Countercyclical Funds

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Apr 13, 2008 10:28 pm

Has anyone successfully used and marketed funds like these?


http://www.proshares.com/abtfunds/AboutShortProShares


Seems like an easy way to short the market without needed a margin account. 
Apr 13, 2008 10:34 pm

This should be titled "Inverse Funds".  Yes these funds can be used to short the market, oil, t-bills, just about anything you want.  But if you think people get mad when you buy something and it goes down, wait until you short something and it goes up.  It is twice as bad.

Apr 13, 2008 11:05 pm

Do you think shorting the S&P 500 based on the broad macroeconomic picture could make sense?  I would think it would only make sense if you got into an S&P short near the peak of the business cycle and stay in for a longer period...at least 6-12 months until economic conditions hit bottom and look like they can't go much lower.  I can't imagine someone trying to trade these funds every month or something like that. 

Apr 13, 2008 11:18 pm

And how exactly are you identifying the peak and bottom?

Apr 14, 2008 1:35 pm

I would think you could gain some good insight by looking at some technical analysis trends for market down turns in the past.  Also, wouldn't key economic indicators like durable goods, inflation, etc., prove valuable to helping predict long term peaks and troughs?  I know we aren't really analysts but I was hoping someone may have some key ideas they have used to predict longer term market cycles. 

Apr 14, 2008 7:07 pm

The problem is leading indicators is a lagging indicator, while the market is a forward pricing instrument.  Technical analysis can be useful, however it can be inconsistent.  If it were this easy, then everyone would be doing it and making money all the time.

Apr 14, 2008 7:24 pm

Second thought, this is a classic mistake (not a criticism, just an observation) of a new broker.  Your job on day one is asset gathering.  Period.  Not market analysis.  Leave that out of your mind until you are established.  You cannot help your clients if you are not in the business.  What is more important than looking for signals to short or market analysis is client management.  Peter Lynch was a god on Wall Street.  His fund did 23% annually from 1980-1999.  Only two down years and the worst was -4.51%.  However half of people who put money into the fund lost money.  Why?  No load fund, no broker.  Your job is to gain clients trust and assets, determine if an investment is suitable, and hold their hand when they want to get out at a bottom and jump back in after a 60% year.  This is the primary value you bring.  Do not get in your own way.

Apr 14, 2008 9:35 pm

You might also want to look at something like a 120/80 fund, nice in the correct situation.

Apr 14, 2008 10:51 pm
ExPropTrader:

You might also want to look at something like a 120/80 fund, nice in the correct situation.

 
Do you have a link to the fund?
 
Also, Primo, I am not 100% sure that I would actually employ this strategy, but I am trying to think of good cold fodder. 
 
"Mr. X has anyone ever discussed ETF funds with that move up in value as the rest of the market declines in value?  Would you have liked to consider this type of investment vehicle a few months ago?  Were you ever informed that these funds are out there?  I am not here to promise you a set return but I can assure you that you won't miss future opportunities because you were not aware of them.   Let's sit down for a few minutes to discuss your portfolio and perhaps we can find additional advanced investing strategies that you may decide to employ."
 
With the recent market downturn, perhaps some of their pain can be used to convert assets.   
Apr 15, 2008 6:11 am

Akkula, The key to setting an appointment is to explicitly ask for the appointment.   

 
"This is Akula with XYZ Financial.  Blah, Blah, Blah.  Blah, Blah, Blah, Blah.  I have an appointment in your office at 2:00 on Monday.   Would it be better if I stopped by at 1:45 or would sometime Wednesday morning be better?"
 
The script that I just gave you including the "Blah, Blah" will get more appointments for you because you would be explicitly asking for an appointment.
 
Find pain.  Don't find pain.  Good phone skills.  Bad phone skills.  From my observations, the factor that determines phone success is explicitly asking for the appointment. 
Apr 15, 2008 9:39 pm

Thanks for the tips.