to get but it's not performing how you might expect it to perform. there's definitely a anomalies and volatility trade is telling me that, you know, they can't predict these things. so if the guys that trade volatility for a living cannot predict the way that tvix is moving, that tells me that the product is fundamentally flawed? yeah. i think that's a very good point. it's a mystery to them as much as to us. is it flawed or just too complicated and perhaps if the prospect tus was clear and had the clear risks involved, would that be a better way of doing it? i think it's a question of complexity. and, yes, i think it would definitely help if the prospect tus was clearer. the risk factors are huge. no one is going to read a risk factor section of an etf or an etn. i can tell you that. and they are probably writing it in a way that the first two sentences, your eyes glaze over. i have spent a lot of time reading these prospectuses and i came away with it on its own and was stumped. so that's how you spend your saturday nights? thank you, isabella, for joining us today. we're bringing you a whole different kind of sparkle. check out this bad boy. it's being called the world's first all diamond ring. it's no band. it's just all diamond. this 150 carat jeweller is going to set you back a cool $68 million. coming up next, the ultimate
This transcript is generated by automated closed captioning, has not been edited, and may not be entirely accurate.
Here's a clickable link., no embed yet available.
She's a lot younger than I would have thought.