Permabears are coming out of hibernation
For permabears who live on doom and gloom to make money this is just a blip which is going to end in tears.
“I’ve never more been convinced than anything in my life that this is a suckers rally,” Tice says.
He says short funds — which borrow stocks to sell to buy at a lower price — are negatively correlated to stocks and risky assets, allowing investors to diversify their portfolio.
“An individual really has three legs to his financial stool — pay check/bonus, stocks, real estate. In 2008 all these legs to his financial stool declined,” he says.
“A short fund is negatively correlated. Therefore in a bad economic environment, when people run the risk of all three of those legs declining and are lucky enough to have a pot of liquidity, they should consider putting that to work to a negatively
correlated vehicle like a short fund.”
Experts say investors should choose short funds with stricter risk management than their long counterparts as their upside is limited — performance reaches its maximum when a stock price go to zero — while the downside, brught by a stock price going higher — can be infinite.