How to Play Rising Dollar, Falling Treasury Yields

You may have never thought it possible, but right now, more than any time in the past few years, it is not unthinkable to be bullish in the morning, bearish after lunch, and neutral into the close, all in the same day. It is not right or wrong. It just is.

These are historic times, with very high stakes. Yesterday’s closing rally for stocks is a perfect example, as it also proved opportunistic for Treasury bulls (NYSE:TLT) and US dollar bears (NYSE:UDN).

For a growing numbers of active investors, the decision to seek refuge in the dollar is now being made without concern for unbearably low money market rates of 0.09%. Instead, it is being done as a directional call, as a barometer of (changing) risk appetite.

“In the past couple of years we have seen nearly $750 billion dollars flow from equities into fixed income mutual funds and ETFs,” says Tom Lydon, President of Global Trends Investments. “Today you have the ability to look to foreign currencies to protect your purchasing power here in the US.”

For the truly bold, there are also dozens of leveraged ETF products to choose from that can magnify a market move – either up or down – by factors of 200 to 300%. The Market Vectors Double Short Euro (DRR) had a strong day Monday on top of a good September that’s seen it rise 10% as the Euro has weakened. On the bond side, the Direxion 20+ Year Treasury 3x Bull (TMF) is on fire as yields grind to record lows, gaining 25% in the past month and 60% in the past 3 months.

See the full “Breakout” interview below:


Leave a Reply

Your email address will not be published. Required fields are marked *