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Playing Defense at Rydex


They need to come out of their shells one of these days...


If anyone wants to see a bit of evidence concerning the level of risk-aversion out there, check out the chart below.

It shows the dollar amount of assets in the Rydex Utilities mutual fund and the Rydex Electronics fund (which closely tracks the semiconductor sector).

Currently investors have stuffed almost $100 million into the Utilities fund, nearly the highest amount in six years. In the Electronics fund, however, assets are scraping along the bottom and very close to hitting a new all-time low. The last times assets were this low were October 2002 and February 2003.

So is it time for a little "short UTH / long SMH" spread? I wouldn't go that far, but this asset allocation is the most stretched in six years, and seems likely to revert back closer to historical norms.

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No positions in stocks mentioned.

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