Kunst

The Riskiness of Bonds

Repeat post, but I think worth it:

These ultra & ultrashort ETFs are extremely dangerous if you hold them for any length of time. Run some charts and you will see.

Examples, 1/1-12/29/08:
China: FXI and FXP are both down 50%.
Oil industry: DUG is down 25% and DIG is down 75%.
Financials: UYG is down 85%, SKF is up 25%.
Real estate: URE is down 80%, SRS is down 45%.

DOG (ProShares 1x short Dow 30) is up 20%, DXD (same except 2x) is only up 15%. The single-leverage did better than the double!

If you hold on to these ETFs for more than a few days, you are on a losing track. Beware!



On Jan 03 07:00 PM snake driver wrote:

> I think I have been learning that painful lesson with SRS over the
> past few weeks. IYR goes nowhere, but SRS goes into the toilet bowl.
> What's the use of being right about real estate if you can't make
> money from it?

The Riskiness of Bonds

On Jan 03 10:46 AM snake driver wrote:

> This seems like airtight logic to me. If treasuries have nowhere
> to go but one direction, how could one go wrong with Chris B's strategy?
> Can anyone describe a scenario in which Treasuries go the other way?

Here's one: The Fed buys treasuries with newly created money. Higher demand means higher price = lower rates. No one can force interest rates up if the Fed keeps buying treasuries. That's the benefit of having your debt in your own currency.

Don't be too sure it couldn't happen.

The Riskiness of Bonds

The problem is that inflation will come from massive printing of money by the Fed to avoid having to pay sharply higher interest rates on treasuries, which are going to be issued in record quantity over the next few months and quarters. It could happen a lot more quickly than you might expect.


On Jan 02 01:51 PM bocaj21 wrote:

> No one knows, of course, but my guess. for what's its worth, is that the
> inflationary cycle will begin at more likely than not at least two
> years or three years out. So, money in investment grade corporates
> of three to five years do not to me appear to be putting one's capital
> in these assets at much risk. (Please, however, don't ask me about
> my AIG bonds).

The Riskiness of Bonds

The next round of inflation isn't going to make your 3% CDs a very good investment either.


On Jan 02 12:59 PM User 118015 wrote:

> There's no better place to put your cash than FDIC insured CD's in
> my opinion. The next round will be inflation and Treasuries will
> be dropping like rocks so the next round will be to pick up some
> of those Treasuries after they bottom out and you will have the cash
> when the drop occurs to do so. ...MarvinMBA

Is Buying Bonds Really a Good Idea?

Long DXO, TBT, UDN, DBA. Let the party begin!


On Dec 31 09:57 AM PastTense wrote:

> What are "the better places to put your money right now"?

The Incredible Lightness of Being (Employed)

Lefty-

I think we're already at war and up to our eyeballs in debt. This time, that may be part of the problem rather than the solution. And I sure don't see any FDR around. (Although he ran on a very different -- conservative -- platform in 1932 than what he actually wound up doing.)

RonPaulFan-

I'm betting against commodities (SMN) for now, as a worldwide recession will do nothing good for demand. After the downturn, commodities (especially oil) will be the big winner for a long time.

At least your guy has some connection to reality. That does make him unique among the candidates, just not electable.

The Incredible Lightness of Being (Employed)

I watched the two New Hampshire debates the other night. It amazes me how the candidates are NOT talking about some of the most serious issues. Virtually no discussion of the health or future of the economy. No mention (except Ron Paul) of the decline of the dollar, or the federal deficit/debt, or the current account deficit. I don't even recall anyone talking about the mortgage/credit squeeze. Limited discussion of Social Security, none of Medicare.

This country is way beyond denial. Just sit on the beach and wait for the tsunami.