Friday, July 11, 2008

Why I'm Long the Ultrashort 20yr Treasury

Regular readers know my antipathy towards the long bond, even though that may sound oxy-moronic. The thinking being that if you believe deflation is upon us, which I wholeheartedly do, you would be long the bond not short. Gary Shilling has been an enormous proponent of this strategy along with Mish Shedlock.

I have been watching the long bond, sitting with no position, vexed by the fear of a run up in the bond (lower rates) due to flight to safety, and the fear of a plunge in the bond (higher rates) due to the recognition by foreigners and traders that our government notes are not worth the paper they are printed on. We just cannot pay and slowly the world is coming to the same conclusion.

The RUMORS of the opening of the window to Fannie and Freddie is not the reason for my trade, the chart is. We are experiencing a material reversal to the downside in price in the long bond -ticker TLT -of some magnitude. (chart above)
To make things clear. I am watching the the long bond chart ticker TLT. I am playing it short via the Ultrashort 20yr treasury. TBT. Therefore I am betting on bond prices falling and hence interest rates rising. Yes I know there is deflation and bonds should be a great investment and they have, but you must remember that in the deflationary crash that started in 1929, the bond market got crushed.
Today's reversal in the TLT's was my signal to get long the TBT. I am NOT in any way trading the news, which at this point are unconfirmed rumors to do that would be folly of the highest order. Kinda like the people who went long stocks on the news and are now getting crushed. Remember NEWS CONFORMS TO THE TAPE and right now the stock market tape says "GOING DOWN".
Final note, all these shills on pom pom TV calling for rumor mongering shorts to be prosecuted, I wonder if they will call for prosecution of the same rumor mongering bulls? Just a thought.
Here's a thought for people who are continue to encourage you to trade, please remember that in a bear market there are only 3 positions, short, very short or neutral. So unless you are speculating short this is not the market for you.

Good speculating to you all and always remember that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:

Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 3 units Ultrashort Dow DXD@ $50.12 stops $62.22/60.49/58.62
Long 2 units Ultrashort Financials SKF @ $103.90 stops $169.79/161.72
Long 3 units Currencyshares Swiss Franc ticker FXF @ $97.35 stop at $93.82
Long 1 units Ultrashort ReEstate ticker SRS @ $88.95 stop $92.72
Long 1 unit Ultrashort QQQ ticker QID @ $37.05 stop at $41.91
Long 1 unit Ultrashort S&P ticker SDS @ $57.20 stop $61.57
Long 2 units Hecla Mining ticker HL @ $8.50 stop at $7.16
Long 2 units Kinross Gold ticker KGC @ $18.93 stop at $17.56
Long 1 unit Ultrashort 20yr Treasury ticker TBT @ $68.70 stop at $65.69
Short 1 unit Daimler AG ticker DAI @ $86.20 stop at $65.94
Short 2 units Brinker Int'al ticker EAT @ $20.07 stop at $19.64
Short 2 units Darden ticker DRI @ $36.35 stop at $35.36
Short 1 unit Lehman ticker LEH @ $43.70 stop at $24.43
Short 2 units Deutsche Bank ticker DB @ $117.03 stops at $93.37/88.34
Short 1 unit of Visa ticker V @ $86.25 stop at $80.16
Short 1 unit HSBC ticker HBC @ $83.23 stop at $80.53
Short 2 units of Netflix ticker NFLX @ $30.35 stop at $29.43
Short 1 unit of IBM ticker IBM @ $122.80 stop at $126.14

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