As I write this section it is Easter Friday, one day after the US Federal Reserve announced it would start buying junk bonds which induced a kind of mini-meltdown in me.
This is not the way free markets are supposed to work. If a company over-leverages it, it gets worked out amongst creditors, not bailed out by an entity that can print currency out of thin air.
The whole thing made me question my plans for one of my TFSAs, where I had placed some capital for the express purpose of hedging on the short side.
So far I’d done ok with PUTs on JNK and even (get this) DUST. My idea there was because 3X ETFs are so toxic, no matter what their orientation was, you could do ok buying long dated, ATM PUTs on any spike in the underlying. (The logic was that the time decay on the option was slower than the ETF decay when the latter was levered 3X and recalculated daily)
It worked for awhile, until DUST got absolutely destroyed last month, even when gold was tanking.
That was that, DUST and NUGT are 3X no more, and were converted to 2X on April 1st. It was good while it lasted.
To my larger point: is it rational to go short the market when the US Fed as well as every Central Bank in the world is hellbent on printing as much money as it takes to make you wrong?
And yet… I was journaling my angst and frustration around all this just to clear my thoughts and I remembered what happened in 2007… when I pretty well picked the top and bought a pile of 2 year LEAPs on the QQQ’s, the SPYs and the DJIA.
Trade of the century, right?