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Monday, September 24, 2012

Mailbag: Bear Trader: Is it the time to build a bearish ETF position to prepare for sharp sell off?

It depends on what you mean by a "sharp sell off". The retail investor is 90%+ out of the market. A "sharp sell off" nowadays won't be the gentle descent of 2007 - 2008 but instead be an algo driven mad shark feeding frenzy. Not months, but hours long. Maybe minutes. Not a fan of SOXS, FAZ, or TZA. Those triple inverse ETFs only track correctly for a few days at a time, and, if held, loose you money compared to an option. Day Trade them only. The algos are all over these leveraged ETFs and will eat your lunch. The volume charts are enough evidence this is so. Remember that an hour for you is a million hours for them - one hour for you is 115 YEARS for them. Newmont is not a "weeks or months" buy yet, the Big Boys ran it up following QEInfinity but it looks like the trading trend ("hours" to "days") is negative to me. I think it is a good stock that is not yet a buy. If you are willing to hold it through thick and thin I think you could be nicely in the money in two or three years. Since QEInfinity was priced into the market it looks to me that Mr. Market is waiting for the other shoe to drop. The elections are too close for anyone to stick his neck out. Also QEInfinity will have simply terrible "unforeseen" consequences. ("Unforeseen" except by Peter Schiff, Marc Faber, Jim Rogers, Doug Noland, Michael Burry, lots and lots of other financial world big shots, and me, I guess.) Speaking of QEInfinity I was optimistic that the FED would not do anything so stupid in any case whatever. Whenever I make mistakes they are lulus. And usually my mistake is to hold human nature in too high regard. Arrogant, conceited, stupid fools. Oh, yeah, QE has made the rich much richer, and the rest of us poorer. Just another tax on the little guy. Whenever you buy food or gasoline remember that the high prices are caused by the diluted dollar. Bernanke and his posse are trying to put out a burning city with fire hoses charged with gasoline. Or maybe they know what they are doing? That is a truly terrible thought.

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