If you trade and have any sense, you keep an eye on the volatility indexes. As of lately they have been taken out back and shot, or more apropriately, they have been given a long, slow, and painful death over the past few months. At new lows for the year, the VXX is in the low nineteens. My point is not to bring up the obvious, rather to suggest with no bottom in the VXX, buying to hedge your portfolio is moronic.

We all know the saying, don’t try to catch a failing knife, and it seems that may pertain to this crazy ETF. Many people on CNBC and around the net have suggested hedging with the VXX. This has failed miserably for everyone who has partaken over the past few months. Those experts have suggested doing it around $25 on the VXX, the VXX now trades at $19, a 25% loss on your hedge isn’t such a good idea. Ask around to those that didn’t believe in the rally and bought the VXX to try to outsmart the trend. They are now screwed, royally. When the waters are a little more choppy, in the coming months, would be a more appropriate time to buy the VXX. Currently though, it is one horse race and the VXX wasn’t invited. There are still headwinds in the U.S. and abroad, but until the markets start taking those into account, the VXX will be taken out back and laid to waste on a daily basis.

We all know that McDonald’s stands out from all the other fast food restaurants. It may have to do with their keen ability to take popular entrees and make them the perfect fast food meal. Most likely its the fact that they make the best breakfast on the planet. More recently they took Starbucks drinks and made them not only affordable, but desirable to the masses that you wouldn’t even think to enter Starbucks store. Though I love a good frappe, there is more to the McDonald’s story then that, there are the continually updated restaurants.

Many investors miss the obvious when it comes to evaluating McDonald’s. As average Americans (maybe in your case above average) we travel throughout the United States, or go through our hometown, and see many different fast food chains. As we mentioned above they are not all made the same, but more particularly their stores are not make the same. A key point many fail to realize about McDonald’s is the power that the franchisor holds. McDonald’s does not merely sell stores or regions, they lease these stores. Which in turn gives them the power to retract the store from the leasee. This means that McDonald’s can tell the franchisee to update their store and they must do so. In fact this happens quite often and is likely why McDonald’s continues to stay on top of their game.

This store policy  separates McDonald’s from all the other fast food chains. Drive by your local Wendy’s, Hardees, or Dairy Queen and the difference is obvious. What is important from an investors standpoint is the importance of aesthetics. A nice store, means happy customer, and anyone who has worked in a service industry knows happy customers are repeat customers. You may say aesthetics are a mute point. Let’s take a look at your recent dining experience. The last time you went out to a nice restaurant, what separated it from the other places you regularly dine? Let’s think, it was obviously the food, and oh yeah the atmosphere. The presentation often plays a huge role but is presented so subtly that we don’t realize it.

“The closest thing to home.” – McDonald’s Slogan (1966-1969)

The investing community has watched the once great Research In Motion fall from grace in recent years. Why you ask, has such a once great product ceased to be admired? It could be attributed to a lack of a uniform vision, or a faltering product. To be honest it does not matter what exactly happened to put RIM in the position they are in today. Simply they are in a dire straight. What holds more importance in my eyes is rather the potential they have in the coming years.

One product can change everything for a company, as Apple has shown us over the years. The iPhone has changed the landscape of the Apple company. Today many companies only produce one product still are able to give investors great returns. RIM has the potential to turn its horror story around. Consumers are fickle and are always interested in the newest and greatest thing. One day it was RIM, then one day it was Apple, tomorrow may be Google’s day. As investors we never truly know what the next greatest gadget will be, we can only speculate. Below is an example of an innovative way that the Android company has set up your phone to go silent at work.

(no longer available)

No I am not saying that they will sell them 40 million RAZRs. What I am saying is that companies, in particular technology companies, can take an innovative spin on a product and easily sell a vast quantity. One creative spin can result in huge demand. The smartphone race will be a long and tough one, and sometimes the tortoise does win the race. I am not suggesting in any shape or form to go out and by the faltering company, but rather to keep an eye on them in the future. RIM can definitely turn their smartphone story around and there is definitely enough room for three big smartphone players in the smartphone market.

Photo by The GameWay

The sentiment as of late suggests that many investors have lost their grasp on reality. For some reason the mindset is that bad things cannot happen to the financial markets during an election year. The ignorance behind this is truly blissful, so keep buying up your hot stocks, while the smart money waits for a better opportunity down the road.

Above is a reminder of 2008, yes the long forgotten 2008. The year that rocked the financial markets and changed the financial world. The repercussions of that year can still be felt and in some instances seen throughout the United States. Whats the most entertaining about the above image are the dates located on the upper right. During an election year, the market went down, very far down. I am not claiming that a financial collapse will occur once again, I am only suggesting the obvious, markets do trend down.

There is all this talk on the news and blogs about things being better, that one should throw all their money into the market. What I find most compelling about the proposed arguments is that people are buying into the hype. Of course everyone wants to make money, no one can doubt an investor for wanting to do that. Though the issue lies with the fact that we have been here before, last year. The arguments proposed for why we should keep trading higher have been heard before. History has a tendency to repeat itself. The headwinds exist and I do not need to spell them out for you. No the collapse of 2008 probably won’t happen again this year, but during an election year the market can and will go down. During 2012 the market can and will go down, so buy that downside protection while it’s cheap, because making money is always better then losing it.