This ETF Has It’s Fortunes Tied To Interest Rates And The Value Of The Dollar (TBT)

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September 16, 2009 11:42am ETF BASIC NEWS NYSE:TBT

killing-dollar“I have come to understand one investment I find very interesting in the current environment, because it acts as a prism, separating the blinding light


 of myriad worldwide business and economic trends into a spectrum of clear hues that are easily analyzed and understood. Said another way, you only have to understand two simple things that you can’t miss–they’re both headline material–and you can make a lot of money. The investment is UltraShort 20+ Year Treasury ProShares (TBT), and its fortunes are tied to interest rates and the value of the dollar.  This is a class I don’t think you’ll want to cut,” Timothy Middleton Reports From True Slant.

(TBT), which is this exchange-traded fund’s ticker symbol, represents the opposite, times two, of the most widely used index of the value of long-term U.S. Treasury bonds.

“Most financial securities are subject to a host of risks, from the CEO being hit by a bus to the federal government ordering a ruinous product recall. Bonds are less risky than stocks because they are closer to the pot of gold from which companies pay out profits. Government bonds are the least risky asset class, because governments don’t often go broke, and U.S. government bonds are the least risky of all, because America is too big to fail. Treasury bonds have no credit risk, but they are not entirely immune to risk. In fact, they are hyper-sensitive to two other risks that affect riskier bonds less–interest rates and foreign-exchange rates,”  Middleton Reports.

Middleton Continues saying “(Short-term interest rates are indeed set by authorities but long rates–and 20+ years is very long in Bond Land–are immune to policy manipulation, and indeed often run contrary to it. A celebrated band of watchdogs called the Bond Vigilantes keep this corner of Wall Street in the spotlight constantly.)”
 
Full Story: HERE

The investment (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. The fund normally invests at least 80% of assets to investments that, in combination, have economic characteristics that are inverse to those of the index. It also typically invests in taking positions in financial instruments, including derivatives that should have similar daily return characteristics as twice the inverse of the index. The fund is nondiversified.
Chart for UltraShort 20+ Year Treasury ProShares (TBT)

 
 

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