When Short Selling Goes Wrong

For now, one of the best ways to capture short-sale gains, without the margin and with far less risk, is to select an inverse exchange-traded fund (ETF) with exposure to areas that are likely to see declines, such as ProShares UltraShort Basic Materials (ETF) (NYSE Arca: SMN) for basic materials or ProShares UltraShort Real Estate (ETF) (NYSE Arca: SRS) for real estateThere’s an inverse ETF to short anything.

Shorting currencies, like the Australian dollar and CurrencyShares Australian Dollar Trust (NYSE Arca: FXA), earned Capital Wave Forecast readers more than 100% in just a few weeks. The next likely currency to short would be the euro, as oil supply worries (read: Syria) set in.

But this is not a short seller’s market – yet. This is still a game of picking individual down sectors and the odd stock to short. Insider selling can be a great indicator of a compelling short.

Investors should limit their exposure and remain adaptable to changing conditions in order to keep playing the bull market – all while waiting for the other shoe to drop and a full bear to begin. Remember, as Shah Gilani says, the only way not to make money is not to be in the market.

Something to watch: George Soros’ 13F filings have revealed a huge short position – puts totaling 1.2 million units – on the SPDR S&P 500 ETF Trust (NYSE Arca: SPY). This position, held since the beginning of the year, has tripled twice in the past two quarters. Soros bet around $1 billion each time when he shorted the pound sterling in 1992, the yen in 2012, and the Australian dollar in 2013. Now he’s betting against the entire stock market for similar stakes.

Maybe he has the magic touch, more so than Ackman or Einhorn. Maybe he knows something we don’t. Maybe the end of the bull market is nigh…

Or maybe he’s setting himself up to lose like the rest of the short bettors at the hedge funds.

Money MorningWritten By Greg Madison From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.

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