Good day, First, I want to applaud your efforts to make things safer for investors, both retail and institutional. The US remains one the safest places to put money to work. I would like to comment on this proposed rule. To be clear, as a retail investor, I do not approve of this rule change. Let me explain my rational. I believe markets respond most to the change in inflation and growth. I subscribe to Hedgeye Risk Management to help me track this dynamic. I am not a financial professional, so I do not have the resources to track this information myself. Using this technique I did NOT loss any money in my retirement accounts during the stock market meltdowns of late 2018 and even the 2020 Covid crisis. In markets, sometimes the biggest battle is not losing when others are. In using Hedgeye I employ a multitude of ETF's. I rarely invest in individual stocks. When I do its usually less then 6% of overall capital. I have used instruments like TLT, PINK, QQC, INFL, XLE, and UUP to protect and grow my capital at various times. I limit my ETF investments as follows, never more then 15% (account value) for fixed income (e.g. SHY, TLT), 10% in currency ETFs including GLD, and 6% in stocks and ETFs. Inverse ETF's, leveraged ETF's, commodity ETN's, and crypto ETF/ETN's are even less, 1-3% of account value at most. I find ETF's like Simplify's SPD an excellent product. The ETF invest most of the fund in the SPY but retains a small percentage to invest in put options and other instruments to hedge against a large drawdown. As a retail investor I would not be able to do this without substantial cost and time. I also lack the skill to trade options well, so having access to a professional that can do this is wonderful. Products like these protect my hard-earned capital from the eventual market drawdown. I use inverse and leveraged funds only as hedges. For example, I do have a stock only account which I use for speculation. I keep some in PSQ while the Nasdaq continues in a bearish trend. When the position gets too big, I sell some. Again, I am NOT a financial professional. I am an engineer, I work everyday to help make things. I appreciate the access to these products while I focus on what I am good at. Many of these products are well explained and outfits like Hedgeye explain which ones to avoid. This brings me to my final point. These rules will further exaggerate the wealth gap in this country. Although well meaning, it will be more difficult for smaller investors to become large investors without access to these products that protect wealth when used properly. If I am forced into an index fund I will be unable to adjust when the market becomes overpriced. I will be unable to protect what wealth I do have. The already wealthy have access to many of these products and more. They would be able to profit more then the middle class. In conclusion, this new rule, while well-intended will not improve the financial well-being of many who take the time to learn and investigate. It will remove an important vehicle for hedging and even profiting on major market moves. It further increase the wealth gap during major shifts in the market. This relies on the flawed notion that stocks only go up. That we can never have bear markets. If a rule like this happens, it would make investing less safe and attractive for myself and many others. I personally would take my money elsewhere. Many thanks for your time and attention.
James Gardner Comment On Regulatory Notice 22-08
Good day, First, I want to applaud your efforts to make things safer for investors, both retail and institutional. The US remains one the safest places to put money to work. I would like to comment on this proposed rule. To be clear, as a retail investor, I do not approve of this rule change. Let me explain my rational. I believe markets respond most to the change in inflation and growth. I subscribe to Hedgeye Risk Management to help me track this dynamic. I am not a financial professional, so I do not have the resources to track this information myself. Using this technique I did NOT loss any money in my retirement accounts during the stock market meltdowns of late 2018 and even the 2020 Covid crisis. In markets, sometimes the biggest battle is not losing when others are. In using Hedgeye I employ a multitude of ETF's. I rarely invest in individual stocks. When I do its usually less then 6% of overall capital. I have used instruments like TLT, PINK, QQC, INFL, XLE, and UUP to protect and grow my capital at various times. I limit my ETF investments as follows, never more then 15% (account value) for fixed income (e.g. SHY, TLT), 10% in currency ETFs including GLD, and 6% in stocks and ETFs. Inverse ETF's, leveraged ETF's, commodity ETN's, and crypto ETF/ETN's are even less, 1-3% of account value at most. I find ETF's like Simplify's SPD an excellent product. The ETF invest most of the fund in the SPY but retains a small percentage to invest in put options and other instruments to hedge against a large drawdown. As a retail investor I would not be able to do this without substantial cost and time. I also lack the skill to trade options well, so having access to a professional that can do this is wonderful. Products like these protect my hard-earned capital from the eventual market drawdown. I use inverse and leveraged funds only as hedges. For example, I do have a stock only account which I use for speculation. I keep some in PSQ while the Nasdaq continues in a bearish trend. When the position gets too big, I sell some. Again, I am NOT a financial professional. I am an engineer, I work everyday to help make things. I appreciate the access to these products while I focus on what I am good at. Many of these products are well explained and outfits like Hedgeye explain which ones to avoid. This brings me to my final point. These rules will further exaggerate the wealth gap in this country. Although well meaning, it will be more difficult for smaller investors to become large investors without access to these products that protect wealth when used properly. If I am forced into an index fund I will be unable to adjust when the market becomes overpriced. I will be unable to protect what wealth I do have. The already wealthy have access to many of these products and more. They would be able to profit more then the middle class. In conclusion, this new rule, while well-intended will not improve the financial well-being of many who take the time to learn and investigate. It will remove an important vehicle for hedging and even profiting on major market moves. It further increase the wealth gap during major shifts in the market. This relies on the flawed notion that stocks only go up. That we can never have bear markets. If a rule like this happens, it would make investing less safe and attractive for myself and many others. I personally would take my money elsewhere. Many thanks for your time and attention.