ETF bet on rising rates

By Steven Halpern, TheStockAdvisors.com | Jan 21, 2010 | comment

"The UltraShort 20+ Year Treasury ProShares (NYSE: TBT) is a bet on higher long-term interest rates," says Jack Adamo. Here's an update on the ETF from his Insiders Plus newsletter.

"The fund is structured to respond at double the inverse of U.S. Treasurys of 20-years or longer.

"I’ve followed the ETF for quite some time and have not seen any troublesome tracking problems, that is, the EFT does a good job of doing what it’s designed to do.

"This is purely a technical call on my part. We know that at some point the bond market will demand higher interest rates on these long-dated bonds. When that would be is way beyond my ken, fundamentally speaking.

"But it has to happen eventually, and the charts are suggesting pretty strongly it is now. One short-term indicator I like has already gone positive on the shares, and it looks like it may break into a positive intermediate-to-long-term formation as well.

"We’ll start with a 5% position now, which we’ll treat more or less as a trade. If the other criterion is met, we’ll increase the position to 10% and consider it a regular holding. But the first position will go in our portfolio immediately.

"Incidentally, this fund was one of Marc Faber’s favorite long-term buys in the Barron’s Roundtable last year. He said it might take a while to work out. I agree, but I think that time is near."

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