DoctoRx's  Instablog

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Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
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  • Sequester Economics: Risk Off 1 comment
    Mar 1, 2013 7:55 AM | about stocks: TLT, EDV

    The long commodities trade, (risk on), that I warned looked to have gone too far in my most recent TLT article last week is here, at least today. Gold is down 5 months in a row- a mark of shrinking liquidity as I see it. This parallels what went on in winter-spring of 2012. The stock market then corrected and Europe went on into full-fledged recession. Oil prices are, I guess, headed toward $80 (WTI, US futures market) as the pattern of lower highs plays out. Strong support is seen at $80. I sold more than half my HP (not HPQ) near the close yesterday as the stock market sold off on confirmation that the sequester is here.

    A risk off scenario would be bullish for TLT. More aggressive ways to play this include (symbols only) EDV (no commissions for Vanguard traders) and ZROZ (Pimco fund). These give the inherent leverage of zero coupon Treasuries. They have larger bid-ask spreads than TLT and are IMHO unsuitable for day trading. Another way for larger accounts to play this is via direct ownership of Treasury bonds, including long-term zero coupon bonds. Except in a post-Lehman environment, these are highly liquid with small bid-ask spreads. Still, for traders, EDV and ZROZ in my experience are better. If you want to hold for a while, then the bonds are better and probably safer.

    Note I am long direct ownership of zero coupon T-bonds.

    Disclosure: I am long TLT, EDV.

    Stocks: TLT, EDV
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  • Rigorous
    , contributor
    Comments (432) | Send Message
    You are really on the verge of showing outright disrespect for Ben Bernanke.
    1 Mar 2013, 12:49 PM Reply Like
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