It finally happened.  A reverse stock split of a popular exchange traded fund now tells us with little uncertainty that three times leveraged exchange traded funds are proving to be an abysmal failure.

The era of exchange traded funds, only a few years old, is starting to already see some victims.  Today the ever popular financial ETFs, FAS and FAZ received a 1 for 5 and 1 for 10 share reverse stock split, signaling an obvious downward trend for all leveraged ETFs.

This means that if you are a trader looking to hold a leveraged ETF for more than one day, you might want to consider shorting the opposite ETF.  For example, had you shorted FAZ in order to take the opposite equivalent position of being long FAS a month ago, you would have saved around 5% in only one month.    In buying a highly leveraged ETF, a person is paying not just for its management, but for the impossibility of managers trying to mirror the results of an industry, times two or three.

It has always been and always will be a silly long term idea.  Leveraged ETFs are not just imperfect, they are dangerous traps for stock market novices and even many professionals.