We all know what happened last month with the infamous XIV product, which was apparently DESIGNED to trade to zero. On February 6th, 2018 the XIV was trading $100 at the close of trading. When it reconciled at 4:01 it began to tumble and even greater morons chased it all the way down into the toilet bowl and into the sewers. When it opened up for trading, it was trading at $5, which is generous considering it was DESIGNED to be worthless. It was all there for you to learn about, in the prospectus, but you were too stupid and lazy to figure it out.
Here’s Jim Cramer explaining what had happened.
NEVER FORGET — it was 'complete moron' $XIV traders who didn't know the different between a stock and a bond who blew up and made stocks go down in February of 2018. pic.twitter.com/3E1BM3q30R
— The_Real_Fly (@The_Real_Fly) March 15, 2018
Here’s some more poignant content from the CNBC website, from a Bill Blain at Mint Partners.
Bill Blain, a senior fixed income broker at Mint Partners, said the main issue with the ETN was “understanding the exact basis on which Credit Suisse has been selling these products.”
And it turns out this understanding is absolutely crucial. The Credit Suisse XIV prospectus says on page 197: “The long term expected value of your ETNs is zero. If you hold your ETNs as a long-term investment, it is likely you will lose all or a substantial portion of your investment.”
Blain said that if that has been “properly made clear to investors” then legally the bank will be covered. “However, it’s not yet clear these products were marketed with that page 197 disclosure concisely explained,” he added.
In response, Credit Suisse spokesperson told CNBC that the bank “clearly stated in the prospectus that this was meant for short-term holding” and that it was marketed exclusively to professional investors.
“It very clearly says this is not a security that you buy and hold. It is designed to be used on a daily basis,” the spokesperson said.
Well is that true? Of course it is. Here’s the CEO of Credit Suisse telling you that he read it in its entirety and it plainly states, in black and white, the damned thing was going to zero. All you had to do was pick up the damned thing and learn about it.
Only morons who didn't read the prospectus thought $XIV would not trade to zero. Here is the CEO of @CreditSuisse explaining how it all worked. He read the prospectus and knew it would trade to zero. Did you @RampCapitalLLC ? Did you @howardlindzon ? pic.twitter.com/krteWmvjep
— The_Real_Fly (@The_Real_Fly) March 15, 2018
MORONS STRIKE BACK
An investor who got wiped out filed a lawsuit in Manhattan, alleging Credit Suisse manipulated the ETN through its liquidation, also stating the company did a poor job explaining the risks associated with the product.
What in the world is he talking about?
Credit Suisse retorted these ridiculous charges with the following statement.
“The publicly available prospectus accurately and fully disclosed the risks of an investment in XIV, which is only intended for sophisticated institutional clients,” the bank said in a statement emailed to Reuters, referring to the product by its former stock ticker.
“Credit Suisse did not engage in any conduct designed to mislead investors regarding XIV’s value or cause the February 5, 2018, decline in XIV’s price,” the bank said.
The bank’s chief executive, Tidjane Thiam, has called the product “legitimate” and said investors took their own risk on a trade that did not pan out.
It just didn’t pan out folks, down 95% from 4 o’clock to 4:01.
The lawsuit is seeking class action status.
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methinks that the standard definition of time b/w 4 o’clock to 4:01 (about one minute) is hardly what regular folks would think is if you “…hold your ETNs as a long-term investment, it is likely you will lose all or a substantial portion of your investment.”
pops always told me before bedtime to read at least the first couple hundreds pages of the prospectus
Don’t invest in anything you don’t understand. – Warren Buffett
Lawsuit, lol. Only in America.
“Wah, wah, the prospectus is too long!”
Even if the prospectus consisted of one sentence that said: “Don’t buy this or you will lose money,” people would still not read it and buy XIV anyway because of historical performance. Just look at every bubble in history.
I also don’t hear people complaing about price manipulation when the market goes up. People don’t want an honest market with real price discovery, they just want profits.
When asked about dumping his position …
“I’ll wait for the class action lawsuit”
–The Fly, Pelican Room 4:30pm 02/15/18
Get off that high horse and explain this to the people.
Shhhh…
It’s hilarious that this thing even needed a prospectus. It’s 100% short. Short ETFs go to zero.
There should be an ETF that shorts inverse ETF’s, lol mind blown…
did you put the captions on ? fly always wins even when he loses