Mean reversion plays generally have a timeline of years; I assumed that’s what you were proposing. This should be obvious from the fact that you could have made the exact same mean reversion argument at the end of 2014 (2014′s massive drops from the Ukraine crisis were when Russia arguably became undervalued according to your metrics), but actually RSX barely moved in 2015 as a whole. Sure if you cherry-pick the high in May 2015 you do well; hindsight-based cherry-picking always does well.
Over very short time frames (like <6 months), RUSS/​RUSL are probably fine because there’s limited opportunity for the transaction costs to build up. That is in fact what they are intended for; short-term bets. But if you’re investing on the timeline of years, they’re really bad, which is hopefully amply demonstrated by the (non-cherry-picked) data I gave for the last few calendar years.
Indeed, I did invest in non-leveraged Russia in 2014 because it was undervalued. But only now that it is extremely undervalued am I willing to make the bet on rapid upward movement where it makes sense to have leverage.
Mean reversion plays generally have a timeline of years; I assumed that’s what you were proposing. This should be obvious from the fact that you could have made the exact same mean reversion argument at the end of 2014 (2014′s massive drops from the Ukraine crisis were when Russia arguably became undervalued according to your metrics), but actually RSX barely moved in 2015 as a whole. Sure if you cherry-pick the high in May 2015 you do well; hindsight-based cherry-picking always does well.
Over very short time frames (like <6 months), RUSS/​RUSL are probably fine because there’s limited opportunity for the transaction costs to build up. That is in fact what they are intended for; short-term bets. But if you’re investing on the timeline of years, they’re really bad, which is hopefully amply demonstrated by the (non-cherry-picked) data I gave for the last few calendar years.
Indeed, I did invest in non-leveraged Russia in 2014 because it was undervalued. But only now that it is extremely undervalued am I willing to make the bet on rapid upward movement where it makes sense to have leverage.