In his latest update, former Bear Stearns trader Greg Mannarino states its time to level the playing field between the average Joe and professional investors.    Mannarino notes the vanishing volume in the equities markets, states the stock market is getting ready to roll-over, and states the bottom-fishers’ cash will wind up in the pockets of professional investors.
Mannarino states it is now time to exit the equities markets and plow the proceeds into PHYSICAL GOLD AND SILVER to protect your assets from the 1-2 punch of the coming massive equities correction along with dollar devaluation courtesy our friends at the Fed via QE∞.

  1. Ok, so I looked into several inverse etf’s. ProShares seems to be the big player. My only concern with these is that they invest in derivatives. Excerpt: The fund invests in derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as….. and so on depending on which etf you are looking at. I thought derivatives are the time bomb that most here are anticipating. Am I interpreting this wrong?

  2. Very dicey to be involved in these markets. It is possible to profit when the indices go down with FAZ, TZA, VXX, etc,, and you look at a gain like UVXY today and it’s enticing. But with the infinite printing going on, there’s a case that the ‘market’ will keep going up–nominally-, and therefore the way to ‘short’ it is with inflation hedges. The market isn’t going up in real terms. In fact, in a true free market with sound money, prices should go down. 

    If you do have a strong conviction about the market dropping, it’s probably wise to look into holding very short term these etfs, especially the leveraged ones. I am a phyzz advocate but did buy USLV (3x leveraged silver ETN) the instant I was watching and heard that QE3 was announced, and it did great that day, but now is really down a ways. I’m still long silver over the long term, but these things decay over time because they are so leveraged, and so, however bogus this ‘slide’ in silver may be, I may have to exit that position and just look at PSLV or something, obviously secondary to buying phyzz. 

    • “The market isn’t going up in real terms. In fact, in a true free market with sound money, prices should go down.”

      Indeed so.  If we look at a chart of the Dow 30 vs. gold, it tells an entirely different story than the same Dow 30 data plotted in USD terms.  Clearly, stock prices are not rising in real terms but they are inflated by QE to look as if they are rising.  It amazes me at the number of people, especially on TV, who are either incapable or unwilling to make this distinction.  Of course, if they did, it would be a kick to the groin of the paper Ponzi scheme and we simply cannot have that, now, can we?

  3. @spore:

    Your general assumption is correct.  Without exception, inverse ETF products are constructed using derivatives.  For the most part, the instruments will work as designed even in extreme market conditions, but only for short- to intermediate-term investment periods.  For example, during the core of the 2008-March2009 crash, inverse ETFs did reasonably well.  One could have easily doubled their money with a well timed entry into ProShares SKF.  Click here for a chart — and do notice that for anyone not getting timing right, losses would have been massively magnified through the bounce years we’ve seen in the financial services industry since March, 2009.

    Mannarino did a poor job discussing the risks and short-comings of inverse ETFs.   I’ll fill in some of the blanks.

    If market conditions get bad enough in a specific sector that the powers that be start changing the rules, an associated inverse ETF can be impacted.  During 2008, many governments declared it impossible to short many financial services companies.  For periods of time, that slowed the decline of these stocks, which in turn impacted inverse ETFs.  Getting the market timing right is more important than the government intervention risk factor, and just looking at the linked chart above will prove that point; even with governments blocking short sales on financial shares during the fall and winter of 2008-09, someone holding SKF would have still done ok.  But anyone targeting a specific sector for downside has to keep this rule changing risk in mind.
    The derivatives risk factor you raise is important.  If the entire financial system freezes-up on account of derivatives crashing, these ETFs are going to be unbelievably risky and volatile.  In the worst case scenario, the ETFs’ value could implode if the financial firm constructing and holding the derivatives book goes bust, and/or if the counter parties to the derivative positions go bust.  This is the classic banking holiday scenario on steroids.  It could happen, but in the very least we’d probably see a great deal of pain in a period of “slow(er) burn” leading up to that final banking holiday crash so it’s possible to use these ETFs to hedge.  But understand that when the big crash comes — not just a slow burn — many of these ETFs will likely fail or partially fail.

    Another irritating artifact of these ETFs revolves around how long you hold them.  Without getting into all the details and math, suffice to say there’s a loss of capital associated with the closing of existing derivative tracking positions in any given ETF’s book when new derivative positions are opened to replace soon to expire positions (sometimes called “negative yield roll”).  This bleeding out of capital can become quite significant over a longer period of time — say, over six months or longer.   I will occasionally take on large positions in inverse ETFs when I think the market or a specific sector is about to get trashed.  But as a general rule, I will not likely hold those positions for much more than a month given this negative roll

    I keep trying to like this Mannarino guy.  But the more I take in his videos, the more his unjustified and unearned ego leaves me shaking my head.  He didn’t address any of these risk factors.  Heck, some here have said Mannarino is good at taking big subjects and compressing them into quick, digestible videos.  Maybe he’s been able to do that on other occasions.  But this ETF discussion was rambling, and anything but organized and balanced.

  4. I never owned any stocks, equities, etc. Because I’ve heard that you have to be 18 years or older to own one and because I’ve discovered the fundamentals of gold and silver before the stocks and equities. Will I ever own one? No, I probably won’t since I’ll be busy stacking some gold and silver.

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