AI
Tuesday, May 10, 2011 8:51:37 AM
I'm starting to change my focus on how to play the market now. The stock market is dead due to lack of interest by just about everyone. The Fed has been successful I think at hammering the speculators. So, they just ran into commodities and forex where the Fed can't touch them. The only thing the gov can do is raise margins on commoditie trading. That's helped them and hurt the small guys, but the big guys run the world and that won't do anything.
But I see something else starting to take shape - and it's a possible big trade. First, read this article by Bove about interest rates and banks...
http://www.cnbc.com/id/42937720
Now, regardless of what he thinks about BAC or C, his point is now starting to take shape about bond yeilds begining to rise soon, and this time it could be the big one. Everyone has been talking up rates over the last year, but now it looks like it's finally starting to come to a point where it will probably do so in a longer term trend.
Previously, I traded into TYO as a way to play that. The trade actualy worked out, but not for me becuase I was too scared. The problem with TYO was that they added (direxion) the shorter term 7 year bond into it which dragged it down because the Fed has been targeting short term bonds for the QE.
But this time I'm not making the same mistake. This time I think I have the right call here - TMV. TMV is the 3x 20+ year bond bear fund, which goes up when the 20 and 30 year bond yeilds rise. Just look at this chart...
The top window is the actual chart of the 20 year yeild, which as you can see puts us less than 1% above the all time low of about 3.25%. We're currently at 4%ish. But look at where TMV is -- at $38ish now, the low back at 3.25% puts that at just $31, so that's your ultimate risk. Not too shabby for something that could easily triple your money with no time risk of options.
The best part is you can sell covered calls on it month after month knowing that eventually you'll see this ramp because it will HAVE to.
But I see something else starting to take shape - and it's a possible big trade. First, read this article by Bove about interest rates and banks...
http://www.cnbc.com/id/42937720
Now, regardless of what he thinks about BAC or C, his point is now starting to take shape about bond yeilds begining to rise soon, and this time it could be the big one. Everyone has been talking up rates over the last year, but now it looks like it's finally starting to come to a point where it will probably do so in a longer term trend.
Previously, I traded into TYO as a way to play that. The trade actualy worked out, but not for me becuase I was too scared. The problem with TYO was that they added (direxion) the shorter term 7 year bond into it which dragged it down because the Fed has been targeting short term bonds for the QE.
But this time I'm not making the same mistake. This time I think I have the right call here - TMV. TMV is the 3x 20+ year bond bear fund, which goes up when the 20 and 30 year bond yeilds rise. Just look at this chart...
The top window is the actual chart of the 20 year yeild, which as you can see puts us less than 1% above the all time low of about 3.25%. We're currently at 4%ish. But look at where TMV is -- at $38ish now, the low back at 3.25% puts that at just $31, so that's your ultimate risk. Not too shabby for something that could easily triple your money with no time risk of options.
The best part is you can sell covered calls on it month after month knowing that eventually you'll see this ramp because it will HAVE to.
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