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Subject:  good time to get rid of some stuff & TLT/SHV arb Date:  1/8/2013  4:23 PM
Author:  altstrat91 Number:  34626 of 35400

seems like for three years now, the chatter has been that bonds will inevitably crash. and i am not alluding to charlie; i am talking about analysts, folks on TV, magazines, advisors and the like etc. there has been some pullbacks, but i was blown away today by the higher highs made by allot of corps. for those folks utilizing margin or leverage, PLEASE do not let this get to your head when you see the marked to market position on your corps going to the moon like this on a daily basis. what goes up, eventually comes down.

good time to exit any holdings you are truly not content with or possibly overpaid for in the past. i have several positions that i will be unwinding this week, but they are pretty decent size, so want to pick the right spots. sometimes dealers will play hide and seek with you when they see your order coming in.

i owe charlie a couple of more plays which i have to vet a little bit further.

also because i am really scraping the bottom of the barrel here at this point trying to put new money to work, i will be working on a possible new opp with a long/short simulateneous type trade with TLT/SHV and/or TLT/TBT; something of this nature. sometimes in the ultra short/long ETFs there is depreciation that can work in your favor if you write the spread properly.

i knew a trader that was doing this very favorably with the triple leveraged ETFs. he was printing some serious coin when i ran into him last year.

one last thing to keep in mind, some of these corps, especially higher quality longer term are trading right now at such insane premiums, you could literally take them off the table today, and basically be paid in full for the next couple years or more. Real world example of a trade i closed out recently; a Johnson & Johnson 2029 w/ 6.95% is trading above a 40% premium to par. In some cases you have long term corps with A rating with a 44% coupon trading at 20%+ over par. That is a whopping 7 years worth of interest right there. But again its not apples to apples in a taxable trading account because one scenario is ordinary income via coupon payment and the other is a capital gain if you sell the bond and take the profit.

but the bottom line is, at some point in the next couple years you will be able to rebuy this stuff at much better yields than today. in the mean time, worst case scenario, you could always trading some EFPs which are guaranteed risk free arbs and pull down at least 100 basis points or better annualized on that.
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