Yesterday the Dow hit an all-time high of 14,273, up from its previous high of 14,087.55 which occurred on October 1, 2007. Additionally, the Dow has posted almost 9% returns for the year, and has doubled since its low points in March 2009. As this Index takes off, inverse ETFs and VIX ETNs are dirt cheap at their lows. Given the popular thought process of “selling high, buying low”, I have to wonder if now is the time reduce exposure to highly correlated equities and purchase some “bear share” ETFa and “fear” ETNs.
Despite the apparent up-turn in the economy, there is still the possibility that the markets will experience something similar to what was seen in summer/fall 2011. Q4 2012 saw a .1% increase in GDP (recently revised from -.1%). With the sequester taking effect, the possibility of lackluster Q1 2013 GDP growth paired with poor GDP growth in Q2 and Q3 2013 could be enough to rattle the markets. While all signs point to positive S&P / Dow / NASDAQ returns for 2013, is it possible that the rest of the year will see stagnant or possibly even negative returns from this point forward?
While the short term appears to be relatively stable, one can not discount market irrationality. Given how low “bear shares” and “fear” ETNs are trading, and how we are already at the peak of financial performance, the possible losses from purchasing leveraged inverse securities can’t possibly outweigh the benefits. For example, the TVIX has a 52-week range of $4.00 – $169.10, and is currently trading at $4.35. The TZA is also trading at its 52-week low of $10.01, and is 60% below its 52-week high of $24.66.
So, what do you guys think? Is now the time to go long on bear ETFs and ETNs?.
if you dislike having money, definitely.
Pulling the trigger on a long term trade or a big one for that matter is a hard thing to do. No one can make up your mind but you; however.... I'm going to say not just yet.
Buy high sell higher fool!
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