By Doug Casey
International Man
October 23, 2026
International Man: The SEC just approved a new generation of funds that offer three times the daily performance of commodities like gold, silver, and oil. Wall Street is making it easier than ever for ordinary investors to take leveraged bets on volatile markets. What do you make of these products?
Doug Casey: Leverage is great-when you guess right. But predicting price is hard enough for full-time pros who are involved in all the details 24/7. That's true of all financial products, but commodities in particular. For the retail public, predicting the price of a commodity is usually a sucker's bet.
The public only gets involved in something after they've heard about it in the media. That means they're the last ones to hear about it. And that's generally after it's gone up a lot. They've heard about fortunes being made and want to jump aboard the money train.
They don't realize that commodities tend to rotate around their cost of production. A myriad of factors can make them go much higher than their cost of production, but they always revert to the mean. Mr. and Mrs. Buggins in Podunk almost always wind up buying at the high. Then, when the commodity not only reverts to the mean but goes way below it, they get scared and sell at the bottom.
The greatest enemy of amateur wannabe speculators is their own psychology. They buy on greed and sell on fear. Professionals try to do the opposite, which is easy in theory but very hard in practice.
Anyway, trading commodities is dangerous enough with no leverage. Triple leverage is triple risk. And that doesn't count the cost of management, various fees, and the interest on the borrowed money facilitating the leverage.
I'm all for innovation, and products that expand opportunities. But the fact that these products are appearing just now tells you something about the market in general. Namely, there's way too much money and enthusiasm on the part of the public.
International Man: You've often distinguished between saving, investing, speculating, and gambling. Where does leverage fit into that distinction ? Can borrowing money or using leveraged financial products turn a good speculation into a great one, or does the additional risk defeat the purpose?
Doug Casey: Let's define some terms. If the precise meaning of words isn't understood, it's impossible to know what you're talking about. And apart from anything else, that's a guarantee of disaster. And remember, I'm just scratching the surface here.
"Saving" is to set aside the excess of what you produce over what you consume. Without saving, a society can't progress beyond living hand-to-mouth.
"Investing" means allocating that saved capital so as to produce more wealth-for instance, financing the planting of a bushel of seeds to yield a hundred bushels later. There's always an element of risk with investing, which is why the public often confuses it with speculating.
"Speculation" is very different. It's not about producing more wealth, but allocating capital to take advantage of distortions in the market. Most economic distortions have political causes, but that's another subject. When prices are high and the public wants to buy, speculators step up to sell, thereby keeping prices from going even higher. Later, when prices are low and the public is fearful and wants to sell, the speculator gives them cash. That helps those who need cash, and keeps the market from crashing even further. Speculators-contrary to their reputation-are actually a benevolent force.
"Gambling" is to rely on chance. It's a form of entertainment. It's a "zero-sum" game with no economic purpose. People who don't understand economics rarely define words properly or think critically. They often confuse gambling with speculating.
So, having said that, how does leverage fit in ? For the average person, who doesn't understand the difference between the four things I've just outlined, it shouldn't.
If there's a time to use these leveraged commodity products, it's after a meltdown. Not now, when they're being widely promoted. Although I hasten to add, commodities in general are actually quite cheap today relative to everything else in the world.
International Man: One of the dangers of these new 3X funds is that an investor can correctly predict where gold or oil will trade six months from now and still lose money because of daily resets and price swings along the way. How important is choosing the right financial vehicle when making a speculation ? Can getting the timing or structure wrong be just as costly as getting the underlying investment thesis wrong?
Doug Casey: Commodity bets are typically made using futures contracts, where the leverage is even greater. One big problem with futures, as well as these 3x products, is that people go into them with inadequate capital. That means they can be squeezed out when the market goes against them in the short run, even if they're right in the long run.
When someone buys these things with inadequate capital, that indicates they're being used as a means to gamble, as opposed to speculate. The buyer is just hoping to "get lucky", usually on nothing more than a hunch or a tout. My advice is if you want to gamble, go to a casino. At least there the risks are transparent, you get free drinks, and might even be comped a show or a room if you lose enough.
International Man: You've lived through numerous booms, busts, and speculative manias. What have those experiences taught you about leverage?
Doug Casey: As a general rule, leverage is not your friend. Not only do you have to guess right, but a lot of factors that we've just discussed militate against you. Leverage also encourages people to trade-jump in and out of the market, trying to outsmart it. That's an especially bad idea. Most traders get eaten up by bid-ask spreads and commissions even while fighting their own psychology.
My approach is to be patient. The idea is to "be right, and sit tight." That's a long-term strategy. It's treated me well in the case of gold, with 100-1 gains since I first got involved.
Admittedly, that's hard to do with most commodities, if only because they're extremely bulky and incur significant storage costs. And things like grains and oil deteriorate. Gold and silver are special that way. It's one of the reasons they're money itself, and different from ordinary commodities.
International Man: Looking at today's markets, are there any circumstances where you'd favor using leverage to take advantage of an extraordinary opportunity ? And what advice would you give speculators tempted to use leverage to accelerate their gains?
Doug Casey: By far the biggest area where people use leverage is in buying their house. Most see it as fairly low risk. They view buying land or a house with borrowed money as normal. But buying a house with a mortgage is very much like buying stock on margin.
Of course, since you need a place to live and store your "stuff" (as George Carlin observed), houses are a special situation. You need a house, and you don't "need" stocks.
That said, my advice is that unless you pay cash-which is how most people bought their houses before the last Great Depression-you should do so with the longest-term fixed-interest-rate mortgage possible. There are tax advantages, and currency debasement is helping to pay off your mortgage. But, at 8%, a mortgage is no longer a gift-even though I expect rates to continue up for the indefinite future. Plus, although most people consider a house an investment (see the four definitions we discussed earlier), it's really just a long-lived consumer good with some aspects of a speculation. But that's a different subject.
About the only way I'm involved in leverage today is with the shares of small resource companies. Should the markets go the direction I expect, they offer well over 10-1 returns from here, with no debt involved. On deals with warrants, it's usually possible to sell the underlying stock after four months, retaining the warrant at no cost for the next two or three years.
Right now, for reasons I've explained at some length (link), that's about the only form of leverage I'm interested in. You want to be cautious in today's over-indebted and over-financialized world. We're on the edge of a precipice. I suspect most people are going to lose a lot of money over the next few years.
Reprinted with permission from International Man.