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Profitable Idea #1: Short the Financials
This sector has been decimated during the last year. We all know the story about banks and toxic assets, and I suspect many of you
could care less about these esoteric products. Unfortunately, the sheer size of the problem explains why stocks have fared so poorly.Today, with much of the value rung out of these stocks, many are suggesting it’s time to buy. Not so fast, say some of the experts
at last week’s Money Show.Although the group may find a reprieve in the form of government aid, what is unclear is the status of current equity holders. These
diehards believe that bank equity is to be avoided at all costs.At a minimum, for those who still own financial stocks, shorting the group may make for an excellent hedging strategy. The vehicle
of choice here are (ETFs)
that bet against financial stocks.As bank stocks fall, these ETFs increases in value. One example would be the ProShares UltraShort Financials (SKF).
In fact, Michael Shulman of OptionsZone.com, is calling it the .
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Profitable Idea #2: Sell Treasuries
Does anyone really believe we can reignite this economy without triggering higher inflation? That fundamental question was explored
at the Money Show in detail.An interesting play on the inflation theme is to bet against the Treasury market.
One consequence of fear has been a huge run into Treasury securities. Yields are at unbelievably low levels. Some have suggested
the market in Treasuries has become the next bubble that will pop under the pressure of inflationary spending.I can appreciate the doom-and-gloom scenarios now weighing on markets, but it’s hard to fathom yields not rising over time as the
U.S. economy heals.An interesting way to play a rise in Treasury yields is the UltraShort Lehman 20+ Year Treasury ProShares (TBT). This ETF will do
well if Treasury prices on longer-term securities fall or rates rise. That seems like a rational expectation to me..
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Profitable Idea #3: Use Options to Profit From Volatility
Buy-and-hold investing is killing portfolio performance. So trading strategies designed to take advantage of are making a comeback in a major way.
Volatility has been at historic highs during this crisis, and those playing the swings have been making a killing in this market.
One way to play that volatility is by using option strategies.Judging by the interest in option trading services at the Money Show, it would appear that individual investors have come to the
conclusion that this is the way to . For option traders it doesn’t matter which direction the market is moving. What matters is that the market
moves by wide margins.There are some interesting strategies beyond simply buying puts and calls, and some of them can lock in significant gains without
increasing risk..
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Profitable Idea #4: Bank Some Green With Alternative Energy
With President Obama promising to help us break our dependence on carbon-based fuel, interest in alternative energy is reaching the
individual investor.At the Money Show, some of the more interesting presentations have been discussing alternative energy and ways investors can make
money from the massive amount of money that is sure to flow to this sector.Investing in the space is highly speculative, as most of the entail a high degree of risk. So, at a time when the appetite for risk is minimal at best, it’s interesting to see
investors flock to the space.Well, "flock" may be an overstatement. But with the right amount of interest, I would say those seeking out this area
are likely to be duly rewarded. There are a handful of exchange-traded funds that can be used to diversify an investment in the green
space and alternative energy.
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Profitable Idea #5: Go For the Gold
One of the more humorous commercials during the Super Bowl encouraged viewers to trade in their gold for cash. Using two bankrupt icons
like Ed McMahon and MC Hammer, the commercial did a great job of getting people’s attention.With gold prices still at high levels, it’s not surprising to see opportunists trying to take advantage of those in dire financial
straits. There were plenty of exhibitors at the Money Show offering investments in gold. And there are certainly many investors that
believe the end of the world is here.Playing on that fear, the gold bug has definitely struck Florida. Does that make gold an investment to be pursued?
I’ve bashed gold in the past, but I appreciate the place gold can have in a portfolio.
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