30 Year Treasuries weakening...

[cjppjc]

Re: 30 Year Treasuries weakening...

the yield curve is shaped by cbs the way a politician shapes his past.

in their heads...



...this will work out... :cool:

but in the end, they fail.

nero is a plant, btw. he's here to make us see how far we've come. he reminds me of me when i first came here 10 yrs ago and didn't know anything.

Was that 98/99? or 99/2000?

[metalman]

Re: 30 Year Treasuries weakening...

Was that 98/99? or 99/2000?

1999... million years ago. there i was... all in nortel and cisco. all in cmgi and the telcos... then along comes mr market... like this kangaroo here...

[rogermexico]

Re: 30 Year Treasuries weakening...

TBT is doing better, but all of the negative beta ETFs are kind of squirrely. We need to work out better ways to do it that we don't have to jump in and out of.

I don't like the ETFs either but for retirement accounts they may be necessary.

For non-retirement accounts, what's wrong with futures contracts? They have worked well for me. You can position 9 months or a year out and roll forward every 3 months or so. They are also great for trading if you are so inclined.

[metalman]

Re: 30 Year Treasuries weakening...

I don't like the ETFs either but for retirement accounts they may be necessary.

For non-retirement accounts, what's wrong with futures contracts? They have worked well for me. You can position 9 months or a year out and roll forward every 3 months or so. They are also great for trading if you are so inclined.

futures contracts are the way to go.

[rogermexico]

Re: 30 Year Treasuries weakening...

Grantham along with Marc Faber were two of the few voices (along with iTulip) calling for a market crash. Now Grantham is calling treasuries toppy. If you are looking for another tie breaker, Faber goes much further saying that shorting treasuries will be the trade of the decade.

Do you have any links you can share on these two guys with regard to us treas?

Before I found itulip, Grantham and Faber carried a lot of weight with me (and still do).

[JKD]

Re: 30 Year Treasuries weakening...

TBT is doing better, but all of the negative beta ETFs are kind of squirrely. We need to work out better ways to do it that we don't have to jump in and out of.

FRED, it is not the negative beta that is the problem. What I think you are alluding to is the decay of the leverged ETFs, not the fact that some of them move in inverse fashion to a given underlying index. In fact, the decay is the same on leveraged ETFs regardless of whether it is an inverse or not. The decay is primarily a result of the frequency of return tracking (daily in most all of the popular ETFs), the amount of leverage (2 times in the case of TBT) and the period amplitude of price movement during your holding period (how wide are the swings on a daily close basis).

This brings me to my point, which is that due to the considerably lower daily volatility of the underlying, TBT exhibits much slower decay than many other leveraged ETFs (it is no SKF or SRS). It is a much more useful proxy over longer periods of time than those that track volatile equity indexes although over very long periods of time the decay will present itself. I suggest a thorough Monte Carlo simulation with your expected holding period and daily volatility in order to see if this holds up under your specific expectations. Although it must be tempting with your conviction to go right for the leverage, if your holding period is 5+ years you will see significant decay if we do not get to where you think we are going in a relatively straight line. Unfortunately there is no non-leveraged inverse Treasury ETF that I know of, you would have to buy a mutual fund type product (Rydex has RYJUX, with its glorious 3.45% expense ratio).

One more thing, Direxion has recently introduced triple leverage 10 and 30 year treasury ETFs. These will exhibit much more decay than the double leverage ETF, although in a trending market the returns will be spectacular. Treasuries are much more likely than equity indices to trend smoothly, which makes them tempting if you can get that entry point just right. Otherwise, forgo the homerun and stick with the Rydex fund.

Regards,

John

[goadam1]

Re: 30 Year Treasuries weakening...

futures contracts are the way to go.

If this is the way Itulip is going, then I would love a "how to do inverse futures on treasuries."

[coolhand]

Re: 30 Year Treasuries weakening...

Fred-

What are you hearing regarding the "rumors of disastrously-below-estimate tax receipts?" To me, this is the elephant in the room that no one is talking about in the main stream media, but I fear (hope given my gold exposure) will be soon...can you provide any more color? Thanks!!

[GRG55]

Re: 30 Year Treasuries weakening...

...what do you think is going to happen to the inflation numbers with oil moving from the 30's in february to 55 today?...

LOL Same thing that always happens.

When oil is on the way up the headlines are filled with news about how tame core inflation remains...the message being that oil and food don't count and can be safely ignored because, well, they are "volatile".

On the way down the media, Fed and the politicians forget about core inflation and assure us that we are in danger of "deflation".

Why would anyone expect this to change?...

[GRG55]

Re: 30 Year Treasuries weakening...

Here are be two opinions from a couple of smart guys, or at least smarter by far than most people I know.

http://zerohedge.blogspot.com/2009/0...eks-later.html



http://www.investmentpostcards.com/


As best I can figure, one of these guys is going to be wrong. I would use FRED's comment as a tie breaker, but I couldn't understand what was his actual point.

I am wary of underestimating the Fed's inclinations to manipulate the long T bond yield, however temporarily. The Fed cannot hold back the tide, but if the "short Treasuries" trade becomes too popular with the hedgies I wouldn't put it past them to try to squeeze the shorts hard to buy themselves more time.

[nero3]

Re: 30 Year Treasuries weakening...

