by Throwaway54275
i.imgur.com/4i0O2Ys.jpg i.imgur.com/T3VSepF.jpg
On the week of May 10, 2010, I purchased about $100,000 worth of FAS and $70,000 of SPXL on the open market. I was 29 at the time and we were in the heart of the subprime MBS-induced financial meltdown. It was awful to be invested through, I was a 20something novice and getting my ass handed to me every trading day. I had graduated from law school about five year earlier, I had disciplined myself to be frugal to pay off my student debt as quickly as possible and when it was paid off, I just kept saving until I had about $300,000 in cash. I purchased a home in foreclosure from the bank for $100,000 to pocket the $8,000 housing crisis stimulus tax credit in 2009 and I also traded in my shitty truck for a Camry to get the $4,000 car industry stimulus tax credit (what a time to be alive back then, $12k in free money). At this point, I had already maxed out my 401k and IRA contributions and I felt that keeping the remaining $170k in the bank at near-zero interest rates was a waste. I was bullish on the global economy then, having understood the Fed and Obama would not allow any more core US investment/commercial banks to fail via the bailout and TARP, and quantatative easing. I just did not know how much lower we would go for how much longer. Trying to catch the knife at the bottom at the wrong time would have bankrupted me. When I did decided to buy, i resolved that this was a purely speculative gamble and that I was ok with losing it all to find out if I was right in the long term. I was still young and could save more, I reasoned.
Fast forward to today and my $70,000 SPXL position is at $775,000. My $100,000 FAS position is at $580,000 (I apologize for my brokerage screenshots not showing the performance of my FAS position, just the share count. I had purchased that position at another brokerage that I later consolidated with my Merrill account, hence the blanks). I would have cashed out earlier but the post-recession rally has been remarkably stable and sustained with far less pullbacks than I anticipated.
As expected, FAS and SPXL are not a true 3x track of XLF and SPX over that time, considering the issues of decay and differing dividend schedules and amounts. Still, I consider myself very lucky to have not lost everything. I would not make the same trade today seeing as how I am nearly 40 with significantly different priorities and risk appetite.
Why am I selling now? Macro reasons. Sluggish earnings growth, my personal pessimism of any substantive trade deal with China coming soon, my anticipation of a selloff if Trump is reelected due to a lack of policy bullets left to stimulate the economy (no more tax cuts, no more help from the Fed since rates are so low as is) and my anticipation of an even bigger selloff if Trump loses to Warren or Biden. I hated the 2017 tax cut, a “cut” entirely financed by debt that we’ll have to pay for later.