ProShares UltraShort 20+ Year Treasury (ETF) (AMEX:TBT)

I'm expecting a bond crash resulting from a Euro collapse spreading to North America

Treasuries will feel the effects of inflation sooner then the fed thinks and commodities will also rise, too many US dollars and debt

in August, "treasuries have no where to run but up....25.60 8/29/2011", i closed this one recently as a reset. I still beleive they have no where to go but up, however, it may take a little time.

safety & return

it costs approximately 7% annually for this ETF to maintain a short position in treasuries. Although there are many reasons to be pessimistic about treasuries, at the cost of 7% annually, treasuries would have to decline quickly to score any points with a long position in this ETF. That is to say, that if it takes a long time for treasuries to realize the expected decline, any gains in TBT from shorting treasuries will be wiped out by the cost of holding a short position. Further, it is even less likely that TBT will out preform the S&P 500 index because the performance of treasuries and stocks have a strong negative correlation. So even if TBT gains, due to a decline in treasuries, the S&P index is likely to gain even more, because it does not have the 7% annual cost that TBT has. In sum, a position in TBT is only worthwhile if you believe treasuries will fall quickly. Any long term gains from shorting TBT will be offset by the cost of holding a short position in treasuries. I do not short TBT in real life, because my cost to short TBT will offset TBT's cost to short treasuries. However, in the Fool world, where there is no cost to short an investment, shorting TBT is a no brainer.

The most obvious short in this market. If I had to invest all my savings into one single short, that would be the short.

When everyone tells you to be in bonds, that means it is time to get out of bonds. Treasuries will probably do ok until operation twist is over around the end of Q2 2012 and then they will fall off.

Sell target: $30, within 6ish months.

If interest rates go up, then bonds will go down. Since interest rates are near zero, there is no where to go but up.

Given the overall confusion here, it's important to clarify a bunch of things.

First is that this fund will increase in value when a given benchmark bund fund decreases in value. Bond prices decrease when interest rates increase. In this case, the relevant question is what the price of twenty year treasuries will be.

My thesis is that with most sovereign and other large banking institutions looking to diversify out of the dollar, the demand for long dated treasuries will diminish going forward. In addition, I believe that there has been a slackening of faith in the Fed's attempts to push down long-term borrowing costs in an attempt to jump-start the economy because the benefits from such efforts have reached their limit as those in a situation to refinance (or buy) have already taken advantage of the low rates. The current historic lows in mortgage rates for example is in large part driven by recent Fed actions that unlikely to continue and also in the eurozone crisis that is dampening what would, I believe, otherwise be a rush for the exits in a downgraded dollar.

Simply from the standpoint of long-term interest rates being at historic lows, the short bond is a good long investment idea. However, this investment could go sideways because of the decay that results from volatility. The fund wants to track the investment performance on a day to day basis. Because of compounding and the fact that the leverage cannot be maintained on a continuous basis, there can be losses to the fund simply from the effects of interest rate volatility. Also there could be losses from volatility because the leverage is created through swaps and swaps, like all futures, are subject to a roll yield or loss over time.

QE3?

Interest rates on US debt have nowhere to go but up.

leveraged etfs bad

Bonds have topped out......Debt limited skyrocketing.....why invest in something that gives you a negative real return....

As of Sept of 2011: Due to the debt crisis growing in Europe and the possibility of it affecting the US markets, this ETF will grow as the bond markets get more and more nervous about the government's growing debt burden.

Does anyone know of any other good ETF's that short the bond market? Thanks in advance.

Let's imagine a world without fear.

I'm not sure on the timing. We could have a decade of zero growth like Japan with treasury yields staying flat. However, at some point, treasuries yields will rise and holders of debt are going to get creamed like they did in the 70's.

US debt downgrade just around the corner