Finally, I decided it: I'll get a loan on my home (mortgage) to invest!

"You cant say its too risky without knowing his logic"

I can't speak on why you can't, but I certainly can. Anybody who has to cash out the value of their house to raise money doesn't have any free capital to begin with. If his financial situation was better, he would not need to extract cash from a home to buy stocks would he?

If he rolled in here and said, I put 375k into a double leveraged ETF, nobody would have said anything except, awesome timing, good job ! Having free capital and investing it at the right time is what it's all about.

But he didn't do that did he? He said he extracted his house value and rolled the dice on a double leveraged ETF.


Again, I don't know why you can't see the difference there, but yeah, night and day. It isn't the fact that he put a lot of money into the ETF, lots of people do that. What makes his case different is, he didn't have the money in the first place. THAT's why it's risky, full stop.


By the way, if you think his "max pain" point is 450 for the markets, you aren't a trader and don't know anything about psychology. There is no F'ing way he would have been able to stomach a nearly 100% drawdown of his HOME value before pulling the plug.

What would have happened most likely is, he draws down 20-30%, panics, sells, and watches his wife leave him with the kids while the markets recover.

450? Please, he would never have made it past 600 on the S&P before crapping his pants and bailing...
 
VIX - Are you some kind of psychic ? You are making predictions about what he would have done if the markets went down but also rather strangely you also seem to have some assumptions about what I know and do not know about trading and pyschology. You also make predictions about his wife and strength of his marriage, wow amazing. I dont even know if he has a wife. If he does how do you know that she doesnt support the decision 100% ? I didnt try to predict his max pain point since I dont know him and thats the point, neither do you.

Out of the general population, yeah most people crap their pants and sell. How do you know that both him or perhaps I fall into that group?

You say rolled the dice in 2009, but the probabilities were on his side at that point in time (valuations, economy recovering, frequency and depth of stock market drops). If you dont have free capital when a once in a lifetime opportunity arises then to me it makes sense to use your credit line if that is your only option but it depends on lots of other factors as well. You may see it as risky and not be able to handle it. Some, not all, but some can handle it depending on the circumstance, if they see the potential reward as worth the risk. We only observe the result. No way I would recommend the same trade now but in 2009, with those valuations and the economy recovering, for some, not all, but some people yeah I would say do it. May also recommend instead of using total amount in 2x ETF they use smaller amount in higher leverage options or certificates to get similar underlying. But maybe he didnt know about the other ways to do something similar so had to go with 2xETF.
 
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"Are you some kind of psychic ?"

No, just a real trader with decades of experience managing millions of dollars of OPM. People who talk about max pain points at the literal break even zero barrier in my opinion are brand new to the trading world and haven't experienced events that test a persons psychology and mental strength. Likely a fresh 2013 and beyond bull market trader. The number 450 shouldn't have been anywhere in your posts. But on the very off chance I'm wrong, sorry.


"You also make predictions about his wife and strength of his marriage"

It was a joke dude. Wow you sound like a fun guy. Remind me never to waste a minute at the water cooler chatting with you...


"You say rolled the dice in 2009, but the probabilities were on his side at that point in time"

Spoken like a true hind sight trader, good work ! I'm curious though, what probabilities are you speaking of? Because in my decade of math degrees I don't remember coming across any "probabilities" of timing the absolute market bottom. Please, enlighten us average Joe's that aren't able to predict when the trough point is.

I know you weren't a trader then, but if you dig up some papers from that period you may find that people were calling the bottom several times and several months before that, and were wrong, painfully, trading account blow up wrong. But the 6th time was the charm right? :)


How quickly people forget. Or in "some" peoples case, weren't around trading to experience it and only view it in the rear view
 
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