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Shorting U.S. Treasury Bonds, Wither TBT

Interest-Rates / US Bonds May 30, 2011 - 04:40 AM GMT

By: Peter_Navarro

Interest-Rates

A loyal reader asked me about TBT – the exchange traded fund to short the long bond. As you may remember, I was very bullish on TBT last year; but it turned out to be one of my worst trades.

The best thing to do when a trade goes the wrong way is to learn from it. In this case, TBT serves a dual function for me – as both a potential trade as well as a leading indicator of the business cycle.


The fact that TBT took a dive provided a very strong indication to me that the economy was slowing back down and the market would turn; that was partly the basis of my cash call back in February, which has turned out to be the right call.

Today, TBT remains a technical sell. Why? The economy is softening. China continues to buy our bonds to manipulate its currency. QE2 from the Fed is not quite done. That trifecta keeps interest rates down and therefore TBT down near its 52-week low.

As to why the economy is softening, see last week’s newsletter. It’s not a particularly pretty picture right.

So I say stay in cash until a bullish market trend reasserts itself. And watch TBT as a very good leading indicator of any recovery – or Chinese yuan strengthening.

Navarro on TheStreet.com

Click here to review my videos on TheStreet.com.
———-

Professor Navarro’s articles have appeared in a wide range of publications, from Business Week, the Los Angeles Times, New York Times and Wall Street Journal to the Harvard Business Review, the MIT Sloan Management Review, and the Journal of Business. His free weekly newsletter is published at www.PeterNavarro.com.

© 2011 Copyright Peter Navarro - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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