Eric Balchunas 7.7 26 ideas

UCO and SCO are double-leveraged oil futures ETFs that involve leverage and rolling futures, earning a red light risk score of 10 in Bloomberg's traffic light system. Leverage and futures rolling create high costs and volatility, leading to significant losses over time, as evidenced by UCO being down 98% since launch. AVOID these ETFs as they are not suitable for buy-and-hold investing and carry extreme risk, designed only for very short-term trading. Short-term traders might profit from volatility, but long-term holders are highly likely to experience substantial losses.

USO is an oil futures ETF that involves rolling futures, earning a red light risk score due to associated costs, and historically, oil price gains have not translated to ETF returns. Rolling futures introduces contango and other costs that erode returns over time, making USO an inefficient way to gain long-term oil exposure. AVOID USO for long-term investment in oil due to structural inefficiencies and high risk, despite its appearance as a vanilla ETF. Short-term trades during specific market conditions might benefit, but it is not designed for buy-and-hold strategies.

UVXY is a double-leveraged VIX futures ETF with high fees and rapid decay, labeled a red-light, high-risk product. The structure involves costly futures rolls, making it corrosive for long-term holding, though it can spike during volatility. Avoid holding UVXY; it's only suitable for short-term, tactical hedging with extreme caution. A sudden surge in market volatility could yield short-term gains, but long-term holders face significant losses.

Eric reported $11 billion in outflows from gold ETFs in March, and gold has not worked as a hedge since the Iran strike. Investors are leaving gold due to its poor performance and failure to provide safety during recent market stress. Avoid gold ETFs like GLD as they are losing investor confidence and underperforming as a safe-haven asset. A sharp escalation in geopolitical tensions or inflation could revive gold's appeal.

SH is a 1x inverse S&P 500 ETF, up 8% in March when the market fell, and is rated yellow-light for moderate risk. It provides more consistent inverse exposure for medium-term hedging compared to levered products, with lower decay. Watch SH for portfolio hedging opportunities during market downturns, but it's not for long-term investment. A sustained market rally would lead to losses, and fees (89 basis points) add cost over time.

There are massive outflows from major equity ETFs like SPY, IVV, and QQQ, with $20 billion leaving in the worst week as the trading crowd gets spooked by crisis news. When professional traders and model-driven funds aggressively pull capital out of broad market indices, it signals a strong risk-off environment and near-term downward momentum for equities. AVOID broad market and tech-heavy index ETFs until the institutional selling pressure subsides. The buy-and-hold crowd (Vanguard investors) continues to dollar-cost average, which could provide a floor and spark a sudden rebound if the news cycle improves.

USO tracks oil futures and has to roll them, which in normal times can cost up to 30 percent a year due to contango. While USO is highly sensitive and useful for short-term trading during oil price spikes, the structural cost of rolling futures contracts makes it a guaranteed money-loser over the medium to long term. AVOID USO for anything other than very short-term tactical trades; use equity ETFs for long-term energy exposure. If the oil futures curve remains in steep backwardation for a prolonged period, the roll yield could actually be positive.

This ETF tracks tanker shipping futures and is up 25% in a day due to the Iran conflict disrupting Middle East oil transport. Disrupted supply chains spike shipping rates. Crucially, the futures curve has flipped into "backwardation" (spot price higher than future price), meaning the fund actually gets paid to roll contracts, reversing the usual "contango" decay that destroys value in these funds. A high-risk, tactical trade for the duration of the conflict. "Red Light" rating due to volatility and complexity. If the curve flips back to contango, the fund will bleed value rapidly.

Unity (U) is down 60% on the month. The Software sector is the second-worst performer. The "AI displacement" thesis is taking hold: "If you can type something in, you can skip a lot of software." Investors are selling generic SaaS/Software stocks fearing AI agents will replace their utility. SHORT/AVOID legacy Software and SaaS names that lack a clear AI defense moat. Oversold bounce or successful AI integration by legacy firms.

Japan is seeing renewed inflows and political momentum under a new Prime Minister. The Yen has weakened (currency wars), historically a trigger for Japanese equity rallies (similar to 2012). While the index (Nikkei) is near highs, the "value compression" has been massive. The opportunity is not in the broad index (which holds dead-weight nationalized companies) but in active selection of manufacturing and global exporters benefiting from the weak Yen. LONG. Japan is "having a moment" with structural reform and currency tailwinds aligning. Global trade war/tariffs (Trump mentioned 15% tariffs) hurting Japanese exporters.