Contrarian Funds: Don't Believe the Bull

Investors should not become complacent because of the recent market rally that has provided temporary respite from the carnage of the previous months. This rally is based on very little positive news in terms of the economy and its prospects going forward.

The key indicators to look for going forward are the unemployment rate and or an implosion of large hedge funds. If either or both of these things occur, the bull will be exposed for what it is, a dead cat bounce. Remember, the housing crisis is not yet over nor is the banking crisis.

With this in mind, investors should continue to look at taking positions in contrarian, or inverse, funds and lie in wait to profit from downward forces that exist but are being overrun by traders and hedge funds looking to make a buck. As Jim Cramer suggests in a recent interview, this is not a market for investors to profit from but one for traders, and professional traders at that.

Cramer: When We'll See Dow 10,000

There is no growth in the U.S. and the contraction in third-quarter GDP confirms this -- so going long this market at this time is strictly for a trader's bet.

Going short, however, gives investors a chance to profit from the likely fall in the market and collect on the downside until such time as the market shows true signs of bottoming. Let's give a rough estimate of, say, August 2009 when this bottoming could happen. This also coincides with Jim Cramer's view of the housing market bottoming around July 2009. At the bottom, or near enough, then the market will be an investors' market to buy and hold and not so much a traders' world.

In the meantime, why not profit from inverse funds. Here are the top 20 inverse stock mutual funds for month of October.

Ticker	Fund Name	Objective	One-Month Return
DXZSX	Direxon Latin Am Bear 2X-IV	Index Fund (not market-cap dependent)	70.51
UIPIX	ProFunds Ult Sht M/C Pro-Inv	Contrarian	38.38
SPPIX	ProFunds Sh Prec Metals-Inv	Contrarian	34.95
UCPIX	ProFunds Ult Sht S/C Pro-Inv	Contrarian	32.18
RYIRX	Rydex Inv RUSS 2000 2X-H	Contrarian	31.57
SRPIX	ProFunds Short Real Est-Inv	Contrarian	28.42
GRZZX	Grizzly Short Fund	Contrarian	25.24
URPSX	ProFunds UltraBear Profd-SRV	Contrarian	23.62
RYTPX	Rydex Inverse S&P 500 2X-H	Contrarian	22.94
DXSSX	Direxion S&P 500 Bear 2.5-IV	Contrarian	21.5
RYMHX	Rydex Inverse Mid Cap Str-H	Contrarian	20.86
RYVNX	Rydex Inverse OTC 2X STR-H	Contrarian	20.72
USPIX	Ultra Sht Nasdaq 100 Prof-I	Contrarian	19.33
RYSHX	Rydex Series Inv RUS 2K ST-H	Contrarian	19.02
SHPIX	ProFunds Short Small-Cap-Inv	Contrarian	18.87
DXQSX	Direxion Nasdaq 100 Bear-Inv	Contrarian	18.28
RYSDX	Rydex Strength $ 2X Str-A	Index Fund (not market-cap dependent)	17.81
RYCWX	Rydex Inverse Dow 2X STR-H	Contrarian	17.05
UKPIX	ProFunds Ultra Short JP-INV	Contrarian	15.57
UWPIX	ProFunds Ult Sht Dow 30-Inv	Contrarian	15.31
*Fund and underlying Index returns are based on the inception date of the Fund. Returns for the benchmark indexes are based on the closest month end to the Fund's inception date.

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