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Two Ways To Play: Bubble Trouble for Treasuries


Strengthen your portfolio in good times and bad.


Bill Gross of PIMCO, the world's largest bond fund, believes the Treasury market is overvalued and displaying bubble-like characteristics. In terms of return relative to the next 10 years -- and given the potential of reflation -- these securities simply offer no return, he said in a Bloomberg interview.

This just a day after 3-month bill rates turned negative for the first time since debuting in 1929 and the Treasury sold $30 billion worth of yield-less 1-month bills.

Gross also acknowledged downside risk to the dollar: "Certainly the government and the Fed cannot continue to talk about the trillions of dollars of expansion of the Fed's balance sheet without the risk of the dollar going south. It is fair to say other economies are doing much the same thing. The dollar doesn't have to go south if all the economies reflate at the same time."

For more on the economy, see Professor Kevin Depew's Five Things You Need To Know: Fed Considers Issuing Own Debt.

From the Bull Pen: Professor Jeff Cooper had a wonderful write-up about Crude on the Buzz today. Oil has lagged the recent runup in metals lately and could try to catch up. Bulls who want to play could consider the ETF (USO) with stop at $33.

From the Bear Cave: Bill Gross believes Treasuries are a bubble. One way to play this is the Ultrashort Lehman 20 Plus ETF (TBT). Bears can consider this stock with a stop around $42.

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No positions in stocks mentioned.

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