|Remember this chart?
Maybe this chart will surprise some others too:
TLT/Bonds versus GLD/Gold ...
Like many here, and like Bill Gross, I have not been a big fan of T-Bonds.
Guess what, since Gross was publicly knocking them back in April...
[b]BOnds/TLT have performed almost the same as Gold.[/b]
How many here would have guessed that ?
What happened since then?...
TLT peaked 2 days earlier than GLD, and on lighter volume than the prior rally,
giving an excellent early warning.
Interestingly, the signals are even clearer using the Intraday charts ...
I am short Bonds now - through being long TBT and TBT calls.
Perhaps when I cover my positions there, I will move straight into calls on GLD.
It could be an interesting ride !|
|TBT Calls, with TBT at $32.95 ... Mid-prices
Strike: Aug20 : Sep17 : Dec17 : /Sp-Dc : Dc-Sp
$35 c : $ 0.48 : $ 0.91 : $ 1.91 :/ $0.43 : $1.00/2= $0.500 ::
$34 c : $ 0.76 : $ 1.23 : $ 2.27 :/ $0.47 : $1.04/2= $0.520 ::
$33 c : $ 1.15 : $ 1.63 : $ 2.68 :/ $0.48 : $1.05/2= $0.525 ::
$32 c : $ 1.68 : $ 2.30 : $ 3.25 :/ $0.64 : $0.95/2= $0.425 ::
Try: Sell Aug.$33c call at $1.15, Buy Sep.$33c at $1.63 (deb:$0.48)|
|yep good post. I don't know how or when this debt supercycle will end, but its going to end badly and make the lehmans meltdown look positively mild.
Please add any further interesting links if you come across any.|
|interesting post, cheers|
|While Obama's White House staff is digging out from "snowmageddon," a potential nightmare is giving him sleepless nights. Let's say we spend our $2 trillion in stimulus and get a couple of quarters of decent growth. The "V" is in. Then once the effects of record government spending wear off, we slip back into a deep recession, setting up a classic "W." Unemployment never does stop climbing, reaching 15% by year end, and 25% when you throw in discouraged job seekers, jobless college graduates, and those with expired unemployment benefits. This afflicted Franklin D. Roosevelt in the thirties. So Congress passes another $2 trillion reflationary budget. Everybody gets wonderful new mass transit upgrades, alternative energy infrastructure, smart grids, and bridges to nowhere. But with $4 trillion in extra spending packed into two years, inflation really takes off. The bond market collapses, as China and Japan boycott the Treasury auctions. The dollar tanks big time, gold breaks $2,300, and silver explodes to $50. Ben Bernanke has no choice but to engineer an interest rate spike to dampen inflationary fires and rescue the dollar, taking the Fed funds rate up to a Volkeresque 18%. %. The stock market crashes, taking the S&P well below the 666 low we saw in March. Housing, having never recovered, drops by half again, wiping out more bank equity, and forcing the Treasury to launch TARP II. The bad news accelerates into the 2012 election year. Obama is burned in effigy; Sarah Palin is elected president, and immediately sets to undoing all of his work. Republicans, reinvigorated by new leadership, and energized by a failing economy, retake both houses of congress. National health care is shut down as a wasteful socialist mistake, boondoggle subsidies for alternative energy are eliminated, and the savings are used to justify huge tax cuts for high income earners. We invade Iran, and crude hits $500. If you're over 50, and all of this sounds vaguely familiar, it's because we've been through it all before. Remember Jimmy Carter? Remember the "misery index," the unemployment rate plus the inflation rate, which hit 30, and catapulted Ronald Reagan into an eight year presidency? A replay is not exactly a low probability scenario. This is why credit default swaps live at lofty levels. It's also why the investing public is gun shy, favoring bonds over stocks by a 15:1 margin. Are the equity markets pricing in these possibilities? Not a chance. The risk of economic Armageddon is still out there. Personally, I give it a 50:50 chance. Batten the hatches, and please pass the Xanax.|
sage of suffolk
|Yeah the ftse double short is tricky to win on IMHO. I bought into it just after launch and bagged an insignificant profit. It seemed that tracking losses, spreads and the inverse ETF problem all ate into what would have been good gains.
