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9 comments:
Roger,
I always find your comments helpful, but must confess my ignorance on your use of "double short" in your video. I Googled the phrase and came up with it as well as "double long," both referencing articles by you, but nothing else. Investopedia was of no help. I'd appreciate an explanation. Thanks.
Well you should go to proshares.com but double short....these funds allow investors to capture twice the inverse of the market. So SPX up 1%, double short down 2%. SPX down .50% double short up 1%. No guarantees of course and it is important to know that the goal is twice the inverse on a DAILY basis. it may not do that over time as that is not the goal.
Roger,
I’m glad to hear you favoring some sort of method for dealing with bear markets. It’s my favorite topic. In my advisor practice, my preference has been to move to all cash when appropriate. Such was the case on 10/13/2000 when we liquidated 100% and stayed on the sidelines till 4/28/2003, which allowed us to avoid the brunt of the bear market.
I am having trouble with the concept you mention of slightly reducing market exposure and, if things go down further, adding double short positions to cover your remaining longs. I find it easier to be in cash and start over upon the markets rallying rather than trying to find a point to get rid of the shorts.
Roger. Excellent video. When you refer to 200-day moving average, do you mean the simple moving average or the exponential moving average? Also, do you see significance in any other moving averages, simple or exponential, such as 100-day, 50-day, etc? Thanks, JCarr
Thanks for the great video, Roger. My previous Financial Advisor had the same viewpoint about buying short funds when the market really starts going south. I am now on my own, and appreciate your savvy advice. Just a few questions from a novice.
1. Since the last few big pullbacks have caught Gold,Bonds, and other traditional "hedges" in their downdraft, is cash the only real safe haven, and less risky than shorts? I say this because buying short ETF's or funds is a high risk diceroll.
2. Re: the above, isn't that why a lot of the more successful funds (BRKA, FAIRX, etc.) hold up to 20-25% cash? Thanks for any input. Scoot
Roger, good video but I'm a lot less optimistic about the benefits of market timing than you. The main benefit of timing is to help reduce portfolio volatility, not to improve returns. If you're lucky enough to increase returns, great, but I don't count on it.
The double short funds are a godsend for individual investors who use them properly. They're a cheap way to hedge without disrupting a portfolio. That said, those who go net short are really swimming against the current. I can't think of a harder way to make money except for gambling or lottery tickets.
I can hear some of our bearish friends growling at your remarks.
However, you make good sense. If a portfolio is constructed in a wise manner, no drastic action need be taken. Chronic bears seem to me to be always re-arranging the deck chairs on the Titanic.
I like to maintain a relatively large number of dividend paying world-wide securities in my portfolio that hopefully buffer the chops and provide a floor of sorts in the event of a downdraft. Also in the portfolio mix is a small double short position that I regard as speculative in nature.
double shorts are trickier than I would have thought. I have embraced them as insurance, a little bit of a buffer, and a means to keep holding longs...many of the reasons mentioned by others. BUT, when putting a double short etf into practice...with the recent bounces we have had off major moving averages, the price of insurance has been higher than expected. In this price action environment shorts end up getting sold, at least by me and I think many others, is higher than cost. We are betting that there will be a deep correction and that like the inverse of buying/selling stocks long we are seemingly expecting that when we sell a short that we will have gotten the "meat" of the move...that is, not sold as our market bottoms but on its way up. This bet has not worked lately. Hence, an increase in cash strikes me as a better piece of insurance. Or is it...that deep correction might really happen. Darn, this is hard. Tom k's expectations may be the solution...just reduce volatility which over the long run, like roger says, will pay off big. I wish that Fidelity would chart my account total return as a single asset over time. Does any brokerage do this? Would be a good idea to see the forest from the trees.
tom k jumped ship after the feb drop and insist he got right back in for the ride up. I stayed in my double short inverse fund and paid dearly so far.
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