Continue reading The Treasury Market Is Breaking Down

The Treasury Market Is Breaking Down originally appeared on BloggingStocks on Mon, 15 Nov 2010 17:00:00 EST. Please see our terms for use of feeds.

The world of international finance is a complex web. The U.S. is still the powerhouse when it comes to gross domestic product. Yet, while perched on top of the heap, the U.S. faces major problems with high-level debt and unemployment.

The U.S. Federal Reserve is faced with having to issue massive amounts of debt just to keep pace with the growing deficits. Now the Fed is planning another round of stimulus by buying more treasuries, dubbed QE2.

Continue reading Why Would Any Country Buy U.S. Treasuries?

Why Would Any Country Buy U.S. Treasuries? originally appeared on BloggingStocks on Sun, 03 Oct 2010 11:40:00 EST. Please see our terms for use of feeds.

Continue reading Drop in Treasury Bond Yields Forecasts a Bear Market for Stocks

Drop in Treasury Bond Yields Forecasts a Bear Market for Stocks originally appeared on BloggingStocks on Wed, 11 Aug 2010 09:30:00 EST. Please see our terms for use of feeds.

For the first time in history, U.S. government debt -- now $13 trillion -- will surpass GDP in 2012, based on forecasts by the International Monetary Fund. Bill Gross of PIMCO calls this a "debt super cycle."

The key problem with such a huge debt is that investors will demand a higher return, which translates into higher interest rates. The interest cost alone on $13 trillion will put an added burden on the government and the people.

Bill Gross further commented that "If real interest rates were ever to go up instead of down," our economic growth will not be enough to support borrowings.

Continue reading U.S. Debt to Surpass GDP

U.S. Debt to Surpass GDP originally appeared on BloggingStocks on Sat, 05 Jun 2010 11:40:00 EST. Please see our terms for use of feeds.

With ever growing uncertainty whether our economy will face inflation or deflation in the months to come given recent government spending, what is certain is that no one wants to see their fixed income lose purchasing power. Unlike most bonds that pay out a fixed dollar amount in interest, treasury inflation protected bonds (TIPs) pay out a fixed amount over the consumer-price index (CPI), making them a popular choice for investor anticipating the economy to experience inflation. If inflation is higher than projected, the government adds to your principal on a TIP and makes up the difference!

Not only does owning TIPs allow one to keep up with monthly bills that are increasing in step with inflation, they are an important asset class to consider when determining an asset allocation strategy. TIPs enable one to further diversify a portfolio. Bonds are ideal for those not able to stomach much risk and TIPs in particular protect one's fixed income from eroding.

Continue reading Inflation worries got you down? Buy TIP, a Treasury Inflation Protected ETF

Inflation worries got you down? Buy TIP, a Treasury Inflation Protected ETF originally appeared on BloggingStocks on Wed, 23 Sep 2009 18:00:00 EST. Please see our terms for use of feeds.

Why is China loading up on US Treasuries? At first glance that seems strange because the dollar keeps falling. Doesn't a falling dollar mean that inflation is on the way? Not necessarily. The Labor Department reported that prices of imported goods fell 15% in August from a year ago, this after a 19.2% drop in July. These numbers are telling us that there is no inflation coming in the near future. The Fed has plenty of wiggle room. It can afford to keep interest rates at historic lows.

So then why is the dollar weak? We know what the answer is. The Fed has pledged $12 trillion dollars to bail out the bankers, housing and the mortgage market, just to name a few areas where the money is going. Then too, we have sky high deficits. The current account deficit will rise to 3.2% of GDP in 2010 and 3.5% in 2011.

Continue reading Why is China loading up on US Treasuries?

Why is China loading up on US Treasuries? originally appeared on BloggingStocks on Mon, 21 Sep 2009 16:40:00 EST. Please see our terms for use of feeds.

It's almost October and the pundits are at again, predicting that the market should sell off again. Let's look at their reasoning.

• We have an ongoing deterioration in consumer debt.
• Joseph Stiglitz, Nobel Laureate, says that "the U.S. banking sector is now in worse shape than before the collapse of Lehman Brothers.
• Bank profitability is expected to come under pressure.
• The U.S. housing outlook is grim.

Continue reading October's almost here: Is the market headed up or down?

October's almost here: Is the market headed up or down? originally appeared on BloggingStocks on Sun, 20 Sep 2009 16:10:00 EST. Please see our terms for use of feeds.

Continue reading Do bond yields hint at another credit crisis?

Do bond yields hint at another credit crisis? originally appeared on BloggingStocks on Mon, 01 Jun 2009 14:40:00 EST. Please see our terms for use of feeds.

This post is part of a 12-article feature that can be read here: Today's best income ideas.

"The markets are littered with compelling buying opportunities that may be the best we see in a generation," says Keith Fitz-Gerald.

In The Money Map Report, he looks at a trio of income ETFs -- one focused on Treasury inflation protected securities, one invested in muni bonds, and one that buys high yield corporates.

"We are holding three positions in our portfolio which we believe can be bought with new money. First, we suggest iShares Lehman TIPS Bond ETF (NYSE: TIP). The 10 year TIPS' yield is 2.23% versus 2.40% for 10 year Treasuries.

Continue reading TIPs, munis & corporates: ETFs for income

TIPs, munis & corporates: ETFs for income originally appeared on BloggingStocks on Mon, 02 Mar 2009 13:20:00 EST. Please see our terms for use of feeds.

This post is part of a 12-article feature that can be read here: Today's best income ideas.

The latest buy recommendation from Jack Adamo is a leveraged ETF that rises in value when long-term Treasury bonds fall in price.

