Before I get started, I want to wish everyone a wonderful New
Year. I truly look forward to prospering with all of you in
Last year I was asked to give readers a trade for 2012. While
I am not a fan of "guessing" where a stock or ETF is headed over
the course of 12 months, I submitted what I thought was a
sensible idea for not only the year, but for the decade
At the time it was, in my opinion, the "trade of the
One year later, the trade remains my go-to trade … nothing has
The global financial system is in dire straits. Debt burdens
are at epic proportions on every level - global, national, state
and local. Indeed, resuscitation looks doubtful.
In my view, one can't ignore the current failures that are the
direct result of the "prosperity boom" that began in the 1980s
and came on the backs of ever-expanding credit and debt. And now
advanced economies are witnessing the damage of the flawed theory
Ireland, Spain, Portugal, Greece, Italy … all are in trouble. The
top five largest economies - including the U.S. - are not far
Those in the know realize the collapse is imminent and
they are not hiding their opinions. Bernanke and friends
essentially told the global market that U.S. growth would be
stagnant for years to come, as the Fed plans to keep interest
rates low until unemployment in the U.S. dips below at least
Maybe the Fed said "at least" because they can't afford
to admit that they agree with the International Monetary Fund's
assessment that global debt issues would persevere for 10 years
or more. Director Christine Lagarde warned of the risk of a "lost
decade" for the global economy unless nations act together to
counter threats to growth.
"In our increasingly interconnected world, no country or region
can go it alone," Lagarde said in a speech to a forum in Beijing
several weeks ago. "There are dark clouds gathering in the global
But haven't we already experienced a lost decade? Just look at
the S&P's performance over the past 12 years.
And now that the U.S. and other leading economies have
exhausted every effort to inject life into the global economy, we
are left with bleak GDP growth and inevitable inflation woes.
And that is exactly why I think shorting
iShares Barclays 20+ Year Treasury Bond (
ProShares UltraShort 20+ Year Treasury (
could be the trade of the decade.
I mention TBT because it is a more aggressive ultra-short fund
for Treasuries. Because of my conviction that the bond bubble
will eventually burst wide open, I want to have some exposure to
an aggressive ETF.
Fortunately for the bond bulls, "the safety trade" still looks
intact despite all of the world's troubles. But how much longer
can rates stay at record lows? Realistically, the reward is now
to the downside.
So how exactly would I play TLT or TBT?
Personally, I would buy TBT. In fact, in full disclosure I
have bought TBT on numerous occasions over the course of the past
year. But I don't stop there. As an options guy, I always want to
use what I have in my portfolio to my advantage. And because TBT
is highly liquid, it offers a wonderful opportunity to use what
is known as a covered call strategy. The strategy is one of the
most simple options strategies around.
If you would like to know exactly how I use covered calls on
TBT, please sign up for my FREE weekly newsletter,
The Strike Price
sign up here
). On Sunday, I'll discuss how I will use a covered call strategy
in TBT for the year ahead. You will not want to miss this
Again, I hope all of you have a wonderful and safe New
Editor and Chief Options Strategist
The Strike Price