Puerto Rico Municipal Bond Bankruptcy

After entering court protection, Puerto Rico now represents the largest municipal bankruptcy ever -- $73 billion. This is much larger than the city of Detroit, which previously held the record at $9 billion. While municipal bonds generally carry lower interest rates due to tax advantages, high levels of default risk will offset this benefit and result in higher required yields. See article here, WSJ.

An Update on Levered ETFs

Levered ETFs are designed to track a particular benchmark, but in an exaggerated fashion. For example, the Pro Shares Ultra S&P500 (SS0) is a 2X fund, meaning its performance should be twice the level of the index. However, this performance only matches short term. In particular, since volatility reduces compounded returns, levered funds "lose" performance through time. In fact, some funds may actually produce a negative buy-and-hold return during even if the underlying benchmark was positive. Unfortunately, many retail investors are flocking to these funds without understanding their risks. (See article here, Reuters.) In recent events, the SEC just announced approval of a quadruple-leveraged ETF, which will further exaggerate the issues described above. (See article here, Reuters.)