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Sept 15 2009 - Equities seem to go nowhere but up.  10,000 is the new goal for most traders.  Although everyone seems fairly skeptical (present company included).  I usually check on pending foreclosures as a litmus test for the financial sector and I am blown away by how many homes will be hitting the market in the next 3 to 6 months.  I still own quite a few shares of Bank Of Internet - B of I  (BOFI) and that is the extent of my long equity portfolio.  I recently sold off many of my inflation plays (I will be looking greedily to return to those positions if we ever get a pullback.  I am looking for a Nov - Dec pullback, as that will be about the time our sugar high starts wearing off (Cash for clunkers, etc.).  Although comparables will start looking pretty good, so we may not see a huge pullback (15% at the most) as last year after September activity came to a standstill.  The interest rate situation has been a conundrum (to borrow an old Greenspan favorite), since fear is apparent in the bond market, even as tempered euphoria returns to equities.  3.5% seems to be the new resistance on the 10 year.   I was hoping 3.5 would be support - oh well.  I believe the reason the long end is still holding up is the fact that banks are merely stealing money from deposits (at .5% and below) and buying treasuries instead of lending.   Fairly simple strategy.  But just like anything else, eventually the chickens will come home to roost.  I will stay short the long end by buying ITM puts on leveraged long bond etf's (like TYD - TMF).

July 15 2009 - With the run up in stock prices, bonds have been selling off.  Perhaps we will make another run to 4% on the 10 yr.  However, the last time we had the quick run, the higher mortgage rates seemed to spook the entire market.  Remember, higher mortgages means absolute destruction to any housing rebound.  But how long can they hold the line.  It seems like a tight rope dance both traders and Ben are now playing... 

July 3 2009... Bond yields have reversed their moon shot (10 yr to 4% and now back to 3.5%).  The market has also reversed and now back to around 8400 on the Dow.   I have been loading now on TBT or TBT like plays.  I own Nov puts on TYD, which is the 3X 10 year bull ETF.  With that  I am hoping to gain from the usual ETF decay associated with leverage and also gain from rising yields. 


May 1 2009...   I have been kicking around my long term portfolio ideas.  I believe it is getting close to the time to get serious about this.  So this is the thesis:  The US will require an absurd amount of debt funding over the next couple of years to fulfill all the social policies that they feel are required.  There is already a ridiculous deficit as we all know.  It will only get worse with baby boomers retiring and hitting the social security/medicare dole among other social changes.  So clearly bond supply will force interest rates higher.  Deflation is a current concern and the Fed knows the only way out is to print money and inflate assets by virtue of default (it is a fairly easy inverse, of course until other countries do the same, and the dollar index merely floats with the rest).  The Fed is now taking all the risk out of the private sector and placing it squarely on their own backs.  This can be seen with the TALF - the TARP - the PPIP (etc.) -  The direct and easy answer to this would be to go long the private sector and short the government.  This gets back to the first point about the US issuing tons of debt and rates rising on the longer end (the government is certainly trying to keep the short end rates very low, so a nice yield curve is helping the banks emerge from insolvency... Gotta love those spreads emerging). 

Portfolio for the typical IRA:
Long TBT (ultra-short 20 year treasury) increasing supply - increasing yields - lower bond prices - Short the government
Long SSO** (ultra s&p 500) Long private sector
FXA - FXC - DXDDX (aussie & canadian dollar, dollar negative fund) higher yielding currencies - commodity exporters
DBB - GSG (Base metal commodities* - World commodity index) reflation - inflation - weak dollar
BOFI (BOFI Holding - Bank of Internet) - Playing the interest rate spread.  Solid undervalued bank.

*I believe current prices of base metals provide a better return than gold for an inflation trade.  Some would use precious metals in this type of portfolio.
** Ultra-funds use leverage and are generally not good long term holds.   It is best to short the inverse fund and use the decay to your advantage.  However, in markets with less volatility (which we may see going forward) this decay may not be as pronounced.  Also, I tend to trade positions every couple of weeks and therefore refresh new shares.  For instance, TBT traded for a while in a pronounced pattern between 44 and 48.  I traded this pattern several times.  My ultra-shares do not get old and moldy....
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