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…)
If you believe as I do that the governments of the world have shot their load, and for whatever reason (politically, economically, or culturally) can’t keep expanding their debt loads, means one thing.
EXETER Pyramid is activated.
NFTRH 353 introduced the idea of a Macrocosm, a planetary representation of elements that need to come into place for a real investment stance on the gold stock sector (as opposed to the imagined elements cooked up by perma-bulls over the last few years). The Macrocosm idea came to me when the gold sector was acting firmly counter-cyclical on a day that most other markets were suffering. Then it happened again.
We begin with NFTRH.com’s post from July 16 noting the message I got from a former associate (from my previous life as a manufacturer)…
“Just an update for you, some disturbing news has leaked out this week. Machine tool builders have put out blow out [lists] to all sales persons in the USA, not sure if world wide. Mori Seiki list has 600 to 700 machines on it WOW!!! never have i heard of such a huge list by any one Builder. Not sure what they see coming but it can’t be good.”
My comment from that post: “Mori is a big builder and when the big builders start blowing out it goes right down the food chain.”
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.
With nearly 500 comments on the prior post, I think I’ll toss out a quick comment cleaner!
So with the final trading day of the month upon us, we come to learn that with the stimulus of $18 trillion in borrowing and 0% interest rates have provided us with a GDP that fell 0.7% in Q1 (and this is with government numbers which are surely as sugar-coated as possible). I pity the next President. Actually, no. No, I really don’t.