Joseph L. Shaefer

7 ETFs to Short Right Now

On Jun 05 11:07 AM Living4Dividends wrote:
Joe - Excellent article.
... I am not a big fan of shorting either. Your potential for loss is unlimited...
...While BRIC has recently run up, and may be indeed overbought, these could well emerge to be the healthiest economiesout there.


Living4Dividends,

Thank you for your literate and thoughtful response. In 40 years of investing and being an industry professional, I have seldom shorted. It takes a major confluence of events and a sense that the “sudden volume” all on the buy side at the end of every day and the clear manipulation of news and numbers is happening for a reason. I believe that reason is to pull in unsuspecting investors, who wouldn’t touch banks and brokers just two months ago, and convince them to buy over $100 billion of new equity, allowing TARP loans to be repaid, bonuses to be reinstated, the government to declare their plan a success, and the pain to be spread, as usual, among the common stock investors.

As for shorting the BRICs, I don’t want to confuse their “prospects” for growth with their “timeline” of growth. They will clearly be an engine for global growth (though I’d rather play that growth via established firms domiciled in representative capitalist democracies with good corporate governance and minimal red tape. You’re welcome to check my article, “Looking to Buy BRIC? The ‘ABC’s are Better” for my full rationale…) I believe the share prices of virtually all companies comprising the ETFs in question are now priced for perfection. They have gotten far ahead of their potential to surprise on the upside and well within the range that any brief stumble will result in a massive outflow of investment.

Joe

7 ETFs to Short Right Now

I've never heard of them. But I'll take a look this evening after I conclude the June issue of Inv Edge... Thanks for the lead,
JS


On Jun 04 04:29 PM raytayzmd wrote:

> ....there's an easy solution to such skepticism...there are now several
> websites where you can actually manage a hypothetical portfolio and
> record trades for everyone to see...one example I can think of is
> "covestor.com"...that's the surest way to trim doubt and collect
> true believers...but, oddly enough, hardly anyone selling investment
> advice ever do that...I wonder why....

7 ETFs to Short Right Now

Right now -- SHORT-term bond funds like SHY and BSV, some gold, the rest cash... We take capital preservation seriously.


On Jun 04 11:02 AM Baboon wrote:

> >I recommend only small positions in these ETFs.
>
> What do you recommend for big bets?

7 ETFs to Short Right Now

We're not greedy. We'll take 100% any day! //grins//

PS -- I like your call sign, VP of Common Sense...

Joe


On Jun 04 10:58 AM VP of Common Sense wrote:

> I forgot the overriding effect of being short, which is the maximum
> gain is 100% unless one expands their position regularly.

7 ETFs to Short Right Now

On Jun 04 07:24 AM Futurist wrote:

... I am curious as to to why you would short instead of buying the reverse ETF's such as the FAZ instead of the FAS?

...My second question is to your market allocation. Did you pick 10% because with triple exposure its the same as risking 30% of your portfolio or are you scaling in to these shorts?

JS: Futurist, I see a fellow reader has already answered question 1 -- I couldn't answer any better! Given the time decay and daily bias, in this case I believe we'll do better by shorting.

And you drew the right conclusion on question 2 yourself. I believe these are volatile //enough// without placing more in the portfolio. We effectively get a triple hedge for the price of a single position. XLNT questions, thanks!

7 ETFs to Short Right Now

Most dialogue on SA, certainly among our regular readers, is constructive and thought-provoking. Every now and then, I receive some drive-by sniping like this, however!

If the individual had actually read the article, rather than just find one headline he didn’t like, he would have seen the article concluded with these exact words:

“We will sell 50% of all if/as the market rises toward 8500 or so and will sell more if it goes to the 9000 area. We will also place our first limit order for the first of the inverse ETFs we plan to buy: EEV at a limit of 36.”

In fact, we sold most everything a little earlier. By selling between 8000 and 8500, however, we enjoyed most of the rally. (In our Investor’s Edge ® portfolio, we sold many positions “too early.” But having made outsized profits from our bank preferreds – also a matter of record – we are still well above the returns of the S&P this year.) We’re not piggish. We don’t mind selling some // positions // too early, as long as we are solidly profitable on the // portfolio. //

I can cite a number of // positions // that didn’t pan out. Only liars, scoundrels, and rearview-mirror snipers bat a thousand on every position. But as long as we beat the averages every year since we set up our model // portfolios // in 1998, I reckon we’ll keep doing what we’re doing !



On Jun 04 07:43 AM raytayzmd wrote:

> ...of course, on March 30, Joe was advising everyone not to be an
> "April Fool":
>
> seekingalpha.com/artic...
>
>
> ...given the S&P 500 has gone up 160 points since then, one might
> consider whether his opinion is a good "contrary" indicator.