How best to invest for a stock market crash?
Posted on 04 August 2010 with 1 comment from readers
Thinking about how to invest for a stock market fall is a logical thing to do at the top of a massive rally. How much upside can be left in this rally? Is the writing not on the wall? Is the good news not all in these stock prices?
Or perhaps you follow financial astrology and reckon Friday will see a Wall Street Crash, and have been excited by the very unusual sun spot activity this week.
Unemployment data
Or you are an economist and think the Fed’s hints about a return to quantitative easing next week mean that the unemployment figures on Friday will send the market into a funk. Or you are a market trader and notice that there is no volume in the market anymore.
The ArabianMoney newsletter has been advocating the judicious use of short ETFs since May, a little early perhaps but then anybody who has these instruments in their portfolio when markets go south will not have to worry about a couple of losing months. The upside is way ahead of any downside to date.
That is the main reason for liking them so much. The downside is controlled as an indexed product without exposure to specific stock risk. The upside is going to track the remarkable decent tracked by these ETFs since the low of March 2009.
Short ETF portfolio
ArabianMoney newsletter readers have access to a portfolio of short ETFs, and this will be repeated in the next issue. Sign up today to get your copy next weekend: Click here!
Only if US stock markets continue to rise in the face of a reversing recovery will this investment be a flop. US housing, auto sales, consumer demand, industrial production and state spending are all deep in trouble. How long can the stock market stay up?
1 Comment posted by readers:
Yesterday, the head of Duke Energy, James Rogers, said on CNBC TV that his company didn’t expect electricity demand to reach pre 2008 levels until 2014. I can’t imagine that much reduction of electricity demand, but he has the meters. Are that many houses vacant? He said it was his opinion that the USA ecomonic recovery would be very slow.
The head of Auto Nation just said on CNBC that US recovery will take “3 or 4 years.”
It might take a lot longer if oil tops $100.
Government and non- profit agency job cuts are up 36% in July, over what they were in June. Planned layoffs are up 6% for the same period.
It will be interesting to see how far the market falls if the US unemployment rate number exceeds 10% this Friday. I doubt it will rise that much, but if it does, a 3% percent drop is possible on Friday. Federal officials haven’t sounded very optimistic lately. A drop in the unemployment rate will set off a 200 point Dow increase.
I love how all the Wall Street robber barron bankers, most of whose jobs were saved with tax money, and some CEOs, constantly complain on TV about Obama being anti-business. They just can’t accept the fact that they only control one branch of the US government right now. What a bunch of rich cry babies. They should drive through some inner city US neighborhoods and look outside the lemo once in a while.
ADP just reported a private job gain of 42,000 last month. They said private employment gains show no evidence of acceleration. That is 6 small increases in a row. Of course, we need about 110,000 total new jobs created every month to keep up with US population growth. And since the number was slightly ‘better than expected’ the futures turned positive.
Wall Street should put up a statue of whoever came up with the idea of the 401k program to force more retirement money into their ‘investments’.