SPDN: An Inexpensive Way To Profit When The S&P 500 Falls

Summary
SPDN is not the largest or oldest way to short the S&P 500, but it’s a solid choice.
This ETF uses a variety of financial instruments to target a return opposite that of the S&P 500 Index.
SPDN’s 0.49% Expense Ratio is nearly half that of the larger, longer-tenured -1x Inverse S&P 500 ETF.
Details aside, the potential continuation of the equity bear market makes single-inverse ETFs an investment segment investor should be familiar with.
We rate SPDN a Strong Buy because we believe the risks of a continued bear market greatly outweigh the possibility of a quick return to a bull market.
Put a gear stick into R position, (Reverse).
Birdlkportfolio

By Rob Isbitts

Summary
The S&P 500 is in a bear market, and we don’t see a quick-fix. Many investors assume the only way to navigate a potentially long-term bear market is to hide in cash, day-trade or “just hang in there” while the bear takes their retirement nest egg.

The Direxion Daily S&P 500® Bear 1X ETF (NYSEARCA:SPDN) is one of a class of single-inverse ETFs that allow investors to profit from down moves in the stock market.

SPDN is an unleveraged, liquid, low-cost way to either try to hedge an equity portfolio, profit from a decline in the S&P 500, or both. We rate it a Strong Buy, given our concern about the intermediate-term outlook for the global equity market.

Strategy
SPDN keeps it simple. If the S&P 500 goes up by X%, it should go down by X%. The opposite is also expected.

Proprietary ETF Grades
Offense/Defense: Defense

Segment: Inverse Equity

Sub-Segment: Inverse S&P 500

Correlation (vs. S&P 500): Very High (inverse)

Expected Volatility (vs. S&P 500): Similar (but opposite)

Holding Analysis
SPDN does not rely on shorting individual stocks in the S&P 500. Instead, the managers typically use a combination of futures, swaps and other derivative instruments to create a portfolio that consistently aims to deliver the opposite of what the S&P 500 does.

Strengths
SPDN is a fairly “no-frills” way to do what many investors probably wished they could do during the first 9 months of 2022 and in past bear markets: find something that goes up when the “market” goes down. After all, bonds are not the answer they used to be, commodities like gold have, shall we say, lost their luster. And moving to cash creates the issue of making two correct timing decisions, when to get in and when to get out. SPDN and its single-inverse ETF brethren offer a liquid tool to use in a variety of ways, depending on what a particular investor wants to achieve.

Weaknesses
The weakness of any inverse ETF is that it does the opposite of what the market does, when the market goes up. So, even in bear markets when the broader market trend is down, sharp bear market rallies (or any rallies for that matter) in the S&P 500 will cause SPDN to drop as much as the market goes up.

Opportunities
While inverse ETFs have a reputation in some circles as nothing more than day-trading vehicles, our own experience with them is, pardon the pun, exactly the opposite! We encourage investors to try to better-understand single inverse ETFs like SPDN. While traders tend to gravitate to leveraged inverse ETFs (which actually are day-trading tools), we believe that in an extended bear market, SPDN and its ilk could be a game-saver for many portfolios.

Threats
SPDN and most other single inverse ETFs are vulnerable to a sustained rise in the price of the index it aims to deliver the inverse of. But that threat of loss in a rising market means that when an investor considers SPDN, they should also have a game plan for how and when they will deploy this unique portfolio weapon.

Proprietary Technical Ratings
Short-Term Rating (next 3 months): Strong Buy

Long-Term Rating (next 12 months): Buy

Conclusions
ETF Quality Opinion
SPDN does what it aims to do, and has done so for over 6 years now. For a while, it was largely-ignored, given the existence of a similar ETF that has been around much longer. But the more tenured SPDN has become, the more attractive it looks as an alternative.

ETF Investment Opinion

SPDN is rated Strong Buy because the S&P 500 continues to look as vulnerable to further decline. And, while the market bottomed in mid-June, rallied, then waffled since that time, our proprietary macro market indicators all point to much greater risk of a major decline from this level than a fast return to bull market glory. Thus, SPDN is at best a way to exploit and attack the bear, and at worst a hedge on an otherwise equity-laden portfolio.

Business Loans In Canada: Financing Solutions Via Alternative Finance & Traditional Funding

Business loans and finance for a business just may have gotten good again? The pursuit of credit and funding of cash flow solutions for your business often seems like an eternal challenge, even in the best of times, let alone any industry or economic crisis. Let’s dig in.

Since the 2008 financial crisis there’s been a lot of change in finance options from lenders for corporate loans. Canadian business owners and financial managers have excess from everything from peer-to-peer company loans, varied alternative finance solutions, as well of course as the traditional financing offered by Canadian chartered banks.

Those online business loans referenced above are popular and arose out of the merchant cash advance programs in the United States. Loans are based on a percentage of your annual sales, typically in the 15-20% range. The loans are certainly expensive but are viewed as easy to obtain by many small businesses, including retailers who sell on a cash or credit card basis.

