A bear's eye view of the current economic conditions

A bit overly pessimistic in my view but the data is presented well here. The importance of the dividend yield and cash reserves/low debt balance sheets in uncertain economic times (or all times?) is a good take-home lesson from that presentation.

If you are looking for a simple way to provide downside protection (hedging) in your portfolio and don't want to mess around with the complexity of options and/or margin accounts you can use specially designed ETFs that use derivatives to reduce trading costs and effectively short entire sectors of your choice.

The ETF's that might be of interest:

1. SDS Ultra Short S&P 500 (US) (gives approx double the negative return of the S&P)
2. EEV Ultra Short Emerging Market index
3. HXD Horizon Beta Pro double short TSX

Look carefully at the graph on the page for number 3. Despite all the downward action of the TSX in the last 6 months, you still will be ahead if you had bought the Bull ETF rather than the Bear one.

IMHO, these ETFs belong in a trader's toolbox and really have no place for the long term investor. I think the solution is to follow Mr. Buffett's oft quoted advice:

"The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective."

and

"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."