Borrowing to Own vs. Borrowing to Bet
A fund built to return twice the daily move of a single electric vehicle company [(Lucid Group, LCID)] was wiped out this month. [LCID shares] fell more than half in an afternoon on a bankruptcy report the company denied. By the close, it had recovered most of the drop. By the end of the week, it was up. The fund was already gone — net asset value negative, shares halted, the counterparty having closed the position on the way down.
Bloomberg Opinion, "Money Stuff," July 20, 2026.
The obvious lesson is that leverage — borrowed money used to increase market exposure — can be dangerous.
We don't think that's the lesson.
Writing about the same collapse, Matt Levine observed that "people should borrow money to invest in the stock index" is "actually a pretty respectable idea with a lot of good life-cycle consumption-smoothing theory behind it," while "people should borrow money to bet on risky electric vehicle manufacturers" ends predictably.
Two different sentences sharing one word.
Three things failed here, and none of them was the borrowing. The exposure was one company rather than the whole market. The structure reset daily, compounding volatility decay — the erosion that comes from applying percentage swings to a shrinking base. And someone else held the right to liquidate the position at the worst possible moment.
A recent paper by Chris Murray and Marco Sammon of Harvard, "The Costs and Benefits of Leveraged ETFs," finds that single-stock leveraged products carry larger volatility drag and higher financing costs than broad-index ones, which raises the return required simply to break even against the underlying stock.
This is our second and third convictions arriving in a single afternoon.
Exposure is only worth holding if the structure around it minimizes expenses, margin calls, and volatility decay. And the market will keep producing products that fail that test, packaged well and sold hard.
Ruth is working on a strategy, and the strategy is predicated on “direct leverage” and increased exposure in broad market index funds, using non-recourse capital, meaning downside is capped at what you invest and the portfolio results are aimed to track to the long-term return of the underlying asset.
Thus, when the stock recovers (as it did with LCID), at Ruth we believe the customer should benefit. We built the structure around a simple requirement: a bad afternoon should not be able to end a long-term position.
Join the early access waitlist to be a part of our community: ruthinvestment.com
Ruth is launching soon. Registration as an investment adviser is pending; Ruth is not yet licensed and is not currently providing advisory services.
This is for informational purposes only and is not financial advice. Investing involves risk, including the possible loss of principal.