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 Travel and Time Buffers to Ensure Connecting Flights

Consider if you will all the new challenges that the TSA is presenting to travelers at airports. They are causing time delays, airport congestion, and people to miss their connecting flights. Yes, protecting the American People is paramount, and that’s their job but let’s talk about how this effects us business travelers shall we. Why you ask? Because as a business traveler, you can’t afford to miss an appointment, so what you need to do is to have a buffer between connecting flights, and in case there is a flight delay due to extra screening, or some incident caused by TSA personnel, you will not have your travel plans ruined.Yes, many business travelers have merely had enough of this nonsense, but it’s still something that must be dealt with. Indeed, these issues can also play havoc on trying to get to your Rent-A-Car on time, as if you don’t show up when scheduled they may run out of cars to rent, or if you get to the hotel too late they may have already rented the room out, assuming you are a no-show.Business travelers are having a heck of a time on the airlines, due to all these new rules and regulations to prevent holiday underwear bombers or something? There are ways to expedite through security by getting a special pass, along with a background check. Although it is a hassle because business people don’t have time to go get all that done, it will save time during travel, and it’s perfect for the seasoned business traveler who spends more time on airplanes and they do it their children’s soccer games.Additionally, because global warming is such a big deal, the temperatures have been dropping world-wide, and therefore cold weather and the coming Ice Age are causing even more flight delays. And if an airliner is on the runway or ramp longer than three hours waiting for the weather to clear it has to go back to the terminal, as per new FAA laws. This means the flight might be canceled, and then you’ll be stuck in the airport terminal until you can get on another flight, if one is even available.It is for all these reasons that a time buffer is about the only current solution, rather than buying a corporate jet to shuttle yourself around. Therefore having time buffers to ensure connecting flights to get to your destination and accommodations is serious. Please consider all this and think on it.

The Definition of Autism – How Will Possible Changes Affect Special Education Services?

There has been much talk about the potential changes to the Autism Diagnosis in the Diagnostic and Statistical Manual of Mental Disorders (DSM) when the updated, fifth version is published (the projected date of publication is May of 2013). One of the expected changes is to combine several disorders including, Autism,Asperger’s Syndrome and Pervasive Developmental Disorder-Not Otherwise Specified (PDD-NOS) into one category called Autism Spectrum Disorder. Although this change concerns some people, most people in the fields of medicine, community services and education already lump these diagnoses together.The major concern is over the potential changes to the specific criteria that people will have to meet to receive the official diagnosis of Autism Spectrum Disorder. In the current manual, a person can qualify for the diagnosis by exhibiting six or more of 12 specified behaviors. The proposed changes to the criteria narrow the field; a person would have to exhibit three or more deficits in social interaction and communication and exhibit at least two repetitive behaviors. The fear is that this will leave out a large group of people who are considered high functioning (including a huge portion of children with the current diagnosis of Asperger’s Syndrome and PDD-NOS). Currently, scientific, trial testing of the new criteria is under way and this data will be used to make final recommendations.Although changes to the diagnosis will likely affect service delivery in the medical field and the community services field they are not projected to make significant changes in the education field because qualification for special education is not based on a particular diagnosis but on educational needs. Currently the federal Individuals with Disabilities Education Act (IDEA) defines the educational category of Autism as “a developmental disability significantly affecting verbal and nonverbal communication and social interaction, generally evident before age three, that adversely affects a child’s educational performance. Other characteristics often associated with autism are engagement in repetitive activities and stereotyped movements, resistance to environmental change or change in daily routines, and unusual responses to sensory experiences.” Each state has their own interpretation of this law so it is worthwhile to search for your state’s educational definition of Autism.Some people fear that a change to the official DSM diagnosis will give school districts a way to stop or decrease services for certain students who currently qualify for services. If schools attempt to do this, many experts believe that children who are on the higher functioning end of the Autism spectrum may still qualify for special education under the category of Other Health Impaired. It is also important to note that a school district cannot discontinue providing a service such as Speech Therapy or Occupational Therapy unless the child exhibits significant improvement and there is no longer a need for remediation in that area.