Surfing Wall Street to Retire: How to Profit from the Upcoming Rise in Interest Rates? TBT?

Friday, October 22, 2010

How to Profit from the Upcoming Rise in Interest Rates? TBT?

I have put a limit order to purchase a call on TBT. This strategy will work if there is a coming spike in interest rates. As always with options the when is just as important as the how much. With QEII ongoing rates could theoretically still drop some and there TBT which is an inverse correlated interest instrument. Given that this instrument is traded daily it has a tendency to drop even if the index stays the same. TBT is meant for day-traders and will continue to decrease even if interest rates only rise slowing. So be carefull!

I would like to thank Rob for this interest rate rising thesis.

Other Options besides the ProShares UltraShort Lehman 20:

VAW - Commodities ETF should rise as the dollar sinks
Real Estate - Prices should climb, but slowly as demand and the future realization that you can not build for that price starts to set in. This will be a long strategy to control inflation.

Do you know any other ways to profit from rising rates?

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Long Term Market Equity - MacroThemes

1. How will the 46'-64' born baby boomers effect cash flows into and out of the market. Given the Dot Bomb and Housing Bubbles which help to define horrible stock market decade, more than likely there will be a movement towards perceived quality like bonds and out of riskier assets like stocks. Therefore, lower P/Es should be expected in the coming years for Stock Market investors. The Baby Boomers will be retiring at age 67 in 2013-2031. Hospital stocks and pharma stock should do well during the retirement.
2. The Information Age will become more and more pronounced by those defining what the information age is becoming. Stock exemplifying these would be IBM, MSFT, AAPL, GOOG, FB, and CRM. Salesforce.com and cloud computing seem to be where things will be headed in the next couple of years. Then likely there will be another correction in directions.
3. Emerging Markets - Additionally, all this free information available over the internet will allow emerging markets to compete without so much of an educational deficits. Look to EEM and emerging market stocks to continue to accelerate progress and prosperity. The China Age - China becomes worlds largest economy in 2032 -City Weekly January 6 2011. This theme has weakened significantly with the Chinese focus towards services and technology.
4. The Energy Age? Not defined yet, but the need will be originating from a peak in fossil fuel production coupled by increased demand originating from the largest part of the Globe. The 3rd World continues to industrialize at an accelerated pace. Small start-ups in Algae, Wind, Gas, and Fracking will be in demand as oil prices keep rising.
5. Resource Scarcity - Human activity will continue to pressure resources especially food, oil, and gold.
6. US Debtor Nation Status - Interest on the national debt should be pushing $1Trillion per year in 2020. City Weekly January 6 2011
7. Obesity kills more Americans than smoking City Weekly January 6 2011. Healthy and honest food options will become more and more in demand as the younger generations expand purchasing power.
8. Nature Deficit Disorder - Kids start getting disconnected from the natural environment at an accelerated rate. City Weekly January 6 2011
9. Emerging Markets - Rise in Food Costs driven by desire for higher protein diets. - DE, POT, ASCO re: Cramer 4-18-11
10. Emerging Markets - Power Management - Electicity will continue to follow the movement - ETN, HON, EMR
11. US - Healthy Food - Industrial Farming, Factory Farms, Hormons, Pesticides, Fertilizers, Chilpotle, Hanes Celestial Seasons, Whole Foods re: Cramer 4-18-11
12. Gold - Inflation Hedge and Especially GLD, SLV, GG, NG, BRK re: Cramer 4-18-11
13. Homeland Security - Even though defense is being cut around the world by developing nations, terrorism is a force that will stick around just like Middle East Terrorism Groups - NICE, Fortnet, American Science and Engineering re: Cramer 4-18-11 Trump should also expand insecurity through isolationism and uncertainty of campaign promises.
14. Currency Going Electronic - Consider credit card companies as a value growth proposition. DFS, MA, V, and AXP will all benefit from this trend.
15. Paperless Office - Though this was a theme in the 90s I believe the paperless office is happening now at an accelerated rate. Companies that can benefit might be ADBE which holds the keys to PDF productions. Other software and cloud plays will also benefit. There is a lack of a pure play paperless office company.

Demographic Influences of Investing

Baby Boomers Born 1946-1964 or Ages 64-46 (2010)
*Boomers might be focus on stable income investment like bonds and high yield large cap stocks.
*Catch ups will likely focus on international stocks

Baby Busters Born 1965-1977 or Ages 45-33 (2010)
*Focused even more so on 401k's and stock investment
*Not a large enough group to have great market inflow influence
*Possible Baby Boomer Inheritors

Echo Boomers Born 1978-1994 or Ages 32-16 (2010)
*AKA Millenials
*Too young to be buying homes, mostly a renter generations
*Probably more concerned with college debt and the like

Signs that a stock is a sell:

1. Accounting Irregularies are discovered - Extreme Concern.

2. The competition is starting to take market share away.

3. Caution! - when all the analysts say your stock is an "Aggressive Buy" be very careful and ready to sell.

4. PEG Ratio > 1.0

5. Short Ratio > .40 Indicator of Bearish Sentiment, but beware of a shorts squeeze.

6. P/B Price to Book = Stock Price/Total Assets-Intangible Assets and Liabilities > 1.0 = Overvalued Indicator

8. Technicals: Head and Should profile is bearish just as inverted Head and Shoulder Profile is bullish.

9. Remember Buy Low and Sell High!!!!!! You never have a profit until it is logged.

Let me know if you have others good rules to sell?

Signs That A stock May Be A BUY:

1. You believe the stock has long term earnings growth.

2. You believe the stock has a moat (Warren Buffett term). This is a form of monopoly or sustainable market control. Examples of a modern monopoly or duopoly (KO, PEP, HD, LOWS, CAT, DE, etc).

Insider Buying Tipoffs:

3.The stock is on the 52 week high list and there is significant and real insider buying.

4. The stock is heavily shorted and has significant and real insider buying.

5. The PEG Ratio is between 0-1. This is a tipoff the stock may be undervalued when considering price in relation to growth.

Let me know your favorite indicators to buy??

Friday, October 22, 2010

How to Profit from the Upcoming Rise in Interest Rates? TBT?

Other Options besides the ProShares UltraShort Lehman 20:

VAW - Commodities ETF should rise as the dollar sinks

Real Estate - Prices should climb, but slowly as demand and the future realization that you can not build for that price starts to set in. This will be a long strategy to control inflation.

Do you know any other ways to profit from rising rates?

No comments:

Post a Comment

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