Today's Ideas:

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    Monday, October 13, 2008

    Everything is fixed

    Here's another guy whose opinions I'm always sure to listen to, Marc Faber, via Bloomberg. Pay special attention to the end of the interview on his outlook for the US balance sheet and how it ends. Over the years, I've observed who is consistently correct, and who's full of hot air (most brokers and politicians). Compare Faber to PM Brown today, who stated something along the lines of "we bought the equity in our banks at the bottom!" That is ludicrous, as any real trader will acknowledge we cannot know until way after the fact. Still, that doesn't keep politicians from pumping and stumping.

    Although bonds are clearly in an uptrend, and I like to stay with the current trend, I will begin to initiate a short bond (ZB) position with a very long term horizon. Like Faber, I expect this trade to unfold over many years. In order to be successful, we must keep size small enough to be able to ride out the upward momentum. The reason I'm willing to get in front of the train is that one rarely has a chance to enter after the sharp move begins. The key is to give yourself plenty of room to be correct.


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