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The markets have been on a tear since December, perhaps with the hope that we've hit rock bottom in our current recession and there's nowhere to go but up (see chart). Fundamentally, we are probably a long way off before things get rosy again. If you read the headlines, you know that Canada's job recovery is lagging behind the US. Alberta and Saskatchewan have been propping up our econ stats by way of Chinese investment, but even this is in question now<\/a>. Ontario's main industry is manufacturing and finance - both of which have or will experience turbulence in their respective markets.<\/p>\n Our largest trading partner, the US, is trying to stage an economic comeback, but given the latest figures from the Bureau of Labor Statistics last week, the prospects look grim.<\/p>\n Before plunging into any investment the savvy investor needs to ask, are the current market conditions justified? Is there any fundamental economic reason why stock prices should be where they are?<\/p>\n In the case of today's market, I would have to say that the answer is an absolute 'no'. The growth prospects for Canada, at least in the short term, do not warrant the general prices of equities on the TSX. There are a lot of reasons they got this high in the first place, but real economic growth after the financial crisis of 2008 is not one of them. Maybe we'll reach the old 2007 market high eventually, but certainly not this year, and some say maybe not even this decade.<\/p>\n The market is probably ripe for a correction right about now, and one of the segments to get hit will be the energy sector. The S&P TSX Capped Energy index<\/a> is an index of companies involved in the exploration and production of oil and natural gas, such as Encana, Talisman, and Suncor Energy. These companies made a killing in the early 2000's as oil broke $100\/barrel and demand was high, but as the economy slows, so does energy demand, and down should go the share price of these companies as they miss earnings from quarter to quarter.<\/p>\n The Horizons S&P\/TSX Capped Energy Bear Plus ETF<\/a> is a good way to play the downturn in this sector, which is about to be hit by weaker energy demand as well as higher operating costs due to general inflation. The wizards over at Proshares have structured this ETF so that it realizes double the up or down that this sector has in a day. In terms of risk, this is probably not the safest way to invest, but when you're sure of your investment decision why not leverage up?<\/p>\n Let's add 300 shares of this ETF to the virtual portfolio. In this case we're only investing $1,300 with minimal downside. The ETF cannot go to zero, and for it to go down any further than it is now the underlying companies will pretty much need to have a record quarter.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" A great thing about modern-day investing compared to when our parents did it, is that we have so many more options available to us than just the old 'buy and hold' strategy. Ideally, we would just be able to ride a wave of growth by purchasing shares in companies that are poised to take advantage … Continue reading ![\"\"](\"http:\/\/konkin.com\/blog\/wp-content\/uploads\/2012\/03\/TSX-SharpCharts-Workbench-StockCharts1.png\" "\\"TSX")
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