Tuesday, January 20, 2009

ETF Pick of The Day: TBT

Thank you Fast Money for pushing our other ETF pick and holding - double negative on treasuries but no negative carry: you get a dividend if you care about that kind of stuff. Cheap entry point at $40.33, with historical average $61.03. Thesis: the sell off in treasuries once people go back to risky assets, or once everyone stops buying them. China, Russia, Japan and Europe will have massive internal budget deficits to fund to care about buying treasuries, and the US can only print so much money to buy its own paper. Plus yields on Treasuries can only go to 0, which is pretty much where they are now.

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market folly said...

you're referencing TBT for short-term trades, correct?

because, it seems as if TBT, just like the other leveraged ETFs, have problems tracking the indexes over long periods of time due to the daily resets.

I'm pretty sure you're aware of this, but just wanted to make sure. although the TBT won't be necessarily 'off' as much as say SRS to IYR or SDS to SPY, but their correlation over longer periods of time really is astounding sometimes.

looking for another vehicle to short treasuries for the longer-term. shorting TLT is an option but then you've got to pay out the dividend. puts on TLT could work, but they're already jacked up with premium. thoughts on how to play it for a longer time frame?

Tyler Durden said...

Short term and honestly i have tried to figure out a synthetic LT short but absent actually shorting the T not sure how to do it. Btw, saw your post on Tontine, what is your take on how they unwind Exide? I like the company but dumping that 31% stake will be like passing a kidneystone.

market folly said...

ok thanks, let me know if you ever find a solid way to play it. i'm out of ideas hah.

tontine has been looking at different ways to unload all their big stakes either by selling to other shareholders, to the company, etc. its hard to say how they're going to accomplish that in this horrible market & credit environment.

To wait for them to unwind it, its probably just going to take a lot of patience and monitoring the SEC filings to see when they're out of it, unfortunately.