Sunday, July 29, 2012

More stupid newsflow: Doug Kass wants to lose 90% on a short bonds position

Here's another retarded article, this time from Business Insider. Doug Kass (whoever!) says US bonds are his favourite short of the decade.

The stupid part is, he says "my favorite short of the next decade is the U.S. bond market". Then he says "I am long ProShares UltraShort 20+ Year Treasury [TBT], which is the inverse, double-short bond ETF".

Even if bonds do go down in the next decade, putting your money in TBT as a long-term strategy can lose you 90% before you ever make your money back! Did this guy not read the memo on not using leveraged ETFs as a long-term strategy, back when it got sent out to the entire fucking investing world?

The article's lead calls Kass "the legendary investor who famously predicted that stocks would bottom in March 2009". Ooh, ahh. So that's who he is. So therefore I'm supposed to believe that this guy will luck out on his next call too? Even so, suggesting I buy TBT at this yield, in this environment, is stupid. Even if it turns out right, it's utterly stupid risk. You need an avalanche collapse in Treasuries, in the next couple months, for a TBT call to work out in your favour.

1 comment:

  1. Thesis is fine but execution is faulty. Even if he is wrong on trend (yields keep marching to zero) it will not be as bad as some of the commodity ETFs (assuming that this Proshares Ultrashort thingy does not use future contracts that suffer from contango). It is the contango that really kills some of these commodity ETFs like double/triple short natgas, gold, etc. Even USO (US OIL) which is not even leveraged has suffered badly from contango.

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