Bradford Giaimo

AIG's Bold Move and Why I'm Shorting the Long Bond

Update: On Monday morning I stated... "from November 13th through November 28th, the long-bond ETF (TLT) has risen 13.3% while the S&P 500 has fallen 1.7%. There has been an excessive flight to safety that has not been reflected in equities. I would argue that those considering buying stocks at current levels might instead look at selling bonds. OR, one might consider selling BOTH the bonds and the stocks, looking for a reversion to mean" (Unfortunantly SA left this part out of the articles title.)

Mo matter, as of the close Tuesday it makes sense to close the trade. With the outright short bond being a marginal loser and despite the fact that a short S&P 500/short long-bond trade was profitable, it's time to move on. Let's face it, like you correctly point out, since Mr. Bernanke let it be known yesterday that the Fed may buy treasuries in "subtantial quantities" to aid the U.S. economy, it's safe to say that there will be some nervous "shorts" going forward. For Monday/Tuesday the bonds (TLT) rallied 3.8% and the stocks (SPX) fell 5.3%.



On Dec 01 06:13 PM the author wrote:

> I appreciate your point of view. Its refreshing to hear an opposite
> point of view in a respectful way. Thank you. While it may look that
> way (selling the bonds at these unpreccedented levels) I am not looking
> to be a hero and pick tops or bottoms. right now this trade falls
> within my concepts and stratgies as I explained in the article. In
> accordance with that I will take it. If it dosent work I will get
> out, take the loss and look for another opportunity to sell until
> that view changes. However you have certainly given me food for thought.
> Good luck.