Be careful with the yield curve. It is a function of the CBs "magic". Right now we are at a critical junction, where their magic weakens. It is quite possible (gasp!), this time it is different. The yield curve and some other 100-year old ideas may just stop working, while the 5000-year old ideas (gold is money) will return with terror and slaughter. :eek: :confused:

I think it is possible for gold to start to hit a new phase, but I doubt that it is different this time. It never is.

In the 80-s junk bonds was the big thing. I have began to wonder if junk stocks will be the big thing going forward.

[raja]

Re: 30 Year Treasuries weakening...

We have been holding off shorting US Treasury bonds for years. For years they "should" have fallen. We've been dying to say "Time at last to short U.S. Treasury bonds." But we could not until the post-global crash deleveraging was over, nor until all foreign offical lenders except China had pulled out. Not until the U.S. government committed 5.5% of 2008 GDP on fiscal stimulus packages. Nor until the Fed began to support the long end of the Treasury bond market directly. Not until the Fed began QE. Finally, not until the first rumors of disastrously below estimates FY 2008 tax receipts begin to circulate--right about now.

I think during the next market crash there will be a flight to safety, again. So, I'm betting now is not the time to short Treasuries.

[jtabeb]

Re: 30 Year Treasuries weakening...

I am wary of underestimating the Fed's inclinations to manipulate the long T bond yield, however temporarily. The Fed cannot hold back the tide, but if the "short Treasuries" trade becomes too popular with the hedgies I wouldn't put it past them to try to squeeze the shorts hard to buy themselves more time.

Whcih brings me to my point, Why Play a game You can't POSSIBLY win?

Even if you are right, the Fed can screw you. Seems like Physical PMs are the only way to play w/o the Gov being able to cause you to "puke" your positions. Why play the same game that they always win (because they can print and buy or sell and you or I can not).

Go talk to Don Harold about being "too smart for your own good" (Like being levered short financials only to have the SEC come out with a BAN on shorting financials). He thought we had an "economy" and didn't realize that we have a "political economy".

How many times do you need to see the game played before you decide to quit and play a game that you actually have a shot-in-hell of winning.

Seriously, this will not be the trade of the decade, this will be THE SHORT-SQUEEZE of the decade. Run away from this trade for your own good.

You wouldn't gamble with a crooked casino would you? Well then why in God's name would you want to be anywhere NEAR this trade?

(If I'm missing something, someone please explain it to me)

V/R

JT

[rogermexico]

Re: 30 Year Treasuries weakening...

Whcih brings me to my point, Why Play a game You can't POSSIBLY win?

Even if you are right, the Fed can screw you. Seems like Physical PMs are the only way to play w/o the Gov being able to cause you to "puke" your positions. Why play the same game that they always win (because they can print and buy or sell and you or I can not).

Go talk to Don Harold about being "too smart for your own good" (Like being levered short financials only to have the SEC come out with a BAN on shorting financials). He thought we had an "economy" and didn't realize that we have a "political economy".

How many times do you need to see the game played before you decide to quit and play a game that you actually have a shot-in-hell of winning.

Seriously, this will not be the trade of the decade, this will be THE SHORT-SQUEEZE of the decade. Run away from this trade for your own good.

You wouldn't gamble with a crooked casino would you? Well then why in God's name would you want to be anywhere NEAR this trade?

(If I'm missing something, someone please explain it to me)

V/R

JT

Yes, you are missing something. You are perhaps being superstitious about shorting. Remember that there is a practical limit to how much you can lose if you short treasuries.

Unlike a tech stock, the practical limit on shorting a bond is the very reasonable aassumption that no one would prefer any bond to greenbacks or electronic cash if interest rates were negative. Why would anyone hold a promise to deliver, say $ 10,000 in ten years and pay, say $11,000 with a coupon of zero? (I know, I know, - absent some commie scheme to tax idle cash -separate topic and extremely unlikely)

Let's say you have an unleveraged short postion through futures.
Imagine the 10 year is yielding 3.25%. With $100,000 in your account, you sell one contract representing a short position on $100,000. If yields are driven all the way to zero by massive fed buying, your loss is, are you ready? $25,000 or 25%. Even if your contract expires and you are forced to deliver the cash, you can roll forward into a new contract backed by your now $75,000 in cash. You are still short and if the price goes down again and you close out or the contract settles at a higher price, you will get the commensurate gain.

Now, instead of engaging in this "dangerous speculation", you note that Gold is trading at $930/oz. You buy 100 oz as rounds and pay $100,000. You bury them in the forest. On some day in the future, central banks (maybe through the IMF of Goldman Sachs) have manipulated the gold price down to $697.50. On that day, even though there is no electronic position statement on the web, you have lost the same amount as the most you could lose shorting the ten-year. This of course actually happened between Aug and November 08.

You need to be steely-eyed about the relative probabilities and the relative payoffs and treat them based on likelihood of occurrence.

In some times, and more than people give credit, Markets are like gravity.

I am only somewhat more afraid to short against the Fed and Treasury re: bonds than I am to buy gold which they may desperately want to stay cheap.

Long term, they cannot hold either asset from seeking its true value any more than they can levitate.

Is the time now? Maybe. I was shy about posting this until Fred's post yesterday, but have been thinking this way for some time.

[nero3]

Re: 30 Year Treasuries weakening...

Like around the break with the gold standard in around 71, treasuries had a short bull, I don't know if they supported the market, but it will of course be like that now. they might suppress it for a while to get the recovery going, but it will come back to bite them, as it is no free lunch. However, thats just what they must do to get a recovery.