What to buy to benefit from US solution to debt ceiling?

[RichS]

Let's assume- for a minute- I have some spare cash lying around (ooh I don't know, maybe £x-£749.10) and I wanted to move on to the next sure thing. And I was certain the US would sort its debt crisis in the next week.

What's the fund (or indeed other investment) to buy tomorrow that's most likely to make the biggest return if they do sort their issues? I currently have exposure to the Vanguard US equity index tracker but is there anything likely to be more spectacular?

[davepoth]

Short answer - AK-47.

Long answer - If the US defaults, it's a very bad thing; it might even cause the US to cease being the world's reserve currency. If that happens, the inability of the US government to manage an economy that floats against something else will likely mean a global recession again.

[RichS]

Sure, agreed. Which is why I was wondering the converse. I'm already "self-hedging" in that if they can't sort it we'll all have bigger concerns than me losing a few grand.

[twinturboz]

Hard to pinpoint what would give you the best return short of looking at individual stocks that have shown relative strength over the sell off the last week.

In short you'd get a broad based market rally. The best way to make use of that is like you say exposure to the index, although your kind of late to the party so to speak as they've already had a nice bounce today in anticipation of a deal being reached. Still that doesn't mean there isn't more room for it to still run.

If you really want to up the risk then there's index's which are leveraged double or quadruple what the Dow or SnP indexes are.

Alternatively the VIX is an index "the fear gauge" I'd expect this to come down after a deal is done.

Edited by twinturboz on Thursday 10th October 20:15

[RichS]

twinturboz said:

If you really want to up the risk then there's index's which are leveraged double or quadruple what the Dow or SnP indexes are.

What indexes are these of which you speak? Forsooth I shall put ye call into Landsdown of Hargreaves of the morrow

[twinturboz]

Ha! Well not really indexes but ETF's

The most liquid ones are

The ProShares Ultra S&P500 (SSO) ProShares Ultra QQQ (QLD)
ProShares UltraPro S&P500 (UPRO) and ProShares Ultra Dow30 (DDM)

SSO is 2x S&P 500
QLD is 2x Nasdaq 100
UPRO is 3x S&P 500
DDM is 2x the Dow

Insert the usual disclaimer here markets can go up and down, your money's at risk etc

[jeff m2]

twinturboz said:

Ha! Well not really indexes but ETF's

The most liquid ones are

The ProShares Ultra S&P500 (SSO) ProShares Ultra QQQ (QLD)
ProShares UltraPro S&P500 (UPRO) and ProShares Ultra Dow30 (DDM)

SSO is 2x S&P 500
QLD is 2x Nasdaq 100
UPRO is 3x S&P 500
DDM is 2x the Dow

Insert the usual disclaimer here markets can go up and down, your money's at risk etc

A 2x pro share will give you approx 1.8 times the move in the resp. index for that day.
But only for that day!!!!!
The way these work is that they invest in swaps and the NAV is reset each day.
I have used UYG and URE quite a lot and to a lesser extent XPP. I used a target of 4% but often settled for 3%, I did occasionally get lucky and get an excess of 10%.

A great deal of care and knowledge of everything that is happening is needed when trading these things. It is essential to use limit buys esp at open or you could end up owning them at the price you wanted to sell

But.....3 to 4% maybe four or five times in two weeks is a nice haul, followed by three weeks of working my balls off to get out level by re buying, eventually getting out with just 5% and putting in much more money than I intended. (or my wife knew about) That isn't much fun.

Plenty of earnings coming up next week, so the time could be right, but do make yourself very aware of how these things work and who else is trading them!!!!!

And of course which index will move the most.
Which is why I liked the Financial index (UYG) over a wider spread index like the Dow or S & P.

[GrizzlyBear]

davepoth said:

Short answer - AK-47.

If the world does all fall, appart I know I would rather have one of those than a savings book or a bar of gold!