Our Highest-Ranked ETF is a Bet Against Oil – And The Global Economy
Each trading day, Portfolio Armor calculates potential returns for every security with options traded on it in the U.S. Potential returns are high-end estimates of how the security might perform over the next six months, and they’re based on an analysis of price history and on option market sentiment. On Friday, the security with the 5th highest potential return in our universe (which consists of all securities with options traded on them in the U.S.) was the ProShares Ultra Short Bloomberg Crude Oil ETF (SCO), which is 2x short oil.
SCO had a potential return of 19%, which was 5th overall, but the highest of any ETF in our system. Here’s a way an investor who wants to bet against oil (and, by extension, much of the global economy) can own SCO while limiting his downside risk to a decline of no more than 15% if SCO moves against him. The best part is, the cost of this hedge is negative, so our investor would essentially be getting paid to hedge.
Getting Paid To Hedge SCO (more…)
The best thing about weekly scheduled “news” events is that they can offer volatility and entertainment. The worst thing is that unsuspecting retailers regarding them as actual “news” and don’t recognize news events and scheduled releases for the scams that they truly are.
This week’s exhibit in the you-can’t-make-this-stuff-up category is none other than light, sweet, and lately crude West Texas Intermediate.
Here’s my quick take on Gold, Copper, and Oil…
- a drop and hold below 1072.30 on GOLD could, finally, see price retest the 1000 level, or lower, since there is an absence of volume support down to this level, according to the Volume Profile shown along the far right side of the chart
- 1150 = major resistance
We may see a turnaround sometime soon on this USD:CDW forex pair.
A break and hold below 50 on the RSI could signal a retest of the 1.250 price level, or lower at the 50 MA at 1.223. The bearish crossovers on the MACD and Stochastics are forecasting lower prices for this forex pair.
My energy bearishness has been oft-mentioned in the hallowed halls of Slope, and the way things are going, it seems like we should drag out the late 1990s terms of how the “new economy” (Netflix, Facebook, Google) is completely dwarfing the “old economy” (crude oil, gold, silver, and other assets you can actually hold in your hand).
Looking at crude’s slippery slide, one wonders if the mid-March lows will be taking out next week:
Going into 2016, the data points to a 9-11% increase in healthcare costs. Let’s not get bogged down into who will bear this cost, let’s just agree it will not be good for Employers, consumers, and State Budgets.
The GDP of the U.S. is approximately $17 trillion. Healthcare is 17% or approx $3 Trillion. This increase transfers $200 billion additional dollars out of consumers (as a tax, or employers as a cost, or States as an expenditure).
This is on top of an expected flat to 2% revenue growth expected next year. Consumers will stop spending on other things or take the tax and drop out, employers must grow $10 dollars of revenue for every dollar of the increase they will absorb, to simply keep EPS the same. At 8% of GDP for Employer portion of Health costs, that is $100 billion in new revenue. That is nearly a 6% growth in Revenue just to run in place.