2017 was a good year for investors as the S&P 500 increased 19.42%, but unfortunately, not all investors saw their investments grow in value during the year. Investors who had purchased some different Exchange Traded Funds saw their investments nearly disappear during what will be referred to as an “up” year for investors and the stock market.
What is not surprising though is that seven of the nine most prominent ETF losers of 2017 had something to do with investing in the Volatility Index. The worst performer was the ProShares Ultra VIX Short-Term Futures ETF (UVXY), falling 93.96%. This fund provides 2X exposure to short-term, first and second month, VIX futures. The UVXY is a fund essentially will offer investors a way to make money if the VIX itself increases. Furthermore, because this fund is leveraged 2X, if the VIX increases by 10%, UVXY investors will make 20%. But, due to the fund's exposure, it has high carrying costs, meaning investors who hold the fund for more than one day will lose money due to those roll costs.
Therefore, the UVXY needs both the market to be volatile regularly for investors to make any money, even over a small period of time. In 2018 its unlikely UVXY will lose as much as it did in 2017 because the end of 2016 was highly volatile following the election of President Trump. Continue reading "Did You Own Any Of The Worst ETF's of 2017"
Based on a number of recent reports indicating the major indexes could end the year flat from where they sit today, I offered a few ideas on how investors could still profit during the last four months of 2017.
One of those ways was using Exchange Traded Funds that invest in the futures of the Volatility Index. For most investors, the CBOE Volatility Index or VIX or even the 'fear gauge,' is a rather complicated and confusing market measuring stick. So, today we are going to go through the 'ins' and 'outs' of the VIX and go into a little more detail on how the average investor can use the VIX ETF's to turn a little profit from time to time.
The CBOE Volatility Index (VIX) was designed to put a number on market volatility so investors could trade and make money based on the volatility of the stock market. This is achieved through the use of the futures market and options prices. The VIX tells investors the square root of the risk-neutral expectation of the S&P 500 variance during the following 30 calendar days.
The VIX is often quoted as a number, say 10, 20, 25. That number represents the expected annualized change, with a 68% probability of being true, of the S&P 500. So for example if the VIX is at 20, it would be predicting the S&P 500 will change up or down by 20% over the next 12 months. Continue reading "How You Can Make Money From Market Volatility"
A number of market participants have begun making year end predictions about where they believe stocks will finish. The predictions have the market finishing higher, lower, a lot higher, a lot lower, and right where it is today. Basically, no one really knows how the stock market will finish 2017 because no one can accurately predict the future.
But, when we look at the past, predictions have been made which aren’t as optimistic. Based on historical data a Goldman Sachs analyst has noted that when stock valuations have been where they are today, the market returns have been in single digits or negative.
Year-to-date the S&P 500 is already up 10.5%, which again compared to historical averages is an above average return. Furthermore, history tells us that we have market pull backs of 5%, 10%, and 15% rather often; about every 3 months, 8 months, and 14 months. We have not seen a 10% or 15% pullback in 2017. Continue reading "Market May End The Year Where It Is Today, But You Can Still Make Money"
After the S&P 500’s rather flat performance over the first three weeks of January, the Index has finally broken higher, pierced through the 2,280 resistance, and seems well on its way to surge above 2,300. So, the question of potential profit taking for the Index at this time may raise some eyebrows. But if we are to take the signals coming from the Federal Reserve over the past few weeks, this is exactly when we should be worried about profit taking and a jump in volatility for the Index.
While the S&P 500 (CME:SP500) was muddling through over the past few weeks, some attributed it to the protectionist stance of the new US president, e.g. the looming threat of a trade war with China, the risk of import levies and, of course, the latest events of this week. President Trump, in a characteristically dramatic fashion, announced the revocation of the Trans-Pacific Partnership Agreement and proclaimed his intention to renegotiate NAFTA, the North American Free Trade Agreement. And how did investors respond? By pushing the S&P 500 up and out of its stagnation and into a new high. Because, while investors are concerned about the risk of a protectionist trade policy, their concerns are somewhat soothed by Trump’s plan to slash the US corporate tax to 15% and boost infrastructure spending.
But what about the S&P 500 are the bulls ignoring? Continue reading "S&P 500: Prepare For Choppiness"
Precious metals expert Michael Ballanger discusses market reactions post-Brexit vote.
To truly appreciate market crashes, you must have an ample serving of grey hair.
Over the weekend, I must have received three dozen "Emergency Email Alert" notifications by newsletter services and financial intermediaries that got absolutely obliterated Friday morning and were expecting more of the same on Monday, which they got in spades. This new generation of "wealth advisors" has, unfortunately, been living off the largess of Central Bank guarantees and the winks and nudges of the "Finance Ministers" and "Treasury Secretaries" and "Chancellors of the Exchequer," where they make investment decisions based not upon analyses of balance sheets or income statements but upon the collective wisdom of Champagne Socialists. I have been writing about this for about thirty-five years and while it has not yet manifested itself in the advance of the prices of precious metals to levels that would correspond to the level of coinciding currency debasement, especially in the United States and Europe, it is going to be the "Talk of the Town" here in 2016. Continue reading "Following Brexit, Central Bank Desperation Never More Evident"
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