We're coming up on the inaguration and a short trading week so I wanted to take the chance to go over what major themes I'm trading on and how to position a portfolio going forward.
The way I develop my ideas is from a "Top Down" perspective. I try and determine what cyclical trends I see going forward and develop trades based on those themes.
The most apparent theme to anyone watching the news is the finacial bailout/stimulus package. This boondoggel is so large, it covers 5 of my major trading ideas.
1)Treasury Bubble - Who on earth would tie up there money for 30 years to get a 3% coupon? The treasury is... by threatening to print money and purchase long dated treasury's, the long bond rate has been pushed down from 4.5% to 3%. By printing money, the fed in encouraging inflation and dooming us to inflation. I beleive it is just a matter of time until we see the long bond with a 6 or 7% yield. Take advantage of this by buying the Proshares ultra short bond fund (TBT) at $40 per share. Place a stop loss at $35 and look for a break out if it trades over $42.
2)Bank Bailout - As mentioned in an earlier post, some of the bank preferred stocks look like real bargains. You get to invest on at better terms the the fed does. I beleive the best risk/reward trades is the Bank of America convertable preferred series L. (BAC.L) Purchase the stock here at $486 and collect a 15% yield. I'd set my stop loss at $450 and hope for a quiet couple of weeks.
It's getting late so the rest will be tomrrow
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