A reader emailed me an article but sent it to me from the site and there was no place for his email for me to thank him, so thank you.
I took a tad off the table at the close today in a higher beta name that not everyone owns. I plan to add in a European pharma name (as health could be a good place to hide out) that a couple of people own but not everyone.
I am still more than 75% invested. A next defensive action after this might be a large position in a double short fund, either an OEF or the ProShares ETF if that one lists soon. This might also be a good place to hide out for a couple of months, imperfections notwithstanding.
If I think it is necessary, and I am not there yet, 10% in a double short fund could take another 20% of net exposure off the table but still allow dividends to flow in. While not perfect this idea has some merit. A 75% cash position is likely to result in missing too much of a huge whoosh up whenever it comes and is a bigger bet that I am likely to make.
As a side note, once ProShares gets the double short ETFs trading the next step needs to be short and double short foreign ETFs to hedge EFA and EEM.
Wikinvest Wire
5 comments:
Hi Roger - how do you feel about the low liquidity of these short funds? Thinking of hedging here a bit myself.
- maybe, the turnover in the short ETF is not so important, because, backing the short ETFs workings is tremendous liquidity of Index Futures markets - but, the bid/ask spread of ETF will be slightly wider?
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I agree with Riccardo. Even if that were wrong though, how many shares do you need to hedge or speculate?
If you are making one round trip over the course of a couple of months a little but of slippage in the spread may not be the worst thing in the world, but if it is you can look to the OEFs instead. Perhaps the competion from the OEF can help?
It seems as if the ever increasing number of ETFs almost guarantees lower trading volumes for most of them, and with it higher spreads and greater slippage. At some point the slippage per trade may well start to matter.
Jon, can't disagree, that is possible.
As a matter of opinion I think that copy cat ETFs could be less and less as the me too's seem to fail to attract volume.
At least I hope it plays out that way.
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