Depending on your firm’s circumstances and your ability to truly understand the different choices available to firms searching for SME COMMERCIAL FINANCE options. Those small to medium sized companies ( the definition of ‘ small business ‘ certainly varies as to what is small – often defined as businesses with less than 500 employees! )

How then do we create our road map for external financing techniques and solutions? A simpler way to look at it is to categorize these different financing options under:

Debt / Loans

Asset Based Financing

Alternative Hybrid type solutions

Many top experts maintain that the alternative financing solutions currently available to your firm, in fact are on par with Canadian chartered bank financing when it comes to a full spectrum of funding. The alternative lender is typically a private commercial finance company with a niche in one of the various asset finance areas

If there is one significant trend that’s ‘ sticking ‘it’s Asset Based Finance. The ability of firms to obtain funding via assets such as accounts receivable, inventory and fixed assets with no major emphasis on balance sheet structure and profits and cash flow ( those three elements drive bank financing approval in no small measure ) is the key to success in ABL ( Asset Based Lending ).

Factoring, aka ‘ Receivable Finance ‘ is the other huge driver in trade finance in Canada. In some cases, it’s the only way for firms to be able to sell and finance clients in other geographies/countries.

The rise of ‘ online finance ‘ also can’t be diminished. Whether it’s accessing ‘ crowdfunding’ or sourcing working capital term loans, the technological pace continues at what seems a feverish pace. One only has to read a business daily such as the Globe & Mail or Financial Post to understand the challenge of small business accessing business capital.

Business owners/financial mgrs often find their company at a ‘ turning point ‘ in their history – that time when financing is needed or opportunities and risks can’t be taken. While putting or getting new equity in the business is often impossible, the reality is that the majority of businesses with SME commercial finance needs aren’t, shall we say, ‘ suited’ to this type of funding and capital raising. Business loan interest rates vary with non-traditional financing but offer more flexibility and ease of access to capital.

We’re also the first to remind clients that they should not forget govt solutions in business capital. Two of the best programs are the GovernmentSmall Business Loan Canada (maximum availability = $ 1,000,000.00) as well as the SR&ED program which allows business owners to recapture R&D capital costs. Sred credits can also be financed once they are filed.

Those latter two finance alternatives are often very well suited to business start up loans. We should not forget that asset finance, often called ‘ ABL ‘ by those Bay Street guys, can even be used as a loan to buy a business.

If you’re looking to get the right balance of liquidity and risk coupled with the flexibility to grow your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your funding needs.

Three Investing Myths To Unlearn Before Investing

I am sure you have heard this axiom: If you don’t know where you are going, you will get there. Many folks investing today are on that path: they are investing without proper knowledge of the stock market, of investment basics, and lacking simple, concise, written goals. Later, these folks will experience great challenges.Among other things, the Federal Reserve’s Quantitative Easing program, a euphemism for pumping money into the economy, is fueling rising stock markets. This could entice even more folks to invest in stocks because they might see opportunities to ‘make money.’ Beware; before investing, at least, ensure you dispel three popular investment myths, and understand the potential investment’s opportunity cost.
Investing in the stock market is gambling
Low priced stocks, especially those at 52-week lows are worth buying
Investment analysts and advisors know how investments will perform
Investing In The Stock Market Is GamblingSimplistically, investing is just another spending form. You buy a book, a car, a house, and you buy stocks, bonds, or other investment instruments. The key is to develop a solid process to follow instinctively before spending: a spending decision process. Your attitude will decide how you behave, and so, you could choose to spend on stocks and bonds – invest – with a gambling motive. That’s why I advise folks never to invest unless they fulfill specific prerequisites, such as being debt free with an established process to replace major assets for cash, and having clear, concise, written investment goals.Then again, even with clear goals, individuals need to know that consistent, solid earnings is the key sustainer of a business’ value, and ultimately, its stock market price.Low Priced Stocks, Especially Those At 52-week Lows, Are Worth BuyingHere is a trap to avoid. A stock is trading at its 52-week low, falling over 50%, and you think it presents a buying opportunity. Maybe; on the other hand, maybe not! Likely, that business’ products and services no longer have the capability to produce previously perceived earnings. Alternatively, investment analysts and others may have promoted this business because of some fad or other irrelevant reason. Yahoo! and Nortel are examples of companies whose stock prices traded at unsustainable levels; after the expected collapse, their stock prices did not recover. Many other examples exist, particularly on the Japanese stock exchange.As I mentioned above, as with all spending, we need to follow a spending decision process before investing. This will allow us to use a fall in stock price as a trigger to identify business’ fundamentals and potential investment opportunities.Investment Analysts And Advisors Know How Investments Will Perform When you listen to these folks, you might forget that they, like you and I, have no clue about the future. Some are in conflicts of interest, blinded, and pushing particular products. Others might be sincere but are relying on the past. And we know, the past might not be a good predictor of the future.Can these folks help? Certainly, but each client must try to understand whom his or her advisor represents, and accept that advisors do not know the future. Accordingly, folks receiving investment advice must be fully aware that they, not their advisors, need to decide when and how to act from advice they get.Before you start investing, dispel the above three myths, learn key investment basics, and learn and make sure you fulfill specific investing preconditions.This final point is obvious but often folks overlook it. Investing in the stock market has an opportunity cost; it reduces, by amounts invested, funds available for other purposes. Ten thousand dollars invested in the market could buy a car, pay a portion of a college semester’s fees, or be donated to charity. Therefore, as part of your spending decision process, ask these three questions before deciding to invest:
What other alternatives exists to use funds you are about to invest?
Given your present and expected situation, is this the best use of funds today?
Will you need to replenish these funds to carry out other specific goals in the next three to five years?
© Copyright 2013, Michel A. Bell