1-Star ETNs Poised to Plunge: VelocityShares 3x Long Silver?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the VelocityShares 3x Long Silver ETN (NYSEMKT: USLV  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at VelocityShares 3x Long Silver ETN and see what CAPS investors are saying about the ETN right now.

USLV facts

Inception

October 2011

Total Net Assets

$121.9 million

Investment Approach

Seeks to replicate three times the S&P GSCI Silver index. The index comprises futures contracts on a single commodity. The fluctuations in the values of it are intended generally to correlate with changes in the price of silver in global markets.

Expense Ratio

1.65%

1-Month / 3-Month / Year-to-Date Returns

5.1% / 94.7% / 42.4%

Alternatives

ProShares Ultra Silver (NYSEMKT: AGQ  )
iShares Silver Trust
(NYSEMKT: SLV  )
ETFS Physical Silver Shares
(NYSEMKT: SIVR  )

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 42% of the 72 members who have rated USLV believe the ETN will underperform the S&P 500 going forward.

Just this past summer, one of those Fools, All-Star TerryHogan, succinctly summed up the USLV bear case for our community: "I remember an old Trivial Pusuit question that asked who was the largest user of Silver in the world, answer -- Kodak. I'm not sure what the answer is today, but I don't see where sustainable demand is coming from, and I just don't like triple leveraged ETFs, as they degrade with any volatility."

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Brian D. Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 11, 2012, at 3:22 PM, EricTheRon wrote:

    I'm not defending this ETN--I think all 2X and 3X ETFs and ETNs are unnecessarily speculative. And I'm not a Gold Bug or a "Silver Bug" (is there such a thing?). But that general comment about silver demand is hopelessly outdated, and could (should!) have been easily updated with a simple google search about the subject. Really poor!

    The fact is that silver demand is outstripping the supply from mines and scrap by 25% to 33%, and has nothing to do with photography. Even if there was a depression and the economy contracted 33%, the silver supply would also contract because most silver is mined along with base metals. And base metal mining would certainly be cut back during a depression.

  • Report this Comment On October 11, 2012, at 3:30 PM, rhealth wrote:

    Gold and silver have cycles, plain and simple. I think in a week you will find your article very timely as I believe both metals will soon start their plunge for the next ? weeks, but don't let it go to your head Brian ;)

    Had you written this article in August you would be very very wrong right now.

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