Who Is Currently Betting Against CDO?

The short answer: Everyone. And, yes, including Donald Trump. Since the beginning of October, the anti-CDO sentiment has permeated virtually every corner of the financial markets. In the last ten weeks, futures traders have largely favored a bearish outcome for the iTrailer ETF (symbol: CDO)—which owns the popular trailer park community The Camping World Stores — over and over again. This pattern has been repeated in the case of several other popular trailer park-related ETFs, including DPLUX, DRW, and DOTFX.

Why Are People Booting Out CDO?

If you follow the markets, you might have noticed that short-sellers have been hitting the trailer park-related sectors hard. Consider these short-sale targets:

  • iTrailer (ETF): 12.5% drop (since October 8th)
  • The Camping World Stores (Stock): 17% drop (since October 8th)
  • DPLUX (ETF): 21% drop (since October 8th)
  • DRW (ETF): 23% drop (since October 8th)
  • DOTFX (ETF): 24% drop (since October 8th)

From a short-term perspective, it’s easy to understand why these securities might be worth avoiding. After all, it’s been a tough ten weeks for the general stock market, and the rally in the popular trailer park-related sectors has yet to show signs of relenting. This could simply be the tail end of a volatile trend that’s seen price fluctuations in these ETFs reach levels previously unimagined. Or maybe these declines represent an opportunity to acquire a solid entry point for the next phase of the current market cycle.

How Is The Anti-CDO Sentiment Even Possible?

On the surface, it would seem that the trailer park community would be a safe haven for the general public during these times of uncertainty. After all, trailers are fairly mobile, which makes them accessible from nearly any location. They’re also relatively inexpensive to own compared to other real estate types. Finally, many trailer parks offer the ability to camp, which — for some people — represents a type of escapism from the stresses of day-to-day living.

While these advantages might make trailers attractive for certain uses, they certainly don’t provide the same level of assurance when it comes to investing. When you consider the risk-reward profile of most short-sale trades, it’s clear that the trailer park crowd is not a particularly suitable group for speculators. For example, if you’re reading this blog post on a short-sale-enabled device, there’s a pretty good chance the trades involving these ETFs are being executed by professional stock traders for large institutions like hedge funds or high-frequency traders. In these cases, the risk/reward profile is almost certainly skewed in favor of the short-seller.

Is This A Real Threat To CDO?

So far, CDO has held up quite well against all of this short-selling, at least in terms of share price stability. In fact, over the last month it’s even outperformed many traditional investment vehicles like the SP 500 or the small-cap Russell 2000, according to data from Bloomberg. While it’s still possible that this recent trend will prove to be a temporary glitch, it’s also quite possible that CDO, and the related trailer park ETFs, will continue to outperform the general market in the coming months.

Whether you agree with the anti-CDO sentiment or not, it’s impossible to deny that this group of securities has become a bit of a laughing stock in the financial media. While they might not represent the most prudent option for investors at this point, it’s also quite clear that many people are starting to fear that they might become a victim of trend-seeking short-sellers. For that reason, it’s probably time for those who are holding CDO, or any of the other related ETFs, to enter into high-quality defensive positions.