Market Folly - Latest Comments in Rationale Behind Shorting Treasuries

Re: Rationale Behind Shorting Treasuries

marketfolly — Thu, 12 Mar 2009 13:30:18 -0000

primatively, you can go to google finance and type in TBT then on the chart you can overlay other tickers... type in TLT which is the treasury ETF long. map it out and see that ytd TLT is down 13% while TBT should theoretically be up 26% then. instead, it is only up 20%. Like I said, its not huge divergence, but 6% is 6%..... you want to capture all of that.

Re: Rationale Behind Shorting Treasuries

LongOfTooth — Thu, 12 Mar 2009 11:30:31 -0000

I'm kind of new to this so please bear with me and my probably dumb question(s).

I'm interested in seeing one or a couple of charts of TBT. One would plot interest rates and TBT as it currently works (resetting on a daily basis). And the other chart (or plot) would show interest rates and TBT if it didn't reset on a daily basis.

Is there anywhere on the internet where charts like that exist?

Thanks and I look forward to your research making it out of the queue.

LongOfTooth

Re: Rationale Behind Shorting Treasuries

marketfolly — Mon, 09 Mar 2009 23:36:10 -0000

thanks for the comment. yea, i've got one literally sitting in queue for weeks but i have yet to publish it in hopes i'll find a better way to play it. I'm a research junkie. to be perfectly honest, i think i'm just going to have to settle for shorting TLT. i was reluctant to do that because you have to pay the dividend if you're short. but, considering the compounding issues in TBT over the long-term and the time decay and premium associated with TLT puts... shorting TLT seems like the best case thus far. I've just been trying to find another angle before "settling" on shorting TLT, ya know?

Re: Rationale Behind Shorting Treasuries

LongOfTooth — Mon, 09 Mar 2009 22:25:38 -0000

I'm just repeating the question Chip asked a month ago "Did you ever publish the new research on what investments to use to short treasuries since you no longer reccommend PST or TBT?"

Thanks

Re: Rationale Behind Shorting Treasuries

chip Feiss — Thu, 15 Jan 2009 19:54:51 -0000

thanks--looking forward to reading your report--
best,
chip

Re: Rationale Behind Shorting Treasuries

marketfolly — Thu, 15 Jan 2009 14:56:19 -0000

hey chip, thanks for the interest. No, not yet. Finishing up the piece this weekend and will post it ASAP.

in short though, we'd recommend either shorting TLT (but you have to worry about paying the dividend since you'd be short) or buying puts on TLT (but high premium there). Will discuss it more in depth in the piece

Re: Rationale Behind Shorting Treasuries

chip Feiss — Thu, 15 Jan 2009 14:47:08 -0000

Did you ever publish the new research on what investments to use to short treasuries since you no longer reccommend PST or TBT?

thanks,
chip

Re: Rationale Behind Shorting Treasuries

marketfolly — Fri, 19 Dec 2008 03:36:14 -0000

thats the problem with being early in the first place, it can be painful. plus, at the time of writing, we did not know the fed was dead set on buying treasuries. so, ultimately has to be re-evaluated from time to time as their gameplan becomes more transparent.

still believe it is the ultimate "bubble" waiting to burst, but we all know that bubbles overshoot to the upside, and overcorrect on the downside. this one is to be treated like a deep value stock in a sense. no exact way of knowing the timeframe. i am still confident in the theme, it will just take longer to play out. i have a very minimal position in TBT (10% of my desired total position). I am being very patient with this one and will add over time as opportunities present themselves. no rush.

Re: Rationale Behind Shorting Treasuries

Kunst — Fri, 19 Dec 2008 02:00:44 -0000

You still sure about this? TBT and PST haven't been very good investments since November 12. If the Fed buys treasuries, there is no lack of demand to force interest rates up.

Re: Rationale Behind Shorting Treasuries

marketfolly — Mon, 01 Dec 2008 23:55:37 -0000

yea thats the downside with this. its hard to avoid those no matter how you try to play shorting long dated treasuries. i've just accepted it as part of the equation seeing as how there are few options to play this thesis

Re: Rationale Behind Shorting Treasuries

mathluvr — Mon, 01 Dec 2008 23:16:29 -0000

What about margin interest and carrying costs? Any suggestions?

Re: Rationale Behind Shorting Treasuries

marketfolly — Wed, 12 Nov 2008 15:27:46 -0000

good catch, thanks. thought i'd gotten rid of that mental slip but apparently not.

Re: Rationale Behind Shorting Treasuries

Louis Hansell — Wed, 12 Nov 2008 15:24:06 -0000

The phrase is "For all intents and purposes", not "for all intensive purposes".
You are correct in your analysis, and recommendation of TBT.