In Insiders Plus newsletter, he looks at ProShares UltraShort 20+ Year Treasury Bond (NYSE: TBT), noting, "Given that the government is printing money by the carload with nothing to back it, inflation has to rebound at some point."

Continue reading ETF banks on a bubble in Treasuries

ETF banks on a bubble in Treasuries originally appeared on BloggingStocks on Sun, 01 Mar 2009 09:30:00 EST. Please see our terms for use of feeds.

This post is part of a 12-article feature that can be read here: Today's best income ideas.

"You may be surprised to learn that we are in the midst of one of the greatest financial bubbles in history," explains Nick Vardy, referring to long-term government bonds.

In his Global Bull Market Alert, the advisor suggests, "This bubble isn't motivated by greed, but by fear." Here, he looks at the Rydex Inverse Government Long Bond Strategy Inverse (RYJUX), which he says, has the potential to become "the biggest trade of the year."

Continue reading Government bonds: An 'inverse' strategy

Government bonds: An 'inverse' strategy originally appeared on BloggingStocks on Sat, 28 Feb 2009 11:30:00 EST. Please see our terms for use of feeds.

The US Treasury expects to fund $1,900 billion in net borrowing this year. To accomplish this, it is bringing back the seven-year note and the three-year note. Traders expect that the Treasury will issue each denomination of notes and bonds each month. To say the least, this kind of financing is unprecedented. The problem will be: who will buy all these securities?

Continue reading US Treasury will fund billions in net borrowing this year

US Treasury will fund billions in net borrowing this year originally appeared on BloggingStocks on Fri, 06 Feb 2009 13:15:00 EST. Please see our terms for use of feeds.

This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.

The Fed funds rate, the most widely followed interest rate the banks charge each other for overnight lending, topped out in August 2006, at 5.25%.

When the Fed started easing rates thereafter, no one at the economic think tanks forecasted anything close to what we are seeing today (namely a Fed funds rate of zero to 0.25% -- a decline of a full 5% in 17 months).

The decline in rates started out so orderly and coordinated that it seemed almost too good to be true, and the Dow Jones Industrial Average hit an all-time high, topping 14,000 for the first time in July 2007.

However, the quarter-point cuts gave way to a three-quarter-point cut, or 75 basis points, on Jan. 22, 2008, signaling that the Fed was seeing a material breakdown in the credit and housing markets. Following that seemingly radical rate cut, just eight days later on Jan. 30, the Fed again slashed the Fed funds rate by another half point, or 50 basis points, to 3%.

From there Bernanke & Co. held steady for a couple months to see if any good would come of their efforts.

When evidence of further erosion in the credit markets surfaced with the impending collapse of Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), Indy Mac, Bear Streans and Lehman Brothers (OTC: LEHMQ), the Fed lopped another three-quarters of a point off the Fed funds rate, taking it down to 2.25% on March 18.

That was considered the absolute floor at the time, a level that would stick. But that wasn't the case.

Continue reading Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond

Best Trades of 2008: #2 Getting long and staying long the 30-year Treasury bond originally appeared on BloggingStocks on Wed, 31 Dec 2008 12:00:00 EST. Please see our terms for use of feeds.

For most investors and traders, 2008 was a tough year. But while many people saw their portfolio take a merciless beating and watched their retirement vanish into thin air, there were a select few who made a killing.

In fact, if you had been on the right side of any of these bets, you could have banked enough dough to make up for your losses and then some.

Here are five trades everyone wishes they had made in 2008:

#1 Shorting 'Chindia' the day after New Year's: The Chindia experience peaked in Beijing with Michael Phelps, and the market knew it would a year and a day before the Closing Ceremonies.

#2 Getting long and staying long the 30-year Treasury bond: This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.

#3 Shorting oil on the Fourth of July: The drop in oil prices has been nothing short of unbelievable. Those that had the fortitude to short crude in early July (and had the stones to stay with that trade) made a killing.

#4 Buying DryShips (DRYS) at the November low: Following its meteoric rise to $116, the stock careened all the way down to $3. But if you went long then, you saw the share price quadruple in less than a month.

#5 Shorting 'too big to fail' Fannie and Freddie: This shorting strategy defied all odds and pretty much defined the year for the stock market.

Best Trades of 2008: 5 moves that could have made you rich originally appeared on BloggingStocks on Wed, 31 Dec 2008 09:00:00 EST. Please see our terms for use of feeds.

"The latest annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991," observes Alexander Green.

Here, the investment director for the industry-leading The Oxford Club suggests that investors consider the iShares Lehman TIPS Bond Fund (ASE: TIP), noting, "This is a great way to buy a diversified portfolio of inflation-adjusted Treasuries and track them quite easily."

"The latest consumer price index figures were a bit of a shock; the annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991.

"Despite these horrendous inflation figures, gold, mining shares and other inflation-sensitive indicators did nothing - or even fell. What gives?

"Remember that the market is always looking forward, not back. Investors are always more concerned with what lies ahead than what happened in the recent past. Next month or next year may be a different story entirely.

"That's why every investor should have a hedge in his portfolio, like inflation-adjusted Treasuries. These bonds are unique in the investment world. They are the only investment guaranteed to beat inflation. And they are great portfolio diversifiers. They don't march in step with either stocks or bonds.

Continue reading Inflation-adjusted gains: A good "TIP"

Inflation-adjusted gains: A good "TIP" originally appeared on BloggingStocks on Wed, 03 Sep 2008 14:55:00 EST. Please see our terms for use of feeds.