Friday, October 29, 2010

Adding more TLT

I am content to get long another unit of the long bond via the TLT here at $100.23 and here's why.

Given the almost unanimity of  bearishness on bonds via Misinformation TV which of course as we all know is CNBC (hat tip to Barry Ritholz of the Big Picture for that one!) I have been watching the bonds, in particular the long end closely. 

I find it curiously interesting how the pundits refuse to talk about our junk market yet have the onions to bash the treasury market. Gee whiz, which would I rather own, Neflix or Priceline paper or U.S. Treasury debt? I get 3 guesses and the first 2 don't count (apologies to Warren, Charlie and the Moodys' gang as I'll skip your ratings!)

For those having trouble following the junk - or high yield market as your broker will call it when he pitches it for your retirement account - market you can do so with Barclays high yield Spdr symbol ticker JNK. 

For all the believers in QE 2 I find their love hate relationship with the federal tit amusing to say the least. These pundits who loath the bonds most probably used to loath the Japanese bond market as well. Countless scores of experts bashed the JGB (Japanese Government Bond) market as it continued to rise (yields falling) and yet it refused to crack. Come to think of it it still hasn't!

For those unaware of current JGB yields the 10yr note yield is 0.94% Yes you're reading it correctly zero point nine four percent while the 30yr is 1.99%. 

For what it's worth the 10yr U.S. Treasury is now at 2.61% and the 30yr Treasury is at 3.99%. I don't like to engage in hyperbole but that looks to me like a heck of a long way to go still.


The U.S. bonds needed a correction and it looks like they have experienced a healthy one of late. I want to address a remark Mr. Gross of PIMCO made regarding bonds the other day on Misinformation TV (CNBC) in which he said yields are almost zero near the short end and TIPS went negative. Now I am no bond legend, nor bond king but what I am is a realist who hopes for the best yet plans for the worst. 

Could absolute yields go negative Mr. Gross? 
Could people actually pay a depository institution of the highest integrity just for the courtesy of returning their capital intact? 
Is it at all possible?

What was that phrase, oh yeah, "I am not interesting in return on my capital, I am simply interested in the return of it".

Based on this then is it possible that those looking for returns, at least those less risk averse, then must move farther out on the curve for yield? Or maybe they will simply continue to buy the NFLX or PCLN paper who knows. 

What I do know is that I wouldn't hold high yield, municipal or state debt paper even if you held a gun to my head, only the highest quality paper (everything is relative right?) for me. Yes I feel this way even withstanding the prognostications of the bond king that the 30yr bull market in bonds is dead. Besides a couple of gentleman I have an absolute ton of respect for, Gary Shilling and Bill Helming are both still bond bulls so I like the company I am keeping.

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $60.30
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $60.50
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 2 units Ultrashort Xinhua China ticker FXP @ $42.45
Long 1 unit Ultrashort Real Estate ticker SRS @ $49.10
Long 2 units Direxion Tech 3X Bear ticker TYP @ $52.60
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 92.15 stop @ $98.74
Long 2 units U.S. Dollar Bull ticker UUP @ $22.56 stops @ $21.94/$21.44
Long 1 unit Powershares Gold Double Short ticker DZZ @ $9.07 stop @ $8.67
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 100.33 stop @ $98.17
Short 1 unit Apple ticker AAPL @ $312.25 stop @ $315.37
Short 2 units Caterpillar ticker CAT @ $77.75 stop @ $81.71
Short 1 unit American Express ticker AXP @ $40.37 stop @ $41.81

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