How RealMoney Can Prevent a Disaster

One of our pros made calls that could have kept you out two ETFs that have been decimated.

Author:: David Morrow
Publish date:: Apr 27, 2009 12:07 PM EDT

Check out Eric Oberg's latest piece on the Temporary Liquidity Guarantee Program.

One of the advantages of subscribing to

RealMoney

is having one of our pros warn you away from buying a certain stock or making a specific trade. Sidestepping an investing disaster can sometimes mean the difference between retiring early and not being able to retire at all.

RealMoney

contributor Eric Oberg, a former managing director at Goldman Sachs, made two of these disaster-preventing calls last Dec. 22, when he wrote a compelling argument warning subscribers against two exchange-traded funds (ETFs) that are designed to provide gains by shorting the indices they follow.

Oberg's article, "Why Short Sector ETFs Aren't So Smart," warned investors against

ProShares UltraShort Financial ETF

(SKF) - Get Report

, a short play on financials, and

ProShares UltraShort Real Estate ETF

(SRS) - Get Report

, a short play on the real estate market.

Both have been disasters. Since Dec. 22, the SKF has underperformed the implied short of its counterpart long fund -- the

Ultra Financials ProShares

(UYG) - Get Report

-- by 84.6%, while the SRS has underperformed the implied short of its counterpart long fund - the

Ultra Real Estate ProShares

(URE) - Get Report

-- by 90%.

Subscribers who followed Oberg's advice saved a lot of cash. A $100,000 investment made in SKF on Dec. 22 is now worth only $48,600. A $100,000 investment made in SRS on Dec. 22 is now worth only $41,900.

Both SKF and SRS were based on underlying indices that were based on being down, and yet somehow, these funds had the wrong execution of an idea that proved correct.

RealMoney:

The site for smart investors.

Click here

for a free trial to

RealMoney

Dave Morrow

Editor-in-Chief

David Morrow is editor-in-chief of TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

click here

to send him an email.