It is no coincidence the issuers launch these ETFs with very high "numbers" - in the knowledge that losses will erode them lower.
they are probably best suited for day trading for those who for whatever reason do not want to use spread bets or cfds.|
|no problem, just wanted to confirm i had worked it out right, i saw it posted on the ftse short etf thread, i took out the ftse double short etf wednesday, and trying to work out why im down more than i thought, but after reading what you posted i see now, cheers|
|yep - you are right it's a 0.25% loss... sorry for mistake...|
|dasv - cheers for pointing this out to me, but in your example the 2.5% loss should read just 0.25%, but still can compound up over time, can you please confirm to me that i worked it out right ? cheers
dasv - 13 Feb'09 - 18:21 - 18 of 46
There was a health warning on inverse ETF's in Moneyweek and also Casey Research this week.
Casey is now saying it's better to short TLT (possible in a CFD) than to hold TBT.
This is because of the fact this ETF tracks daily price movements.
e.g. you have a investment of say $1000 in TBT.
Day 1: the bonds it tracks go up 5%, so TBT falls 5%. At the end of day 1 you now have $950.
Day 2: TLT goes down 5%, so TBT rises 5%. At the end of day 2 you now have 1.05 * 950 = 997.5 (a 2.5% loss) even though the bonds it tracks are at the same price as 2 days ago.
Unfortunately in my SIPP I can't short TLT. So I'm sticking with TBT but heeding the health warning.
I might add to this trade with a short on TLT in my CFD account.|
|Absolutely mate. On a day when worse than expected unemployment figures are out, we also here that the BofE have bought over 15% of the Gilts Auctioned recently. Surprise surprise the stock market rallies. The valuations are silly now, but there is a dash to put cash somewhere.|
""Good grief! Just last week, when the auction results were announced it was trumpeted to great fanfare that there was "more than sufficient" bid-to-cover, "strong demand" and all the rest.
And now it turns out that 47% (!) of the bonds that were taken by the primary dealers in that auction have been quietly bought by the Fed and permanently secreted to its balance sheet.
They didn't even wait a full week! A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using "primary dealers" and "POMOs" and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.
The speed of the shell game is accelerating.
This immediate repurchase of newly auction bonds by the Fed tells us that demand for these bonds is not nearly as high as advertised, and that things are not quite as strong as represented.
And oh, by the way, don't expect any stock market weakness while so many billions are being shoveled out the Fed and into the pockets of the primary dealers. They'll have to do something with all that freshly minted cash....."|
|A good paper on why you should be short treasuries:-
|I second that c2i.
I having started to send an email to my spreadbetting company everytime my online account goes to "phone only". I am encouraging everyone else to do the same with their service provider and maybe just maybe they will start to take notice. Thus provide us all with a better quality of service.
Please pass it forward.
|treasuries technicals of TLT
|History lesson for economists in thrall to Keynes
By Niall Ferguson
On Wednesday last week, yields on 10-year US Treasuries -- generally seen as the benchmark for long-term interest rates -- rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.
Most commentators were unnerved by this development, coinciding as it did with warnings about the fiscal health of the US. For me, however, it was good news. For it settled a rather public argument between me and the Princeton economist Paul Krugman.
It is a brave or foolhardy man who picks a fight with Mr Krugman, the most recent recipient of the Nobel Prize for Economics. Yet a cat may look at a king, and sometimes a historian can challenge an economist.
A month ago Mr Krugman and I sat on a panel convened in New York to discuss the financial crisis. I made the point that "the running of massive fiscal deficits in excess of 12 per cent of gross domestic product this year, and the issuance therefore of vast quantities of freshly-minted bonds" was likely to push long-term interest rates up, at a time when the Federal Reserve aims at keeping them down. I predicted a "painful tug-of-war between our monetary policy and our fiscal policy, as the markets realise just what a vast quantity of bonds are going to have to be absorbed by the financial system this year".
