Posts Tagged ‘TBT’
Short Treasuries
April 24th, 2011 | 
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Waiting for the right time to Short Treasuries
We are looking at a unsustainable rally. The government has put a lot of programs in place that are propping up the stock market. Look at all those TARP payments. They’re all in the billions and they have kept the bank stocks up in the market. Some banks have more than doubled from their March lows. Bank of America, BAC, has increased 300% from its bottom. That’s insane!
China has a problem with these TARP payments. They have been continously funding our economy by buying our debt. However, their funding has been decreasing as they see us printing billions of dollars to pull ourselves away from this recession. Tim Geithner recently made a visit to China to persuade them to continue to buy the US Dollar. He went to a university and all the chinese students got a good laugh when he stated the economy was in great shape and the United States will continue to have a strong dollar.
The chinese need some convincing to continue to help us out. They don’t want to fund us if our US Dollar is going to get weaker. They can start buying other currencies that still keep their strength. Hence, the government needs to give them ‘more for their money’. They start raising the yield on the treasuries. To do this, the government starts buying the treasuries. Countries like China will get a fat yield for holding the US Dollar. However, this artificial buying to keep the yield up cannot last forever. Our treasury yields are reaching historic lows, and when these prices finally drop, we need to plan to take advantage of the situation.
This is where our two short ETFs come in, ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT) and Direxion Daily 30 Year Treasury Bear 3x Shares (TMV). When the government keeps lowering the price, we make money. People will not buy treasuries unless they can get a nice yield for their money. The government will have to raise interest rates, lower the price of the treasuries, or continually buy them up to continue this trend. Whatever way they do it, shorting will be the way to go. It’s just a matter of time to do it. Currently, treasury prices are kind of high but in the next few months I expect there will be a good time to get in. Just monitor those prices and yields and wait for the right time to bite!