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Macro Economic Plays

Aug 17 2008

Macro Economic Plays

Long the Ultra QQQ ProShares ETF (QLD) and Short the SPDR Gold Shares (GLD)

Long the Ultra QQQ ProShares ETF (QLD)

            This Exchange Traded Fund (ETF) trade is a double of the Top 100 Nasdaq stocks and therefore attempts to double the performance of the Nasdaq 100 Index. With the current trend of the markets moving higher, this is a macro economic play on the recovery of stocks. Staying with the technology weighted NASDAQ removes any downward pressure that could be felt from financials moving forward.

            The top holdings include future options and swaps of the Nasdaq 100 in addition to a heavy weighting in Apple (AAPL) and lighter weightings in names such as Cisco Systems (CSCO), Gilead Sciences (GILD) and Google (GOOG) to name a few.

Short the SPDR Gold Shares (GLD)

            This ETF trade is a macro economic play of the recovery of the dollar, but more specifically the decline in the value of gold. The ETF attempts to match the value movements of gold bullion. The past week saw the ETF drop from above $84 a share down to $78. Since mid-July the ETF has been falling on a regular basis but is still well above its 52 week low of $64.50.

With Europe needing to lower interest rates due to their weakening economy, the US Dollar should continue to rally. The US Dollar rally is bearish for gold and thus the drop in GLD is anticipated.

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