bexrtnd.info

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.

Most small business owners are likely to be severely impacted by recent commercial lender changes. In almost all cases, the business lending changes are permanent and cannot be avoided if a commercial borrower wants to continue their present banking relationship. One noteworthy exception is illustrated by a few new and more flexible commercial lending sources.One of the biggest commercial lending changes involves new guidelines for working capital financing. Most banks appear to be quietly eliminating business lines of credit or severely reducing the amount they are willing to finance to a level which is not helpful to an average business. Very few businesses can survive without a reliable source of working capital, so this change promises to receive the highest priority from most small businesses. To replace the disappearing commercial lines of credit, the most practical options for business borrowers include working capital loans and merchant financing from one of the alternative commercial finance sources still active in small business financing programs.Another business lender change is illustrated by the difficulty of locating investment property financing. An increasing number of banks will make commercial mortgage loans only when the commercial property is considered to be owner-occupied (which means that the commercial borrower occupies a substantial portion of the building). Commercial properties like apartment buildings and shopping centers are often owned by investors that do not occupy the property. For many banks, it appears that they are currently restricting their commercial lending activities to those which qualify for SBA loans (Small Business Administration) which generally exclude investor-owned situations.A third significant business lending change is demonstrated by revised guidelines for refinancing commercial real estate loans. In almost all cases, commercial lenders have dramatically reduced the loan-to-value percentages that they will lend. In some areas and for specific types of businesses, many banks will no longer lend over half of the appraised value. The difficulty for a commercial borrower refinancing an existing commercial loan reach a crisis level very quickly when this happens. In many cases the original business loan was based on a much higher percentage of business value than the bank is currently willing to provide. When a current appraisal reports a decrease in value since the original loan was made, the lending problem is further compounded. This outcome is especially common in the midst of a distressed economy which leads to decreased business income that in turn often produces a lower commercial property value.For a fourth commercial lending change example, many small business owners have already discovered an inflated fee structure from most banks for virtually all small business finance programs. Perhaps the bank perspective for some of the commercial financing fee increases is that they need to find a revenue source to replace the diminishing income from small business loans which has resulted from bank decisions to decrease commercial loan activity. Except for unusual and unavoidable circumstances, business borrowers should seek different commercial funding sources when they encounter suddenly increased business financing fees levied by their current bank.Banks changing their overall guidelines for small business financing produce a final and widespread example of commercial lender changes. Many banks have effectively stopped making any new commercial loans to small businesses regardless of business income or creditworthiness. Unfortunately these banks are not announcing publicly that they have discontinued small business finance activities. This means that while they might accept business loan applications, they do not intend to actually finalize commercial financing in most cases. Whenever it becomes obvious that the bank has no real intentions of making a requested working capital loan or commercial mortgage, this approach has clearly frustrated and enraged business borrowers.The five commercial lending changes described above are unfortunately the proverbial tip of the iceberg. As they approach business lenders to obtain commercial real estate financing, working capital loans and small business financing, business owners will need to be especially skeptical and diligent.