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Ken's Mailbag - Q&A On BRLI and Rydex 2X Russell Ultra-Short ETF
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


 

Subscriber Questions:

May 11, 2010

Ken,

You noted in today's comments that for BRLI, that they may have taken some of the trades off the tape. I was actually stopped out at 2:50PM the day of the plunge and they took 2,000 shares away from me in the low $17s. I contacted the firm where my account is held immediately and took 2 hours to get hold of them that day. They indicated there was nothing that could be done. I did check the busted trade list and BRLI was not on it. The shares were taken at about a 35% discount from where it was trading 1 minute earlier. Please let me know if you have any suggestions. Thanks.

Alan

 
Ken's Response:

 May 11, 2010

Dear Alan,

I am very sorry to hear about your experience.  You might take it up with the firm that holds your account again, and maybe make a more formal complaint to them in writing with a certified letter if they do not provide what you find to be an adequate response by phone. It may not be your brokerage firm's fault at all that it happened, yet you might also threaten to escalate your complaint to the SEC and/or FINRA, and, beyond that, consider going to arbitration if you feel it is worth the effort for a chance at recouping something.  Since the data on the charts I have viewed on various sites differs and has clearly been revised on DailyGraphs, it behooves Fidelity to look into the matter for you again and provide sufficient explanation.  It is not illegal for stocks to be volatile, but when the exchanges became disconnected and market participation mid-session was suddenly as thin as the "after hours" trading session, it sure made it tough on those of us with a desire to limit our downside. If you need an expert witness let me know, and please keep me posted on whatever may come of your contested BRLI trade.
 
Please let me know if you have any other feedback by filling out the inquiry form.

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

  
Subscriber Questions:

May 25, 2010

Ken,

Again, if you have any insight, your help would be appreciated. I was holding significant positions in RRZ, the Rydex 2x Russell ultrashort fund. Without notification to me by either Fidelity or Rydex, the fund was liquidated last Friday. (Maybe this explains the mysterious run up Friday at the close).  I found this when I went to sell today and found there was no longer a valid ticker symbol. I thought I was hedged for this downturn only to find I did not have a position. I was hosed again. Not only that, but I can't get my money until they do whatever to finish closeout of the account. Also, proceeds will be less any closeout costs.

Rydex indicates they notified Fidelity and Fidelity indicates they were not notified and aren't responsible. They indicate they cannot contact every customer for every split, blah blah blah, etc, basically both pointing the finger at the other.  Any insight would be wonderful. Thanks.

Alan

 
Ken's Response:

 May 26, 2010

Dear Alan,

I have heard of mutual funds closing before or merging in with other funds, and I suppose the same thing is likely to happen to some ETFs. I don't know what to say except that this seems to be part of the high price of low-cost investing, as the investing public still salivates for no-load and low commission products that do not have a proven long-term track record. I am not sure, but would guess that Rydex has a right to have a fund "go out of business" as it sounds like they have.  So now, you just have to trust that they tried their best and won't be grossly unfair to you.

If you watched the Q1 CANSLIM.net Webcast (click here), I briefly discussed the recent performance of one of the many popular 2X index ETFs. I also pointed out at an investor meeting in San Diego not long ago that the ProShares prospectus' describes the underlying investments as mostly being "swap agreements", which made me very concerned.  I imagined what the response might be if I called up investors and said, "I have a great investment for you. Let's put your money into swap agreements." 

Please let me know if you have any other feedback by filling out the inquiry form.

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

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