TBT (ProShares UltraShort 20+ Year Treasury) $19.05, is the inverse ETF for Long-term treasuries, 20-to-30-year treasuries. In other words, it is a visual of bond activity that is in harmony with interest rate direction and inverse to bond price movement. Interest rates have a direct impact on stock valuation metrics and on gold pricing. In a previous email we shared the correlation between TBT and GDX, the VanEck Gold Miners ETF. The correlation is spooky close – almost as if algos are programed to mirror the activity of TBT in an inverse way.
We share the chart (below) of TBT as a reminder to monitor TBT activity. The higher TBT rises, the greater the stock market risk to revaluation (lower) on a valuation basis. Gold miners as we mentioned also will react in an inverse direction.
*One way to use this is to scale down your equity exposure as TBT rises.
We do not have a formula at this time for scaling out of the stock market as TBT rises. Accounts related to LOTM are over-weight in deep value, blockchain related and the Mining and Nat Gas areas as our long-term investment theme. We are comfortable with that as a long-term theme and holding steady unless something changes in our macro view.
We are slowly increasing a position in the ETF, QID, $24.67, the PROSHARES TRUST – ULTRASHORT QQQ. Ultra-short means 2X the actual movement of the QQQ. In English it is levered by 2X the inverse price movement of the Nasdaq 100 Index. It is our hedge on the market.
Please share thoughts on this, but my thinking is the QQQ is most vulnerable to rising interest rates and a re-valuation of stock market value to interest rate metrics. It is along the lines of Marty Zweig’s simplified, three increases in the fed funds rate and it is a stock market sell signal. For those of you who remember Marty, he was constantly worried paranoid about the dangers of the market taking money away from him in a visual nervous mannerism. Yet this constant concern allowed him a very lavish lifestyle. At one time he owned the most expensive residence in the USA. Thank you, Marty – you showed many of us a way forward. More discussion on the Zweig System is linked here.
Below: Two-year chart of TBT. If this were a growth stock, we would say it is in a strong rising trend.
Be careful out there. No one cares more about your money than you do. Adapt but adapt slowly.
Training, Coaching & Mentoring available
Where Value meets Buy Signals!
Feel free to forward or recommend to others.
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
Please refer to our web site for full disclosure at www.LivingOffTheMarket.com ZTA Capital Group, Inc.
To Unsubscribe please select “return” and type Unsubscribe in the subject line.
