A U.S. Senator who previously bet against the stock market in 2022 has placed a new bet with an ETF that shorts U.S. listed companies. Here are the details.
What Happened: Delaware Senator Thomas Carper bought up to $110,000 in Ranger Equity Bear Bear ETF (ARCA: $HDGE), an active ETF that shorts US listed stocks, according to Unusual Whales, a Twitter account that tracks unusual trades by Congress members.
Carper, who sits on the Senate Finance Committee, "is actively shorting the US economy,” Unusual Whales tweeted.
The Ranger Equity Bear Bear ETF HDGE from Advisor Shares was launched in 2011 and has $152 million in assets under management.
“The investment objective of the AdvisorShares Ranger Equity Bear ETF is capital appreciation through short sales of domestically traded equity securities,” the company’s website says. “In selecting short positions, the Fund seeks to identify securities with low earnings quality or aggressive accounting which may be intended on the part of company management to mask operational deterioration and bolster the reported earnings per share over a short time period.”
AdvisorShares says the ETF could be used as a tool in a long/short strategy where investors go long on an index ETF and go long HDGE giving them short exposure as well.
The fund invests in companies with future catalysts that could drive stock prices lower. The fund seeks to hold between 20 to 75 short positions averaging in size of 2% to 7% each.
Among the current top ten holdings of the ETF are Universal Display OLED, OneMain Holdings OMF, Equinix EQIX, DoorDash Inc DASH and Cirrus Logic CRUS.
The current makeup of the ETF is 45.7% small cap stocks, 36.5% mid-cap stocks and 17.8% large cap stocks.
Why It’s Important: While members of Congress are allowed to buy and sell stocks, including taking short positions, as long as they properly disclose, this could be a bad take for the public.
The push to ban members of U.S. Congress from buying and selling stocks, options and ETFs has risen in recent years. Over the last two years, members of Congress have been buying and selling stocks linked to committees they serve on or based on new policies or contracts announced by the U.S. government.
Carper, who previously served as Delaware governor from 1993 to 2001, has been a U.S. Senator since 2001. He has actively been betting against the performance of the U.S. stock market in 2022.
As a member of the Senate Finance Committee, Carper could be privy to information of what the U.S. government plans to do to fight high inflation and keep the country out of a recession.
Along with the new position in the Ranger Equity Bear Bear ETF, Carper previously held shares of the ProShares Short QQQ PSQ, which bets against the performance of the Nasdaq 100, as tracked by the Invesco QQQ Trust QQQ.
Carper also previously held shares of the ProShares Short S&P 500 SH, which shorts the S&P 500, a key market index tracked with the S&P 500 ETF Trust SPY.
The U.S. Senator holds long positions in several stocks, so the new position could be a hedge as it was meant or a trust that AdvisorShares has found companies that will likely have earnings pressure going forward.
News of Carper’s bets against the U.S. stock market could continue to put pressure on a ban of members of Congress to be able to trade stocks.
- The HDGE ETF is up 7.6% in the last month compared to a 9.2% drop for the S&P 500.
- The ETF is up 23.0% year-to-date in 2022 compared to a loss of 23.9% for the S&P 500.
- HDGE beats the S&P 500 over the short term
- Scaling out further shows HDGE down 22.6% in the last three years compared to a gain of 8.2% for the S&P 500.
- Over the last five years, HDGE is down 17.6% compared to a gain of 11.7% for the S&P 500.
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