Using UltraShort 20+ Year Treasury ProShares (TBT) To Hedge Inflation
Tom Eidelman, vice president of Eidelman Capital Management, came out with a video yesterday detailing why his company is chosing the UltraShort 20+ Year Treasury ProShares (TBT) as a hedge against inflation.TBT seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Lehman Brothers 20+ Year U.S. Treasury index. He states that the treasury will have to issue three times more debt this year as they did last year. Using a supply and demand analogy, he bet’s the treasury will need to entice buyers with higher interest rates, causing treasury bonds to fall. (see the video below)
Interestingly enough, Tom wrote an article on leveraged funds for Barrons Online back in January of this year stating the pitfalls of leveraged ETF’s. His article titled, “One-Day Wonders” can be found: HERE
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the TBT is a wonderful trading etf – why buy and hold waiting around for inflation?
In the second to last paragraph of my quarterly letter I explain a little further why I like the TBT for long only accounts despite their inadequacies. For investors with the flexibility, I would rather short Treasury bonds directly or short the TLT.
I did run a regression between the performance of the TBT vs. Treasury Bond returns and found a fairly steady negative correlation (which is exactly what we want) unlike some other wild double short ETFs like the UltraShort China ETF (FXP).
Here’s a link to my newsletter.
http://www.eidelmancapital.com/Q209Final.pdf.
-Tom Eidelman
eidelmancapital.com