"Thank you for the continued excellent daily commentary, and the Chart Seminar in May, both of which helped me throughout a vintage year which delivered over 45% return on investment. This has been achieved by using a 'trend-following' approach based on investments in shares, funds and ETFs, not by spread-betting, which indicates that very good returns can be obtained with these vehicles.

"Regarding ETFs, which many subscribers will likely be using, I think it's worthwhile to highlight a couple of points mentioned recently in Comment of the Day.

"David mentioned on December 17 [Ed: 23rd?] that agriculture "ETFs have been a predictable disaster because of the contango costs which they increase." In other words, they are poor vehicles for 'long' investors. However, the opposite is also true for 'short investors': Eoin mentioned on December 23 "... the (xxx) ETF will be a great short capturing the decline and the contango."

"So I think it's worth emphasizing this point: short ETFs can be great investments when prices are in a steep down-trend, since they capture both the fall in prices and the negative roll effect due to contango. That becomes clear if one plays around with ratios and overlays in the Chart Library for short ETFs vs the underlying assets.

"This seems to be generally true. But I have two questions. Are you aware of any investment-class exceptions? And I wonder if you can guide us whether there are specific factors could make certain short ETFs even more powerful performers. The answers could be of general interest to other 'oldies' like me who are not comfortable with spread-betting on futures contracts. Thank you."

David Fuller's view Many thanks for this thoughtful feedback and an interesting email. Also, congratulations on seizing your opportunities, with considerable success.

Fullermoney is not for everyone (we are not a tip sheet) but it is very gratifying when hands-on investors succeed by learning and continually honing their investment skills. These include factual, behavioural chart reading, enabling them to make better educated decisions in terms of staying with consistent trends and recognising when they are becoming overextended and subject to mean reversion or even trend reversal.

Anyone who is sufficiently wise and experienced to make an unleveraged return of 45% will hopefully also recognise that vintage years are blessed with the good fortune of some big trends. Consequently, not every year can be a vintage year, in which one can make a big return without taking correspondingly big risks. 2010 had some very favourable tailwinds for bulls, not least accommodative monetary policies, reasonable valuations and a sporadic improvement in investor sentiment from the bearish extremes of 4Q 2008,1Q 2009 and amazingly, 3Q 2010. Conditions are not always this propitious, and you and I can only deal with the reality that markets provide.

Here is the link to my comment on 23rd December, regarding the adverse affect of the contango on performance for the oil tracker (USO US). In other words, I said that while USO was under performing during crude's advance because of the contango, this same factor would ensure that it was a good short in the next significant downtrend for oil.

The email above also mentions short commodity ETFs for the next downturn. Potentially, since any large contango in the futures should enhance performance. However in each instance one should check the actual commodity futures market in question to see if there is a significant contango. There are also short ETFs and one should compare performance against the underlying commodity, which we can easily do with overlay charts in the Library, to make sure that the ETF actually performs as intended.

Fullermoney remains wary of leveraged ETFs which do not always perform as one might hope or expect. As a general rule, the more complex the instrument, the more erratic the performance.