If you are worried about a recession and how that will affect you and your investments, then one option would be to take long positions with the ProShares ETFs. Personally, I still like selling short on stocks and stock index futures, but I know that many people do not.
So here is a great article I found on how you can make money in a recession or a bear market with Ultrashort ProShares ETFs.
If you liked this article and it helped you, feel free to comment and let me know. If it didn’t help you, then let me know why.
Hmmm interesting article
Alessio what do you think about long term investment in developing markets like the Philippines? I’ve been rather hesitant to invest these days but when looking at the Philippines and the fact that its economy actually grew by 7.3% in 2010 and has been showing strong growth rates lately (I checked reports from the IMF and World Bank). Also a recent report showed that the Philippines actually outpaced India as the prime location for business process outsourcing. I smell potential profit but I’m still thinking, would appreciate any advice you could give.
For short term holding (i.e. days), maybe. The tracking costs due to volatility of the tracked asset and the costs of shorting make them very poor long term holdings. Always need to check the TER. There’s one thing that *is* guaranteed when investing: expenses.
And, in the midst of this Lehman-type European banking crisis (read about the Belgian and French govts bailing out Dexia Bank?) ETF counterparty risk is a real consideration.
Is there a minimum investment? I’m definitely worried about the recession, however, I haven’t ever invested in the stock market and I’m not sure this is the time to do it.
I need to go find the remedial version of this because it seems so complicated!
I think it is very dangerous to encourage the public to get involved with high risk products like this
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I have been trying to use these (I use the triple inverse funds like FAZ, and several others) but the main issue is finding the right time to buy these funds. If you end up buying these at the wrong time you will end up losing in the same proportion. Everything comes down to successfully timing the market. Do you have any suggestions on figuring out when to enter and exit positions when using these ETFs? The usual technical indicators do not always work well. Your reply will be greatly appreciated.
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Trouble is I don’t really understand all the jargon yet to be able to decipher an article like that. What I got from the article was that they are inverse tracking the market and you make money as the market goes down, but why. Unlike short selling which I have my head around thanks to your videos I’m don’t understand this.
I personally don’t fool around with leverage 2x and 3x ETFs unless we are in a trending broad market. Right now, the markets are in a trading range with too much choppy price action. Yesterday, we had a big dose of market manipulation by the big boys on wall street and all those that were long in 3x inverse ETF – TZA got chopped in half. Becareful, because this market is treacherous. Leveraged ETFs aren’t for noobs. However, simply inverse ETFs without leverage should be fine because they track the broad markets at a 1:1 movement. It’s more safe than “shorting” because with non leveraged inverse etfs, the most you can loose is your initial investment, however with shorting, you are borrowing from your broker and you can loose more than your initial investment which makes shorting riskier than buying non leveraged inverse ETFs.
Alessio, I am totally new to forex trading and I have only started to do some educational stuff since your BBC video. I am thinking of going with a Metatrade 4 system because it is free and I am have narrowed down brokerages to a short list.
Can you recommend any way to best educate myself (other than practice accounts and trail and error/experience)?
Also, I want a broker here in the US, recommend any?
Just the other day, PROSHARES came out with a message explaining how they do Ultra’s.
Bottom Line was… it’s figured for EACH DAY, and not over the long term. So if you stay in them, you could win or lose a lot more, depending on the combination of directions it goes EACH DAY.
Remember, don’t bet more than you can afford to lose. Always have a Stop Loss to make sure you bail out if the bottom drops out of it while you’re driving thru the burger “to go” lane.
Happy Investing. I hear that TUMs wafers are on sale. [ Grin ! ]
Hello there,
First of all, congratulations for your courage telling the truth live on BBC. Yesterday, the adviser for IMF said something similar about this crisis. Now more and more people will become aware of what’s really going on.
About stocks, I agree with “Joe Shark”, “it is very dangerous to encourage the public to get involved with high risk products like this”…the first thing the public have to do, I would say, is to start small, start taking some basic courses and reading some basic books about economics and finance…They have to have a basic financial education in order to do well in any asset class (Businesses, Real Estate, Commodities and specially stocks).
Cheers!
That’s a good idea Rich. And I would agree. The problem is that most people will not. I know this as I worked in the training and education industry for years. Excuses will get in the way. But I take your point.
