I am an equity/derivatives guy - I think I always will be, but, I KNOW I need to expand my knowledge of how the bond market works, and the signals it gives off. I’ve been reading one of Bill Gross’s book, you know the manager of PIMPCO, “The Peter Lynch of Bonds” according to the cover. He called Treasurys the “most over-valued asset class in the world, bar none” in April of this year. It’s sentiment like this that I’m pretty sure why ProShares created PST, and TBT; leveraged ETFs that short the 7-10 year, and 20+ year, US Treasury Indexes from Lehman brothers. I started learning about the bond market back in ECON 101, but have relatively ignored learning more. I have been smacked in the face with it over the last six months in the news, and ramped up during this recent GSE debacle. From what I can tell, the upside for TBT is much better than the downside, at this point in time. Do you concur, or disagree, why - or why not? Any insight from any expert macro / bond guys would help. I am new, and learning.
Speculation ramped up on Friday, as investors hypothesized that the GSCs would need help, thus hurting credit rating of the U.S. As such, TBT had nearly it’s second highest trading volume since it’s launch. PST actually did set a record for trading volume, since it’s launch.
Interest rates are bound to tick up…I mean, they almost have to.
I have to give a hat tip to Joe Dowling, for pointing these vehicles out on twitter, I didn’t even know they existed before Friday. I did something impulsive and after only an hour or so reading about TBT, Dan Conway can contest, I bought some…early in the day. Every conversation I’ve had with Joe, he has left me with nothing but a good impression of intelligence. Plus, I think he’s likely the second richest guy I’ve ever talked to. So yeah, I have no shame in cherry picking his ideas, making some money, and learning along the way. The way I see it, win or lose, I’ll either pay tuition to the market, or make some money. I’m young, and need to learn. I applied the exact same logic, that new derivative traders should use - you learn allot faster with skin in the game. Maybe this is reckless, I dunno. I know I learned really quick when my first derivative trade fell 100%, and my next one doubled, that was almost 4 years ago - I have no regrets over losing ALL the cash on that first trade.
Disclosure - like this matters…I AM short 20+ year Treasury Index via TBT.
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