Subject: Proposed SEC Rule Change - File No. S7-24-15, Release No. 34-87607
From: Harry Turner

Mar. 23, 2020

The existing guidelines for leveraged and inverse funds are more than adequate. No changes are needed. The SEC has provided no basis whatsoever for making it more difficult to trade in these securities and securities they truly are, pun intended, as illustrated below.

While the market was ascending to record highs, it became prudent to hedge my portfolio, so I invested a small percentage of IRA assets in SPXU, triple inverse S&P 500, knowing someday there would be a significant market correction. I wanted some market insurance or "security" with this hedge. I later added positions in SCO (double inverse oil price) and UVXY (VIX x 1.5). Together, they enabled my IRA to nearly double in value at present. All three have provided returns with minimal cash exposure or risk due to their increased daily compounding effect. The compounding potential in these securities means a smaller percentage of total assets can reap far more returns than common stock. Recently I sold SCO near the WTI oil price of $21/bbl and plan to buy a small amount of UCO (double long oil price). My small investment in UCO will realize a similar gain to SCO as oil prices recover, but with limited cash exposure and therefore limited risk.

By contrast, I invested in BPT common stock over the years for it's high dividend yield. On 2/24/2015, JP Morgan initiated coverage of BP Prudhoe Bay Royalty Trust (BPT), claiming “…fair value at $40/unit, implying ~50% downside potential.” BPT closed at $80.44 the day before JPMs' published downgrade on 2/24/2015. Two days later (2/26/2015) the intra-day low hit $61.67 - over 23% down. Obviously, there is risk everywhere in the stock market and few safe havens exist.

As demonstrated above, the use of inverse and leveraged funds should be encouraged, NOT discouraged. One can always come up with examples where every type of investment has lost money, but that is not the norm. The tail must not wag the dog when it comes to SEC regulations. Exceptions must not limit the individual freedom of investors. Other than cash, safe haven investments during the current market downturn also include SPXU and soon, UCO, among others.

Harry M Turner