Frugal – well done to you for wanting to lean. Yes there are books and materials out there. I will put a few on my blog. The brokerages that I would use is optionsxpress or Tradestation (which combines charts and broker). The first one is more user-friendly than the second.
There has been a lot of talk over the years about “ETF-decay” but if you look at almost any 6 month chart on a 2x/3x-inverse fund, you are going to see a lot of volatility, but you are also going to see a +40-60% rise. Timing is important, but it doesn’t have to be to the day. You could have been building a position in FAZ for instance, which is supposedly very scary, from starting as early as February. I remember everyone was so convinced about QE3, but ZH had been talking the need to crush the markets to justify QE3 since as early as November 2010, they even picked April as the month to look out for (though mid-april would have been a poor choice). QE2 ended what, end of July? Even if you waited until that last minute, you’d still be ahead. So why aren’t I rich….?
Emotional regulation is the key to being able to hold a position as it is moving against you, and that is something I lack in spades. Losing money in the market uncovers all the worthless feelings about yourself that are basically lurking just below the surface. Its very popularly known as Loss Aversion and even knowing that is what is happening does not prevent it from affecting decisions. My strategy has been to try and find a “Master” someone in whom I can trust completely and when I’m feeling worthless, I can say, “No, its okay, because Master said so”. It’s all very LOTR, sorry. The problem is that last November I picked a bad master who was actually worse than I was at finding entry and exit points (and I paid for the privilege!). Really, unless you are just made of steel, can invest money and walk away and not look at it, yet paying enough attention to the markets to know what is going on (catch-22!!), OR can find someone with a similar outlook on things that is made of steel and can do the above FOR YOU, I don’t see being in the market as a very good idea. That is the problem with trading/investing: most people do not, including myself, have the psychological wherewith-all to handle the anxiety of risking their hard-earned wealth. If I felt a buy-and-hold strategy could return anything over the next 10 years, I would recommend that, but I would laugh heartily at the prospect. Good luck. Over a 5 year period, your best bet, physical gold and silver, hold on to what little wealth you have… so where does leave alessio?…
What the average public doesn’t need is a day-trading advice. Most people have lives and things they need to get done. Ideally alessio would provide a weekly or even bi-weekly (I’d pay for the service!!) in which he says, “Look, this is the macro-environment, we are going to establish a position and hold it for three months.” Then if there is a big move upwards in our position before what he is anticipating (recession) has actually played out he might say, “Look, we’ve had a big short term move up in our position, let’s sell half and put wait for a lower entry point to re-enter”, and then a month or so later, “Okay, we’ve had a big move down in our position, below our last selling point, let’s rebuy into 100% of our position”. And so on. It’s not that hard, but in the maelstrom of financial news, I can tell you that is very difficult to do. I was a boxer, and I can tell you, jab, rear cross, hook. You do those three things with proper rhythm and range, you will be world-class. You don’t need to be fast (time it to the day), or strong (bet everything on every call). In fact, understanding how much to commit at any given moment (i.e. I’m 60% sure, or 80% sure this will work). Trust me, you don’t want to step inside the ring without a trainer.
I have used short Etfs and always got burned its done on daily basis for most and they often do not reflect the actual level of the market very well
ETFs are there for the house ie the bank to profit but also remember in afalling market you can have massive relief rallies wiping out your gains in minutes
last Friday saw stocks shoot up like this.
You ahgev to be very nimble to profit in this way
I woujld say the safest bet is to buy gold and silver and hold if you want to make money or at least preserve your wealth
cammel, eye of a needle.
The viability of the UltraShort product would be how quick you can get out of it, as the stock market certainly doesn’t always refect the fundamentals on the ground….in fact it almost never does perfectly. Maybe you have a paid product in which you teach people regarding how to workaround 80% of the risk, but otherwise, this is not a buy and hold stock, and the average investor is pretty poor at the micro-managment necessary to prosper here with these EFTs.
Hi Alessio,
what is your take on this ?
Do the Pro Shares still work ?
http://www.topgunfp.com/many-proshares-ultrashort-etfs-are-a-disaster/
Thanks!
Thanks for the information, how do l know about the ultrashort efts in the London markets
Hi David – good question. I don’t mainly trade the UK markets – but contact your broker in the UK about the UK Ultrashorts on the FTSE for example. Sorry I could not be of more help.