Note: do yourself a favor and click on the link to Mr. DeMuth’s full article. It is very well-written and informative. If you do not understand why the ideas he is describing are terrible ideas, you will have a hard time trading stocks successfully. Reasons number six and seven are particularly important and remind me of this post I made a while back when I sold Apple: http://tradingcommonsense.com/?p=736
In a new piece for Seeking Alpha, hedge fund manager Chris DeMuth, Jr. wrote a tongue-in-cheek piece spelling out some popular trading ideas for 2016 that he believes are among the worst trades to make. Here’s a look at some of the ideas on his list.
1. Levered Long Market Exposure
DeMuth argued that a Shiller P/E of 26 and a market cap to GDP of 119 percent imply future annual returns of around zero, which is similar to the S&P 500 performance in 2015. Long investors that believe they can overcome the odds via stock picking are likely mistaken.
2. Sovereign Debt
Buyers of levered sovereign debt ETNs like DB 3X Japanese Govt Bond Futures ETN JGBT and DB 3x German Bund Futures Exchange Traded Notes due March 31, 2021 BUNT 1.17% that are looking for safety are misguided. DeMuth noted that the yield on these investments is “more or less zero,” which is not worth the risk.
3. U.S. Dollar
At current levels, DeMuth believes that U.S. dollar indices like the PowerShares DB US Dollar Index Bullish UUP 0.16% are also not worth the risk in 2016.
4. Closed-End Fund IPOs
DeMuth pointed…
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