Tag Archives: Direxion

James Sees Market Testing March Lows

Short ETFs may see a resurgence if Barry James’ prediction comes true.

The Direxion Daily Financial Bear 3X Shares (FAZ), the ProShares UltraShort QQQ (QID) and the ProShares UltraShort Russell 2000 (TWM) were among the top 12 stocks to see the most net cash inflows today according

In a presentation yesterday by mutual funds recently named Lipper Leaders, Barry James, the portfolio manager of the James Balanced Golden Rainbow Fund, says we’re entering a depression.

Lipper, which competes with Morningstar as an evaluator of mutual funds and ETFs, rates funds according to five criteria: total return, consistent return, capital preservation, expenses and tax efficiency. The ratings go from 1 to 5, with 5 being the highest. I’ve attened quite a few of these Lipper Leader presentations over the years and Barry James keeps popping up. Compared to other mutual funds in the same category of balanced funds, those that hold stocks and bonds, the James Balanced Golden Rainbow Fund has scored a 5 in total return, consistent return and capital preservation for all the measured periods: the three-years ended March 31, the five-year period, the ten-year period and lifetime of the fund.

James makes the top of the class by properly evaluating the risk in the market. So, he’s worth listening to. He thinks the economy is heading into a depression. He comes to this conclusion because businesses have cut inventories, but he doesn’t see any increases in production. Restaurants at resorts are seeing declining business. He thinks the economy remains weak, which will lead to a weakened stock market. James expects the market to test the March low.

He said the recent rally has been a short covering rally. More than growth or value driving the market, he said the rally has been based on “silly cheap stocks. In terms of quality, poor, or low-quality stocks have been running rather than growth or value stocks.
to the Wall Street Journal.

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Got Them By The Shorts

Barron’s recently examined how the double-leveraged and double-inverse leveraged ETFs out of ProShares, Rydex and Direxion can create startling and distressing results for investors who correctly pick the direction of the market.

In the four months following the end of the Beijing Olympics, the Chinese stock market plunged 34%. Investors who bought the ProShares UltraShort FTSE/Xinhua China (FXP) right after Olympics and held on expected to see a return of 68%. Instead they received a 56% loss.

The devil is in the details. The leveraged funds only guarantee double the return on a daily basis. So, if the fund falls 20% one day and rises 20% the next, the investor isn’t even. That’s because the initial base on the second day is only 80% of the first day’s total. The Barron’s piece, One-Day Wonder, gives a good simple explanation. For more details on how this works, check out Chapter 9 of ETFs for the Long Run.

Talking About ProShare on the Radio Again

I guess my October appearance on The Vince Rowe Show, the Online Trading Academy, was a success.

I’m talking on the radio again about ProShares and short ETFs today, Thursday, at noon, eastern time. I will also talk about Rydex and the new Direxion short ETFs.

You can listen live online at Vince Rowe.com, on Live360, or on the BizRadio Network.com.

Or on these radio stations:
BizRadio Network 1110AM Dallas: 11:00 am – 12:00 pm Monday – Friday
BizRadio Network 1110AM Houston: 11:00 am – 12:00 pm Monday – Friday
CNN Radio 1190 Dallas: 12:00 pm – 1:00 pm Monday – Friday