Jasper M's  Instablog

   One again, I found myself speculating in US Treasury Securities. And making tiny profits over short periods.

   Several months ago a friend asked my what i should do with a certain, small percentage of his wealth he was undecided about. "Anything but cash" was his only injunction. After some thought, I recommended UUP, and IEF. 
    Not long ago, noting wheels coming off of the Eurozone, I decided to join him, and put my money where my mouth was. The Euro dutifully tanked, the dollar soared . . . and rates on the 10 year plummeted. Since IEF is 7-10 year Treasuries, the fund jumped nearly 3%. 
     My victory dance was tempered by the usual concerns. The flattening of the yield curve was bad for insolvent banks trying to "grow their way to health" (cough, cough, Keynsian bullshit, cough, cough), tempting who knows what by the Fed. And we Do have The most dedicated spender ever elected in the Oval office. So at some point, bad policy is bound to overcome foreign currency weakness, at least on the long end. So I closed the position, after about a month. After commissions, in and out, almost exactly 2% profit. 
    Now, 2% in a month is nothing to sneeze at. I have said before, I suspect the reason so many investors get sucked into trading is they close a position quickly upon some nonconfirmation, find that they made a small profit, and then note that the profit per unit time was very high. And I would Love to one of those guys that can make 2 % every month. But I'm not, and that is Not what I have been trying to do. In my case, my continued experimentations with Treasuries are a matter of momentary clear convictions about certain trends, which I cannot adhere to for long because the I cannot make sufficient sense of the technical indicators involved to convince myself of the stability of any trend I think I've identified. 1987 taught me that it is sometimes better to be a year early than one day late, and so, when I get concerned about direction, and the technicals do not reassure me, I leave. 
    My current intent is to ladder back into IEI (3-7 year Treasuries [likely coinciding with the absolute limit of US government solvency]), thus reducing my maturity exposure, and locking in what, in a deflationary environment, is a perfectly respectable return. 
     
    


Disclosure: still long UUP