Melaschasm (65.15)

Green Thumb the S&P?

April 08, 2011 – Comments (2) | RELATED TICKERS: TLT , TLH , TLO

Crazy idea right? 

From a CAPS points perspective there is no reason to directly green thumb an S&P ETF, even though investing in such an ETF can be a very good idea.

If you are reasonably good at macro economics, and feel confident that the S&P will be significantly higher at some point during the next 5 years, how can you turn that knowledge into CAPS points and bragging rights?

There are several ways to score points from a rising S&P.

1.        Find stocks that are likely to lose value, and red thumb them.  This will score points from their losses and from gains in the S&P.

2.       Find investments that are not going to change much in value.  Safe secure low volatility investments will not rise in value as fast as the S&P, and thus a red thumb of these investments will net positive points in CAPS as the S&P increases in value.

3.       Red thumb long term T-Bill funds.  Interest rates are very low, and will almost certainly rise over the next few years.  An increase in interest rates will drive down the value of these funds.  With real  money this can be a difficult investment because interest rates might not rise fast enough to offset the interest payments, but in CAPS a rising S&P will generate big gains from this strategy.