My understanding is that these ETFs do not actually engage in plain-vanilla short selling, but use options, futures, forward contracts and swap agreements in order to perfectly track their respective indexes. The ProShares ETFs that I have been watching lately have been doing a good job of operating exactly as advertised, providing twice the inverse [...]
Hedge fund managers said to pack dirt under fingernails, roughen hands on bricks to avoid suspicion and possible shipment to North Dakota re-education camps.
These days it seems like we are living in an Onion article (1 , 2). It would be funny if it were not the end of the world as we know it.
I’ve [...]
Trading was suspended in London this week for some vehicles issued by ETF Securities, because the funds relied on counterparty arrangements with AIG (Reuters). The dirty little open secret of levered and short ETFs, and many others, is that they rely on swaps to get that near-perfect tracking of their underlying indexes.
“LONDON, Sept 16 (Reuters) [...]
Those reporting reporting all-time lows in Treasury yields need a little history lesson. Let’s take a quick look at the bond market first. For those who know how to read it, its behavior is ominous.
Click image for sharper view. Source: Bloomberg.
This deflation is so strong that investors are lending money to the government at long-term [...]
Here’s a five day chart of my favorite commodities stock shorts:
Click for sharper view. Source: Yahoo! Finance.
I nailed the commodities short at the peak in June, and sold a lot of my puts (GLD, GDX, TCK, NUE, X…) earlier this week as the sector made what may be the first of multiple panic bottoms in [...]
The opportunity to short REITs (or IYR, a REIT-heavy ETF) is fantastic at right this moment. This is about as perfect a short set-up as you could ever wish for: securities of companies in a rapidly deteriorating sector have rebounded to near where they were a year ago when optimism was abundant and the stock [...]
I wouldn’t be surprised if the market ends down on the week (maybe even the day). This morning’s little bailout* blip just offers shorts another chance to set up some trades we may have missed in the bounce since July. (*For a dissection of the bailout, here’s Mish).
Why short leading discount big-box retailers? Although they [...]
Click image for sharper view. Source: Wall Street Journal Online
Earnings have gone negative. How’s that for value? Remember, most bear markets end with P/Es below 12, sometimes 7. Even the value play in the group, the S&P 500, will have to fall by more than half to get there, without any further contraction in earnings.
And [...]
Bloomberg today has an interview of the Austrian-minded founder and manager of the Prudent Bear Funds.
Some take-aways:
Policy makers and central bankers are to blame for blowing this bubble.
“Institutions and foreigners no longer trust our structures, our insurance, our ratings, etc., therefore we’re in big trouble.”
“Over 18 months, this market will be down 50, 60, 70 [...]
Inverse ETFs are best used for trading, rather than to buy and hold for the duration of a bear market. Non-traders looking to hedge their longs or profit from the bear market should consider long-term put options instead. Contrary to popular belief, options can require less expertise and offer a lower overall risk to a [...]