tag:blogger.com,1999:blog-8702840202604739302.post6944724962627004207..comments2024-03-28T03:38:53.734-07:00Comments on MacroMania: Time to short treasuries?David Andolfattohttp://www.blogger.com/profile/12138572028306561024noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-8702840202604739302.post-58910729773414349442011-06-24T11:02:44.358-07:002011-06-24T11:02:44.358-07:00It is investing in securities that are currently b...It is investing in securities that are currently betting against the bottom? Because if the piles of money from TNS should fly stocks.varicose veinshttp://www.varicoseveinguide.com/noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-72816693190925178242011-03-29T22:16:03.080-07:002011-03-29T22:16:03.080-07:00I like your post and I want to recommend many of m...I like your post and I want to recommend many of my colleagues to read this.body lifthttp://www.bodyliftguide.comnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-74589466038601345522011-02-07T11:48:05.113-08:002011-02-07T11:48:05.113-08:00I guess what you meant to say is that TBT is not t...I guess what you meant to say is that TBT is not the <i>best</i> way to short treasuries. Perhaps so, but I'm pretty sure that TBT will generally rise along with nominal interest rates. Indeed, it's behavior appears perfectly consistent with this view.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-8971361364350605802011-02-07T10:03:31.442-08:002011-02-07T10:03:31.442-08:00There are (now) lots of explanations online; Googl...There are (now) lots of explanations online; Googling returned this as the top result:<br />http://accruedint.blogspot.com/2009/05/leveraged-etf-math-this-may-smell-bad.html.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-72595407804390689192011-02-07T06:59:24.218-08:002011-02-07T06:59:24.218-08:00Um...OK. Care to elaborate?Um...OK. Care to elaborate?David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-6193842058426442272011-02-07T04:46:05.216-08:002011-02-07T04:46:05.216-08:00TBT is not a good way to short Treasuries, assumin...TBT is not a good way to short Treasuries, assuming your expected holding period is more than a day.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-30393303899693527482011-02-05T07:54:06.143-08:002011-02-05T07:54:06.143-08:00Prof J:
No effect of inflation on the EP. What i...<b>Prof J:</b><br /> <br />No effect of inflation on the EP. What is your sample period? (Do you include the 1970s?)<br /> <br />It is evidently an empirical fact that high inflation rates are correlated with variable inflation rates. Loosely speaking, there is more uncertainty associated with higher inflation rates. So I guess from this perspective, the higher premium on stocks you identify should not be surprising. I would be surprised, however, to discover that this premium was limited to stocks.<br /><br />PS. On Binky...lolDavid Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-60588216759827677792011-02-05T06:17:07.011-08:002011-02-05T06:17:07.011-08:00David,
Yes, I agree this security that you found ...David,<br /><br />Yes, I agree this security that you found that allows to short nominal treasuries is quite dandy.<br /><br />I've almost finished a first draft of a paper looking at the "right" measure of inflation vis-a-vis the effect of inflation on the equity premium. So far I've found no relationship betwixt inflation and the S&P 500 nominal excess return. I think this means that unless the inflation is unexpected, the overall effect has already been priced in. Inflation leads to higher nominal discount rates, but also higher nominal growth rates, thus ultimately the effects cancel (more or less).<br /><br />The interesting thing is that higher measured inflation (depending on how it's measured) lead to higher subjective risk premiums on equities. In other words, the real effects of inflation (in aggregate) on stocks appear to balance out, but people become more nervous and so attach a higher risk premium which reduces stock prices. Binky might say people become underweight in stocks...Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-55831918532389516892011-02-05T01:47:28.118-08:002011-02-05T01:47:28.118-08:00>> What could go wrong with this trade?
It ...>> What could go wrong with this trade?<br /><br />It will be completely wrong when your organization is rigging the market. Tell your boss stop channelling off money to the primary dealers then your trade will work.<br /><br />>> Well, the fact remains that U.S. treasuries are likely to retain their role as a safe-haven instrument, at least for the near future.<br /><br />Anyone who thinks investment based solely on Gov't promise to pay is a safe-heaven needs to have their brain examined for sanity. Government debt will never get repaid, it's never intended to be. Gov't will not default only currencies will get debased which is happening right before our eyes, thanks to great minds like you in your organization.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-45863443419097196122011-02-04T17:38:38.393-08:002011-02-04T17:38:38.393-08:00Prof J:
Weird that some of your original post di...<b>Prof J:</b> <br /><br />Weird that some of your original post did not appear.<br /><br />In any case, I sort of figured that this is what you were saying. But I'm thinking that any inflation will ultimately manifest itself in higher nominal stock prices too. So shorting stocks in this environment is not the same thing as shorting nominal treasuries.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-70290832398440421362011-02-04T16:08:49.762-08:002011-02-04T16:08:49.762-08:00David,
I don't blame you - a good 2/3rds of m...David,<br /><br />I don't blame you - a good 2/3rds of my post didn't show up.<br /><br />I'll boil it down like so. Since the Treasury rate is the benchmark rate for pricing most assets, including other bonds, stocks, options, etc. an increase in the benchmark rate will cause the prices of all these securities to drop. The sensitivities will depend on the extend to which the interest rate risk is already priced in.Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-40558827359384294492011-02-04T14:11:41.109-08:002011-02-04T14:11:41.109-08:00Prof J: Not sure I follow.<b>Prof J:</b> Not sure I follow.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-987007001203854902011-02-04T14:05:49.455-08:002011-02-04T14:05:49.455-08:00I appreciate learning about the new security - was...I appreciate learning about the new security - wasn't aware of that one.<br /><br />But really, I think one could end up short any American market and play this one. The risk-free rate of Treasuries is the benchmark rate for most securities.Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-46653737587019776972011-02-04T13:29:35.220-08:002011-02-04T13:29:35.220-08:00JP: If they're American investors, they're...<b>JP:</b> If they're American investors, they're likely just overweight.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-39490950784172524532011-02-04T13:06:32.429-08:002011-02-04T13:06:32.429-08:00So are you saying that investors are currently ove...So are you saying that investors are currently overweight treasuries?<br /><br />Anyways, I pretty much agree with this trade. The safe haven destination of choice seems to be moving away from US to the Australias, Brazils, and Canadas of the world, at least that's what Bill Gross is predicting:<br /><br />http://europe.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+February+2010+Bill+Gross+The+Ring+of+Fire.htmJP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com