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TBF Will Pay Off Sooner or Later

|Includes:ProShares Short 20+ Year Treasury ETF (TBF), TBT

On a historical basis treasury rates are clearly closer to the bottom than the top. So there is no doubt in my mind that rates will rise some time in the future. The only question is "When?"

The strongest case against them not rising any time soon is if indeed we fall into a deflationary spiral ala Japan.and their lost decade. If this does emerge and the Fed can't fight it off, then rates will stay low for a long, long time.

However, I think the odds on that are about 1 in 4. Meaning it is a concern to watch out for, but not as likely to happen as say a muddle through economy with modest growth and low inflation. That is because Ben Bernanke got the job as Fed chairman mostly based upon his resume as being the best student of "what not to do" during a recession/depression.

Several years ago he got the nickname "Helicopter Ben" after a speech where he listed all the tools at the Feds disposal to stave off deflation. His premise being that any outcome is better than deflation and even if you have to throw money out of a helicopter to the citizens below, that is what you have to do.

So I think current economic conditions would probably not run straight into deflation on their own. But if they did, then Helicopter Ben would come to the rescue which is more likely to create an inflationary environment and higher Treasury rates in the future.

I do have shares of TBF tucked away in my portfolio. I realize it may not pan out soon, but 3-5 years down the road I am confident it will pay off handsomely. And once the bounce occurs the switching into TBT is not a bad idea to get better leverage to the up move.



Disclosure: I sure as heck do.

Disclosure: I own TBF, may own TBT down the road

Stocks: TBF, TBT