Twice As Nice

Twice As Nice

How leveraged funds can make a boring investment sizzle.

Look at the chart below. You could buy the blue line (TLT = long-term US Government bonds) or you could buy the red line (UBT = 2x long-term US Government bonds).

Some things that are not twice as nice.

Flat tires.
Sprained ankles.
Dips in the stock market.

There has been a lot of news these past two weeks that is having financial repercussions felt in almost every asset class around the world.

– The 30 year US government bond dropped below 3% due to Europe imploding (uncertainty).
– MF Global steals $600,000,000 from their clients and no one goes to jail (uncertainty).
– Europe continues to pretend that 17 sovereign countries that have been fighting each other for 400 years can now agree on one currency (uncertainty).

None of that sound very nice, does it?

So what would you have liked to have anticipated for your portfolio these past two weeks…or two months? Here are two investments that are higher today than they were two months ago AND you could have put on a 2x position:

      The US Dollar is still the prettiest horse in the glue factory. It’s 2x investment is EUO.

      The US long bond is still holding near three year highs. It’s 2x investment is UBT

These are both investments that I have advised my clients to buy in the last year.

When a sector or asset class is nearing (or at) extremes it is sometimes nice to place a 2x position with a tight stop loss. I think we may be coming up to one of those situations soon by shorting TLT.

I think TLT (US Government 20 year bonds) could still go a little higher but the upside is limited with the downside potentially being noticeably large. You could position yourself with TBT (2x inverse of TLT) or you could go even bigger with leverage and buy TMV (3x inverse TLT).

That is what I call Twice As Nice.

Here are some of my favorite 2x funds that I have recommended over the years:

2x the stock market = SSO
2x the long-bond market = UBT
2x the gold market = DGP
2x the US Dollar = EUO
2x the precious metal mining market = NUGT

Take advantage of these 2x funds to grow your money when the market is at extremes. But do it wisely… because no one wants a portfolio with two flat tires.

Together, we are protecting and growing your wealth,
RC Peck