What I can do is continue to pound away on a trade that has made and will continue to make money. Folks, there are trillions and trillions of dollars of excess debt hanging over the heads of consumers, municipalities, states, and entire countries. Much of it will never and can never be repaid. Never. American money rates will not rise, indeed cannot rise for a very long time. You should set yourself up to profit from this by riding the yield curve - my preferred way is call options on Eurodollars anywhere from 9 months to 18 months out. You could accomplish much the same thing by owning Eurodollars outright, going even further out the curve by buying 5, 10, or 30 year Treasuries, or owning a stock like NLY.
I wouldn't buy or add to any existing position at the moment because the panic over Greece has pushed Eurodollars, Eurodollar calls, and Treasuries way up in the past 3 weeks. Wait for the next $1 trillion package to juice equities higher and Eurodollars lower before jumping into this trade. Take your time - this thing will be going on for years.
Would you mind elaborating on the NLY trade? I looked into the name somewhat recently, but was deterred by the fact that the dividend was substantially higher than the eps.
ReplyDeleteMy due diligence on that sort of stuff w/NLY will be lacking. I'm a long time holder of NLY and have a great deal of faith in their management, so I don't follow the details of their quarterly earnings very closely. I have owned NLY for 11 or 12 years, reinvesting divvies the whole time. Other than the reinvestment, I have done no buying (or selling) since that original purchase.
ReplyDeleteIts been a heckuva investment. They might have stuggled a bit lately due to some Fannie and Freddie shennanigans leading to high prepayments. Ultimately, I expect NLY to do just fine as long as money rates remain low.