De haut en bas came the patronising response: I belonged to a "Dark Age" of economics. It was "really sad" that my knowledge of the dismal science had not even got up to 1937 (the year after Keynes's General Theory was published), much less its zenith in 2005 (the year Mr Krugman's macro-economics textbook appeared). Did I not grasp that the key to the crisis was "a vast excess of desired savings over willing investment"? "We have a global savings glut," explained Mr Krugman, "which is why there is, in fact, no upward pressure on interest rates."
Now, I do not need lessons about the General Theory. But I think perhaps Mr Krugman would benefit from a refresher course about that work's historical context. Having reissued his book The Return of Depression Economics, he clearly has an interest in representing the current crisis as a repeat of the 1930s. But it is not. US real GDP is forecast by the International Monetary Fund to fall by 2.8 per cent this year and to stagnate next year. This is a far cry from the early 1930s, when real output collapsed by 30 per cent. So far this is a big recession, comparable in scale with 1973-1975. Nor has globalisation collapsed the way it did in the 1930s.
Credit for averting a second Great Depression should principally go to Fed chairman Ben Bernanke, whose knowledge of the early 1930s banking crisis is second to none, and whose double dose of near-zero short-term rates and quantitative easing -- a doubling of the Fed's balance sheet since September -- has averted a pandemic of bank failures. No doubt, too, the $787bn stimulus package is also boosting US GDP this quarter.
But the stimulus package only accounts for a part of the massive deficit the US federal government is projected to run this year. Borrowing is forecast to be $1,840bn -- equivalent to around half of all federal outlays and 13 per cent of GDP. A deficit this size has not been seen in the US since the second world war. A further $10,000bn will need to be borrowed in the decade ahead, according to the Congressional Budget Office. Even if the White House's over-optimistic growth forecasts are correct, that will still take the gross federal debt above 100 per cent of GDP by 2017. And this ignores the vast off-balance-sheet liabilities of the Medicare and Social Security systems.
It is hardly surprising, then, that the bond market is quailing. For only on Planet Econ-101 (the standard macroeconomics course drummed into every US undergraduate) could such a tidal wave of debt issuance exert "no upward pressure on interest rates".
Of course, Mr Krugman knew what I meant. "The only thing that might drive up interest rates," he acknowledged during our debate, "is that people may grow dubious about the financial solvency of governments." Might? May? The fact is that people -- not least the Chinese government -- are already distinctly dubious. They understand that US fiscal policy implies big purchases of government bonds by the Fed this year, since neither foreign nor private domestic purchases will suffice to fund the deficit. This policy is known as printing money and it is what many governments tried in the 1970s, with inflationary consequences you do not need to be a historian to recall.
No doubt there are powerful deflationary headwinds blowing in the other direction today. There is surplus capacity in world manufacturing. But the price of key commodities has surged since February. Monetary expansion in the US, where M2 is growing at an annual rate of 9 per cent, well above its post-1960 average, seems likely to lead to inflation if not this year, then next. In the words of the Chinese central bank's latest quarterly report: "A policy mistake ... may bring inflation risks to the whole world."
The policy mistake has already been made -- to adopt the fiscal policy of a world war to fight a recession. In the absence of credible commitments to end the chronic US structural deficit, there will be further upward pressure on interest rates, despite the glut of global savings. It was Keynes who noted that "even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist". Today the long-dead economist is Keynes, and it is professors of economics, not practical men, who are in thrall to his ideas.
The writer is Laurence A. Tisch professor of history at Harvard University and author of The Ascent of Money (Penguin)|
|wow. next stop mid 60's!|
|I wonder whether next line of support at 97 or so on TLT will hold... Looking like a fall back to the low 90's IMHO|
|this link posted on TR32 - gives a good view of treasury technicals and fundamentals: http://www.marketoracle.co.uk/Article10308.html|
|hmmmm TLT breaking through support now - 90's in sight? Perhaps time to jump on TBT and hope for traversal to next support/resistance?|
|different kinds of treasuries explained:-