I've been investing in QID for quite some time now. QID is an ultrashort ETF that provides 200% inverse returns to the Nasdaq 100. When the Nasdaq 100 goes down, QID goes up by twice as much. My overall position is still down, but last month QID returned 15.78%. I thought I'd look to see how that return compared to other ultrashort ETF's for US indexes and sectors, International indexes, and Canadian sectors and indexes.

As everybody knows, last month wasn't a pretty one for the markets. It paid to be short every sector or index I looked at with two notable exceptions: Gold and Utilities. Let's look at the indexes.

INDEXES

There are four funds that are ultrashort the major US indexes. I've included the symbol, the index that fund is ultrashort and the return over the last month according to Google Finance:

 

Symbol            Index                           1-Month Gain

QID                 QQQ                           15.74%

DXD                DOW Industrials            10.71%

SDS                 S&P 500                       10.92%

TWM               Russell 2000                 15.89%

 

SECTORS

I looked at 11 different sectors that have ultrashort funds associated with them. It's no surprise that the financial were hammered. If you were in the ultrashort fund for the financials, you are up 23.9% for the month. The Utilities index was the only one that had a positive return for the month. Being ultrashort the Utilities would have cost you 7.87%. The real shocker for me was Consumer Goods. With all the scuttlebutt about the US heading for a recession, you would expect Consumer Goods to get hammered, but they were one of the stronger sectors.

 

Looking at the sectors, again, I've included the symbol, the sector that fund is ultrashort and the 1-month return according to Google Finance:

Symbol            Sector                         1-Month Gain

SMN               Basic Materials             10.54%

SZK                 Consumer Goods          2.04%

SCC                Consumer Services      15.13%

SKF                 Financials                   23.90%

RXD                Health Care                  3.30%

SIJ                   Industrials                 13.01%

DUG                Oil & Gas                      2.61%

SRS                 Real Estate                 21.77%

SSG                 Semiconductors           23.08%

REW                Technology                 12.81%

SDP                 Utilities                         -7.87%

 

INTERNATIONAL

 

There are also 3 ultrashort funds for international indexes. If you bought EFU, which is ultrashort the MSCI EAFE, you would be up 9.29% over the last month. Ultrashorting Emerging Makets (EEV) would have been a better bet. You would have been up 15.03%. Ultrashorting the FTSE/ Xinhua China 25 (FXP) would have gotten you a 4.54% return.

 

CANADA

 

Ultrashorting the Canadian index wasn’t a very profitable endeavour. HXD.TO, which is ultrashort the S&P/TSX 60 is up 0.28% over the last month. Being ultrashort the Canadian Financials (HFD.TO) yielded 1.07%, while ultrashorting Energy (HED.TO) yielded 1.08%. The worst ultrashort bet would have been HGD.TO, which is double-inverse the gold index. This bet would have cost you 10.56%.

 

Conclusions

 

Generally speaking, ultrashorting Beta seemed like a good strategy last month. Everything with a high Beta (with the exception of gold) dropped quite a bit. Small caps and economically sensitive sectors like materials and semiconductors drastically underperformed the market, while defensive sectors like health care and utilities outperformed. This is exactly what the textbook says should happen. I wonder if everybody read the same book?

SunTzu