A full description on why I bought this and why it's going to be a great hold over the long run can be here. [Nov 21: Bookkeeping: Initiating Ultrashort Lehman 20+ Year Treasury]Let me just say, the higher this instrument goes - the worse it is for our country. Due to a lack of alternatives we've been the only country in the world that can get away with being the center of a financial tsunami and people run INTO our currency & debt. Now the first stages of running away from our debt begin... and our borrowing costs (interest) begin to go up. When the day comes when the dollar follows, it could get very ugly. But that's a fire to worry about another day.
The great irony is once the world returns to growth or at least stabilization the great flight "away" from safety could torpedo both our bonds and currency. Look at what is happening to the U.K. currency the past week - scary. Multi trillions financed at 2.5% is a different story than financed at 5-6%. Or worse if people really start to face reality regarding our (non) ability to pay back our debts.
I'm giving you the Cliff Notes - if you want the full scoop read the November post.
Long Ultrashort Lehman ETF in fund; no personal position
11 comments:
Mark -
I also have a position in TBT, however I am quite cautious since I don't see any real alternative to the U.S. dollar as the world's reserve currency. Therefore the prospect of China and Japan selling U.S. debt in size seems only a remote possibility - your thoughts?
I don't think the dollar will be falling hard anytime soon - #1 deflation is destructing many dollars so less supply and #2 your reason
Bonds should move first and currency eventually. The problem is liquidity - yen and dollar are most liquid and doing the best. Euro some people are tossing around the chance it won't even be around in a few years - not saying it will or will not, but you don't hear about that issue with Yen/Dollar. The more stable countries have far smaller pools so not a place institutions can play in as easily.
That's why I think the dollar will hold up until the world stabilizes. Then you should see a return to australian dollars, brazial reals, canadian dollars and the like.
Mark:
When you see action like this on a down day in the market (although things seem to turning today) does this mean money moves into stocks?
I bought some of this at the open. Should have bought last week. Just wasn't sure which way the market was going. I've been watching TLT. It really had an enormous runup and it broke through all of its daily averages. TLT has a very nice head and shoulders pattern and should at least break down to its 100MA.
jegan
dclancy
I read very little into anything nowadays
the "not so invisible hand" is so prevalent in so many markets it is making "signal posts" that we've been using for years, useless.
All this credit market "improvement" is because the Federal Reserve is involved everywhere. Markets are still dysfunctional.
I think the world is now coming to the realization it has to prepare for a few trillion in US notes coming.
tbt is another leveraged proshares etf... suffers from same long-term lack of correlation to the index due to the daily resets.
ie holding SDS over long periods of time screws you, you'd be better off just shorting SPY. same applies to TBT. shorting TLT is better option but you have to pay the dividend. leap puts on TLT are the other option but you obviously cant do those.
mf, curious on that one
TLT down from $117 to $108 in past 5 sessions (-7.6%)
TBT from $38 to $44 (+13.6%)
seems to track "sorta kinda 2x" or at least MUCh better than the equity even though its probably constructed the same. I know its only 5 days but even these SRS and SKF don't wory for 5 day periods.
Hmmm
Anyone else think that this puppy is moving on speculation that foreign governments will sell bonds in order to pay off debt?
You mean countries like Iceland, England, Ireland or Hungary? Who'd buy 'em? Bloggers like Kathy Lein and Bill Luby seem to feel that the dollar is just the defacto go-to currency when times are tough. I'm not big on currencies, but I suspect TBT is moving simply because TLT had such a rocketing good run and it looks like it's rolling over. Investors seem to play one side of these paired ETFs and then jump to the other... jegan
Hi Mark,
1st, terriffic work on ur blog generally.
If u track TLT returns vs TBT u will see that they do not correlate wellas mf has said. The return from 12/31 for TLT is -9.06% vs TBT ret of +16.7. For 11/21 to 1/22 TLT = +6.17% vs TBT -14.67%. The rets include divs.
U will find over time that TBT will underperform gernerally and it has happened in the 3x ETF's that both can have negative returns. U would be much better off shorting TLT or the futures or finding something else that tracks better.
Good point fellas - I am still in mindset of Marketocracy.com. No reason to own TBT when one can short TLT and not have the "instrument risk". I sold my tiny batch of TBT and replace with tiny batch of TLT, hoping for a pullback (in this case, appreciation) to buy more.
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