CORRECTION IF FED INTEREST RATE IS 10% ECONOMY IS BOOMING. BONDS IS MOSTLY PRESERVATION OF CAPITAL AND IS IDLE CAPITAL. RIGHT NOW BOND YIELDS IS SAME AS DIVIDENDS. INTEREST RATES DOWN BONDS GO UP. BOND TRADING IS BORING TOO.
If what we've been witness to the past month in bonds is what you consider "boring", then I'd sure like to see what your idea of excitement is. Also, turn your caps lock off.
Once banks are saved, all bets are off. It'll be a false recovery with high inflation, followed by jacked rates, and then the market, jobs and consumer gets flushed. Everyone keeps forgetting the Debt Order of Creditors: Banks Inflation Consumers High inflation is far more destructive than the paltry deflation we've seen so far. If the Powers-That-Be allow a resumption of consumer borrowing, we're gonna see it. The Optimists cite reflated wages to pay off Bubble Debt. Guess what? Wages never got close to home prices last time (hence, the massive defaults). In order to get wages close to Bubble debt, future real estate will be 200-500% higher than it is now. Gas 8 bucks. Bread 5 Bucks. etc etc. And a whole new raft of suckers get locked in at new tops with more debt than before. Thats what a "Bubble" is. And we're headed into a even bigger one than the last!! There's no way around it. Reflating a new Bubble to "save" the last will be more destructive than the current Bubble !!!! Isn't that obvious?? Once its done, Volker will save the day and we're all gonna be fucked. People have no idea how bad things will get if Bernacke doesn't nullify CDS and let Banks fail, right now. Its all political. The 9 Trillion laid out thus far was more than sufficient to solve this debacle many times over, yet here we are. Whether the Banks withhold credit indefinitely (deflation) or we go into massive inflation, the Treasury has made clear its motivations are driven purely by political interests - Ie. The Bankers. The only reason why Banks are reflating a new Bubble is because they got caught on the wrong side of the last one!! When they're in the Black, the Hammer is gonna drop on rates and all the Perma-Bulls and Consumers are gonna be left pissing in the wind. This thing is gonna end, and its gonna end badly.
the problem with the real estate bubble like many real estate bubbles was excessive 'speculation' with easy mortgages. why were the banks lending money who can't afford the mortgages with 5% downpayment. mortgages downpayment needs to be 25% or more if the market price is inflated. banks need to be more conservative in lending practices. the mortgage defaults are from job losses and from housing speculators or housing flippers.
Yes and no. Speculation results from cheap credit. To single out the individual actors and not lay no blame on the Conductor (the FED), is sheer folly. Agree about mortgage securitization - there has to be fiscal accountability or Capitalism doesn't work. The FED must be dissolved = no more bailouts. Or Banks must hold paper for X years before disposition. With guaranteed bailouts, criminal regulators and raters, and instant securitization, bad debts are gonna flourish. As for homeowners who bought in at Bubble Top. Americans need to learn the hard way. Accountability means accountability for everyone - Banks and Consumers.
Regarding TBT - and fully disclosing that I don't know much about ETFs - is there any disadvantage to using this ETF for the long term (say 5 years or so) and going long it now? I mean disadvantage in the method of shorting bonds...and the Lehman name - that doesn't mean too much, does it? Someone else just manages the ETF.
From the prospectus, which you read: http://media.proshares.com/documents/ProSharesProspectus.pdf Principal Risks ProShares UltraShort Lehman 20+ Year Treasury is subject to the following principal risks: ⢠Aggressive Investment Technique, Risk Correlation Risk, Counterparty Risk, Credit Risk, Debt Instrument Risk, Interest Rate Risk, Inverse Correlation Risk, Investment Company and Exchange Traded Fund Risk, Liquidity Risk, Market Price Variance Risk, Market Risk, Non-Diversification Risk, Portfolio Turnover Risk, Short Sale Risk and Valuation Time Risk. The Fund may be subject to risks in addition to those identified as principal risks. For more information on the Fundâs principal investment strategies and risks, including a description of the principal risks noted above, please refer to the sections entitled âPrincipal Investment Strategiesâ and âPrincipal Risksâ. The section titled âSpecial Risks of Exchange-Traded Fundsâ in this Prospectus and the SAI contain additional information about the Fund and related risks.
There may also be regulatory risk with the new Congress. They may feel that these inverse ETF's are short instruments in disguise, etc. God knows what they will do.
If your question is not related to a retirement account, there is a way to address your concern (which is legitimate). PM me if you would like that I share such a info with you.