“If you’re a contrarian investor, there’s nothing as fun as getting on the other side of a very crowded trade. And the most crowded trade going today is the “flight to quality” — quality apparently meaning bonds of a U.S. government that is sitting on $13 trillion of debt. This morning, there was such a panicky flight to “quality” that investors were snapping up 10-year Treasury notes yielding a whopping 3.1%,” Evan Newmark Reports From The WSJ.

Newmark goes on to say, “Would you lend anyone money at 3.1%? And especially the U.S. government? I wouldn’t — and that’s exactly why both before and after the market open, I started shorting longer-dated U.S. bonds. That means I expect Treasury prices to go lower, sending yields higher. At an average price of about $37.75, I bought the ProShares UltraShort 20+Year Treasury ETF (NYSE:TBT). It’s currently trading over $38. Now a few caveats. This is a speculative trade — not long-term investing. The (NYSE:TBT) is a leveraged ETF that magnifies (actually doubles) both losses and gains. When the 10-year Treasury was yielding close to 4% in early April, the (TBT) traded over $50.”

“Thanks to Greek profligacy, German intransigency and Kim-Il-Jong’s lunacy, we have U.S. bond buyers that are no longer rational investors. They’re stampeding out of equities, euros, commodities and even corporate bonds. Forget return, investors care only about safety. This means they’re more likely to misprice the security. Now, I don’t know if investors are actually mispricing government debt. Only time will tell. But consider what the 3.1% yield is saying. It’s saying a global recession is imminent. It’s saying we can kiss any U.S. recovery goodbye. In fact, it’s saying the U.S. will likely be gripped by a decade-long deflationary bout with little to no GDP growth,” Newmark Reports.

See the article: HERE

Here are some more details on the ProShares UltraShort 20+Year Treasury ETF (NYSE:TBT) below:

UltraShort 20+ Year Treasury ProShares (NYSE:TBT)

This ETF seeks a return of -200% of the return of an index (target) for a single day. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.

As of 5/24/10

Related posts:

1. PIMCO Missed The Trade Of The Year In The Treasury Market (TBT, TLT, TBF, IEF)
2. ETF Trade: Shorting Treasury Options; Profit, Rinse, Repeat
3. Why Do Emerging Markets Seem Crowded? (EEM, GMF, RSX)
4. The Treasury Investment That’s WAY Better Than Treasury Inflation Protected Securities (TBT, TLT, IEF, TBF, TIP)

ETF BASIC NEWS, TBT