September 30, 2014

Make Money With Short ETFs in Tough Economical Markets

Global stock markets continue to crumble around us. With the latest news  regarding the default situation in Greece things look even worse. However, there is still a way to make money with ETFs. Short ETFs are a great way to make money while we are stuck in tough economical markets.

Precious metals – particularly silver and gold, are doing well and will continue to do well. However, there are also the short exchange traded funds like SUK2 for the FTSE, or SE2P for the eurostoxx that many investors are making money off of. There are also many US equivalents to these short ETFs.

Short ETFs can capture and monetize a falling stock market for even the most humble investor with just a few dollars in a brokerage account. This is if you do your homework and pay your cards right.

If markets resume their upward trend then this is a bad strategy. But how likely is this? Goldman is in the dock. Greece is causing a European bond crisis. The UK election threatens a hung parliament with no leadership. The Chinese economy is overheating. The US housing market remains in a depression that will get worse if interest rates rise courtesy of the Greek crisis spreading.

Since the bad news is that the United States economy – and most other economies around the world, are in the toilet, and will continue to be for a while, then using short ETFs to make some money is a great way to put some extra cash in you pocket and a great way to allow you to keep investing, even in these tough economic markets.

Will ETFs Suffer Based on What Happens in Greece?

Many investors are wondering if ETFs will suffer badly based on the news that Greece is more than likely going to default. The best answer I can give is that ETFs will at least tumble some based on what happens in Greece, as will most everything else.

Single-country indexes on Monday in the region were suffering declines of 3%. Worries over Greece’s financial condition and the Eurozone debt crisis rippled through global markets. It seems the entire world is going to feel the burn if Greece defaults.

France’s CAC 40 declined 4.4% while Germany’s DAX fell 3.1%. ETFs tracking European stocks were falling to start the week after Friday’s rout. Why the major declines in these other countries? There is so much money tied up in Greece form other countries (including America) that if Greece defaults they are going to drag these other countries in a downward vortex with them. America has a ton of money tied up there, and many people will suffer hits on their retirement funds if Greece defaults.

The iShares Lehman 20+ Year Treasury Bond (NYSEArca: TLT – News) rose 0.7% as yields on the 10-year note traded under 1.9%. [Treasury ETFs Jump]

“The market is in extreme fear,” Charles Berry, a fixed- income trader at Landesbank Baden-Wuettemberg, told Bloomberg. “It’s the problem in the euro area that drove that sentiment.”

There are still some solid ETF investments, as real estate ETFs and Gold and Silver ETFs will more than likely remain strong and remain a good place to keep your money safe during these tough economic times.