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How to Capitalize on Higher Bond Prices, Lower Yields

Never mind which company Bill Gross is working at this week. The talking heads on Wall Street have been ranting about the bursting of the bond market’s bubble for years, and it’s getting old. They did it in 2009. They did it in 2010. They did it in 2011. They did it in 2012. They did it in 2013. And they’re doing it again in 2014.

At the start of this year, a poll of 72 Wall Street economists confidently predicted the bond bubble’s end was imminent. Were they right?

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The chart below plots the year-to-date performance of the S&P 500 against an assortment of long-term U.S. Treasury ETFs. In every case, the gap of outperformance by long-term U.S. Treasuries versus U.S. stocks, as tracked by SPDR Dow Jones Industrial Average ETF (DIA), continues to widen. If this is your definition of a bond market collapse, go back to sleep.

The ETFs being charted are the iShares Barclays 20+ Year Treasury Bond ETF (TLT) and the twice-daily leveraged ProShares Ultra 20+ Year U.S. Treasury ETF (UBT) and the triple-daily Direxion Daily 20 Year Plus Treasury Bull 3x Shares ETF (TMF). As you can see, TLT, UBT and TMF are all killing the SPY’s YTD performance by double digits.

etf etfs


The above chart also shows our actionable timestamped alerts given to ETFguide’s readers for capitalizing on the trend of higher bond prices and lower yields. Not only have we been right, but we’ve been saying the exact opposite of Wall Street’s chart challenged throngs. The only bubbles Wall Street sees are the bubbles in its champagne glasses!

For historical perspective, our next chart shows the performance of long-term U.S. Treasuries versus the S&P 500 during the 2008-09 financial crisis. The future is never like the past, but sometimes it rhymes.

etf etfs


Don’t miss our latest volatility alert, according to the Volatility S&P 500 (VIX), which is now up 81% and still open. By the way, since July 1, the VIX is up 49% while the S&P 500 is down 0.90%.  Who says buying depressed assets doesn’t work anymore?

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