Why Listen to the Crowd?
I get where the author is trying to go here, but I am not so sure about the usefulness of such data. From my perspective and cutting to the chase, if any market explodes upward, and let’s assume that market is a staple (i.e. oil, wheat, etc.), then it seems like for the average person (who is of course always constrained with limited time). their best option is to:
1. put on a hedge in the market of concern.
2. trade the market of concern in the direction that market is moving…for potential profit.
Peter Walsh Added:
August 11th, 2008 at 9:57 am
Mike,
Thought I’d share this piece from Motley Fool that discusses funds that people should stay away from. Many in the media still believe long only is the “proper” way to make money. Don’t understand why they believe short opportunities are only make sense for a “narrow slice” of investors.
Best,
Peter
P.S. - I really enjoyed Trendfollowing and The Complete Turtle trader. They both shed light on the fact that if you have some sommon sense and a good game plan, you’ll be able to make money on the upside and downside. But staying focused on your system is key.
Who needs them?
Most importantly, the majority of investors have no strategic need for these funds. The ProShares UltraShort Financials fund is a leveraged fund offering 200% of the inverse of the return of the Dow Jones U.S. Financials Index. This only makes sense for a narrow slice of the investing population, because the ETF allows you to try to bet against one segment of the market to make a quick profit. That seems more like gambling than investing. And while the fund has benefited in recent months from the rapid price declines in stocks like Freddie Mac (NYSE: FRE) and Washington Mutual (NYSE: WM), short funds like these only make money when the market is in decline. They are not appropriate long-term investment vehicles.
Gary Added:
August 12th, 2008 at 6:29 pm
If you think that 2 to 1 is too leveraged and ‘gambling’, don’t even look at commodity contracts. People use this type trading in it,too. And they make a bunch of money.