Bond yields are screaming upward, and they won't slow down until they overtake the rate of inflation - so we are basically at 5%+ on a T-bill right now, and probably headed toward double digits by end of winter. Yields Up = Prices Down. Short them until inflation returns to about 2%.
Shorting bonds is of course a little hard for a retail investor, but I have a couple of ETFs that work very well for it. TMV and TTT have proven quite profitable. TMV is up 114.5% in the last 12 months, and about 59.23% YTD. TTT has similar numbers, just some admin fee differences, up 116.5% in last 12 months, and 59.64% YTD.
When these start to level off, just sell the shares and flip all of it into whole 1K bonds. As yields begin to go downward, the values of new-issued / higher-yielding bonds will go to the moon. I made about an 85% return in 3 months in June 2020 doing the same strategy, I shorted them on the way down in June, then bought everything so cheap that I actually had internal interest 12% yields coming off from what I was actually buying Corporate AA+ bonds for. By October, I sold that stuff for ginormous gains when everyone realized the sky wasn't falling.
Using the same approach - I recommend shorting the snot out of real estate too. Technical indicators are pointing toward 10% +/- first mortgage rates by January, and that will kill the housing prices. DRV is a good short ETF tool.
@NordicVetMBA Just checked DRV, cannot buy the shares as a retail investor on IBKR, so will have to go with options. Would May 19 '23 ITM calls make sense? Any opinion - so not advice :) - will be highly appreciated, thanks again!
CBIchiban
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Thanks for posting, @NordicVetMBA. Still time to short, so I may well try it out.
NordicVetMBA
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@CBIchiban, sorry, I’m on the west coast and get a later start than most.
You didn’t mention which ITM calls you were thinking but I am guessing you mean bonds.
May might be a bit far out, as I think some really bad stuff may happen about December to January, and the Fed might have to course correct - but if you don’t intend to hold to strike date and sell before - that may not be bad. ;) my crystal ball is fuzzy.
DRV shorts real estate via some bond shorting and I assume it is shorting the REITs as well - those will be killed by higher rates.
CBIchiban
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@NordicVetMBA, Thanks so much for your extended help, greatly appreciated! I changed the expiry date on the DRV Call options from May to January 23, picked a lower strike ($70) in case DRV should retrace a little more after the preceding 5 green weekly candles, with a bid just above $15. Let's see.
NordicVetMBA
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@CBIchiban, Sounds good for version 1.0. If you see good results, try mixing a few maturities and laddering them. The dark cloud on this strategy is the cities & counties. Most of them have an astounding amount of Treasury bonds as reserves in their "pooled investment accounts." It's not unusual to look at a medium-sized city with a political wish list (annual budget) of like $150 million, but in their audited annual financial statement, they are holding $1 billion of T-bills. They also have to convert that to cash to pay large upcoming obligations - annual pension fund deposits, construction contracts, etc. I doubt the average city controller is aware of their tsunami of a problem - but the independent auditors will be in January and quickly point out that the longer-maturity stuff they have is worth 70 cents on the dollar. That will be a heck of a news story. So stick to shorter maturities and look for a rhythmic cycle to follow.
CBIchiban
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@NordicVetMBA, Thanks for the laddering in advice, which I will abide by, as well as the key pieces of information on T bonds. DRV Call options order just filled :)
NordicVetMBA
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@CBIchiban, Don't look for a parabolic breakout on this stuff, the bond market moves pretty slowly in terms of trends, just draw a Gann Fan and let it go as long as your picks are following predicted paths.
CBIchiban
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@NordicVetMBA, Just added a script written by a TV user, Gann Fan with Fibs. This is great help to monitor price, thanks again!