Posts Tagged ‘cash’

Grexit: Remaining In The Eurozone Is No Longer ‘The Base Case’ For Greece

April 21st, 2015

greeceAccording to the Wall Street Journal, Greece staying in the eurozone is no longer “the base case” for European officials, and one even told the Journal that “literally nothing has been achieved” in negotiations Read more…


Words Of Warning: Get Your Money Out Of European Banks

March 24th, 2013

banksIf you still have money in European banks, you need to get it out.  This is particularly true if you have money in southern European banks.  As I write this, the final details of the Cyprus bailout are being worked out, but one thing Read more…


Mass Panic In Cyprus As The Banks Are Collapsing and ATMs Are Running Out Of Money

March 21st, 2013

cyprusEuropean officials are openly admitting that the two largest banks in Cyprus are “insolvent“, and it is now being reported that Cyprus Popular Bank only has “enough liquidity to cover the next few hours“.  Of course all banks in Cyprus are officially closed until Tuesday at the earliest, but there Read more…


Banking Meltdown In Cyprus Could Lead To A “Lehman Brothers Moment” For All Of Europe?

March 19th, 2013

europeCyprus lawmakers may have rejected the bank account tax, but the truth is that the financial crisis in Cyprus is just getting started.  Right now, the two largest banks in Cyprus are dangerously close to a meltdown.  Read more…


The Start Of A Historic Financial Meltdown In Europe?

February 4th, 2013

europeMichael Snyder: Are we witnessing the start of a historic financial meltdown in Europe?  In recent days, two massive corruption scandals have greatly shaken confidence in European financial markets. Read more…


Previous Corporate Hoarding Of Cash May Soon Become A Big Positive

January 19th, 2013

Wall streetSy Harding: For a number of years politicians and analysts have bemoaned the fact that U.S. corporations were hoarding cash to an unprecedented degree, refusing to invest it for future growth Read more…


10 Shocking Quotes About What QE3 Will Do To America

September 15th, 2012

Ready or not, QE3 is here, and the long-term effects of this reckless money printing by the Federal Reserve are going to be absolutely nightmarish.  The Federal Reserve is hoping Read more…


U.S. Economy: 17 Reasons Why A Recession In 2012 Is Underway (INDEXSP:.INX, SPY, TZA, FAZ, GLD)

July 27th, 2012

Michael Snyder: If you were hoping for a recession in 2012, then you are going to be very happy with the numbers you are about to see.  The U.S. economy is heading downhill just in time for the 2012 election.  Retail sales have fallen for three months in a row for the first Read more…


Praise To The Central Banks As Two Years Of Fears Have Disappeared (SPY, VGK, EWC, IEV, EWJ, EWI, EWP)

February 18th, 2012

Sy Harding:  Kudos to central banks.  The eurozone debt crisis produced two years of fears that it would result in financial collapse and a severe recession in Europe (NYSEArca:VGK) that would spread Read more…


Gerald Celente: Run, “You Can’t Trust Anybody & The Entire System Is Collapsing” (GLD, SLV, AGQ, GDX, ZSL)

December 4th, 2011

Dominique de Kevelioc de Bailleul: Many have long predicted a time to run for cover would come, but the notion that the reason for selling your paper assets to move into plain ol’ cash, or better yet, physical Read more…


All Investments Involve Risk…Even Cash; How Much Cash Should You Hold? (TBT, TLT, GLD, SLV, SPY)

November 11th, 2011

Keith Fitz-Gerald: As you might imagine, I receive a lot of questions from readers around the world and right now the question I’m being asked most frequently is, “How much cash should I be holding?” Read more…


QE2 Winners Not Forecasting QE3 Jackson Hole Miracle (SLV, GLD, TLT, SMH, XLE)

August 18th, 2011

Chris Ciovacco:  In 2009 and 2010, the Federal Reserve was able to reverse sharp declines in asset prices by pumping large amounts of printed money into the global financial system via quantitative easing. With the Fed’s 2011 Jackson Hole speech set to take place on August 26, we recently Read more…


6 Ways To Protect Your Assets From Impending Deflation Including ETFs (DGZ, XLU, VPU, VCLT, TLT, D, PG, MO)

August 5th, 2010

There’s more talk now about an impending deflationary period than we’ve heard in several years and the thing about this churn is that even if we don’t truly experience textbook Read more…


Serious Money: ETF That’s Better Than Cash

May 20th, 2009

cash……But where to put the cash. A checking account will only pay you a fraction of a percent interest — no thanks. Treasuries are safe but do not pay much either unless you invest long term. What I decided to do was find an Exchange Traded Fund (ETF) that allowed me short term liquidity, security, relative stability and paid a higher yield. I also liked the idea of an ETF because it allowed me to keep the funds in the brokerage account and I could still keep score.

What I decided on was the Vanguard Total Bond Market (NYSE: BND) ETF. It is currently paying a 4.15% yield and I can trade shares anytime to get cash. Read more…


Leveraged ETFs Beat Margin

April 26th, 2009

leverage2Leveraged ETFs are convenient, but are they more efficient and effective than traditional margin leverage? In this report we compare performance of both in up and down markets and consider qualitative differences. Overall, we find that leveraged ETFs are still the preferred method for making big bets on market direction.

Traditionally leverage is obtained by borrowing money from a broker at margin loan rates and then either buying an ETF or selling it short. Alternatively, one can buy so-called leveraged ETFs which contain all leverage and margin costs. They come in long and short flavors and typically ratchet leverage up by a factor of two.

First let us compare how the two strategies handle the ubiquitous S&P 500 in bull and bear markets. On the one hand we buy SPDR 500 (NYSEArca:SPY), the giant S&P 500 ETF, once with cash on hand and again on margin for double exposure. On the other hand we buy Rydex 2x S&P 500 (NYSEArca:RSU), a leveraged ETF targeting double daily returns (discussed later). RSU wins handily in the bear market of 2008 and just slightly in the March 2009 bull run: 

  Bear market: 2008 Bull market: March 9-31
SPY return - 34.6% 17.6%
SPY 2X -69.2% 35.2%
less 5% margin 5.0% 0.3%
net return -74.2% 34.9%
RSU -65.2% 36.5%

 When we consider a shorting scenario, results are mixed. Here we compare Rydex 2x Inverse S&P 500 (NYSEArca:RSW) which targets the inverse of double daily S&P 500 returns against a double short position where cash on hand is posted as collateral to short once and another short position is made with a margin loan. RSW trails by 8% during the 2008 bear market and wins in the 2009 spring bull market by 4%. 

  Bear market: 2008 Bull market: March 9-31
SPY return 34.6% -17.6%
SPY 2X 69.2% -35.2%
less 5% margin 5.0% 0.3%
net return 64.2% -35.1%
RSU 56.3% -31.5%

 Now we turn to the closely watched sector of financials. Here we compare ProShares Ultra Financial (AMEX:UYG), which tracks double daily returns of the Dow Jones Financial Index, against going long twice on iShares Dow Jones US Financial Sector ETF (NYSEArca:IYF), which tracks the same index without leverage. UYG wins handily during the 2008 bear market and again less dramatically during the Spring 2009 bull market: 

  Bear market: 2008 Bull market: March 9-31
IYF return -47.7% 35.6%
IYF 2X -95.3% 71.2%
less 5% margin 5.0% .03%
net return -100.3% 69.9%
UYG -83.3% 74.0%

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