Thursday, July 1, 2010

Is there really a Silver Lining?

There is so much talk about inflation and printing money that it seems a foregone conclusion. Gold is near its all time highs. The conventional wisdom on this is pretty set in stone. Commodity prices will skyrocket again with inflation, yet US Treasury securities keep moving up. Eventually the Treasury Securities or Gold will reign supreme (kind of like on the Iron Chef). Once in awhile there is a contrarian bet on this that stands out. Take a look at the ZSL on this AlphaVision ETF Landscape. The ZSL (Proshares Ultrashort Silver) is an ETF that looks to mimic a negative 200% bet on the price of silver. Silver goes up, and the ZSL goes down twice as fast on a given day. Silver goes down, and the ZSL goes up twice as fast on a given day. The returns on the ZSL have been pretty bad over the last year, down some 60% as the precious metals have popped.

ZSL 6-30-10R1The ZSL stood out because there were not very many stocks (or ETF's) that were up at all over the last two days (the exceptions being all of the Long Treasury ETF's in the foreground) with larger 5 Day Average Value traded versus the 3 month moving average.

What the picture above shows was that the 5 Day Average of Value Traded was 1.5 times greater than the 3 Month Average. Money was moving into the ZSL yesterday and over the last two days in much bigger size than normal. Someone here looks to be making an unconventional bet on metals prices that works more with the continued rise in Treasuries. Food for thought....

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