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One of today’s interviews at Yahoo Finance’s BREAKOUT is with Jim Binco who makes the same argument for buying Treasuries that Gary Schilling has been doing. “Forget the crappy coupon", says Shilling. "Buy ‘em for their likely cap gains.” Bianco offers a similar argument.

"Never get bearish on something where somebody with a printing press has promised to buy $85 billion a month," he says in the attached video, a thinly veiled reference to the quantitative easing action being taken by Federal Reserve chairman Ben Bernanke. By his math, savvy traders who buy 10-year notes when they yield rises above 1.9% would be able to pocket 2 to 3 times as much in gains once (and if) that yield comes back down to 1.5%; which he expects it will.

"It's not great but definitely not bad," he says of the hypothetical 6-7% return, predicting that the upcoming debt ceiling debate in Congress at the end of February will be nasty and the ensuing turmoil will likely send investors fleeing for the safety and certainty of the Treasury market.
http://finance.yahoo.com/blogs/breakout/bond-buyer-secret-tu...

Buying Treasuries for their possible cap-gains isn’t a trade I would attempt right now for my own portfolio for not having done the homework needed to manage the risks of the trade and for still being able to make better money in other segments of the bond market. But Shilling and Bianco aren’t dumb, and the trade they suggest is one you should consider, even if you end up rejecting it for your own reasons.

Charlie
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