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How We Just Made 19% in Two Months in This 'Boring' Trade

By Dr. Steve Sjuggerud
Monday, December 5, 2016

My True Wealth subscribers just pocketed 19% in two months – in boring Treasury bonds.
 
How did they do it?
 
Today, I'll share with you exactly what we did. It's a perfect teaching moment for how to set up a trade, when to get in, and when to get out...
 
The entire trade took place over three issues of my True Wealth newsletter...
 
1.   In mid-June, I introduced the opportunity. But the time wasn't right just yet.
 
2.   In mid-September, the uptrend appeared, so we put the trade on.
 
3.   In mid-November, our reason for being in the trade was gone, so we sold for a 19% profit.

Let me go through each of these in just a bit more detail...
 
In mid-June, I told True Wealth subscribers:
 
For the first time in, well, as long as I can remember – I finally expect a meaningful move higher in long-term interest rates.
 
Today, we are at an 18-year extreme in our advance-warning indicator. If history is any guide, then long-term interest rates are about to go higher...
 
In both 1998 and in 2012, our advance-warning indicator was a couple of months early. So we are not going to pull the trigger and bet on higher interest rates just yet. Instead, we are going to wait for the uptrend in long-term interest rates.
 
Buy the ProShares UltraShort 20+ Year Treasury Fund (NYSE: TBT) when interest rates start to go up.

Our advance-warning indicator was the activity of large speculators in the 30-year bond futures markets. It was hitting a record extreme, and ended up peaking in early July. That meant investors loved bonds... to a degree not seen since 1998.
 

When everyone loves an investment, it ultimately reaches a point where nobody is left to buy. Bonds were at that point.
 
By mid-September, we finally saw the trend in interest rates start to go up. So we bought shares of the ProShares UltraShort 20+ Year Treasury Fund (TBT) – which is a bet ON higher interest rates and AGAINST bond prices.
 
Our timing was pretty darn good...
 
"Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost," one Bloomberg headline said last week. According to the article, November was the worst month in global bond history, going back more than 25 years.
 
As you might imagine, the 18-year extreme in our advance-warning indicator disappeared completely.
 
Our reason for being in the trade was gone. So we got out of the trade in mid-November, for a 19% gain in two months.
 
We took what we were given:
 
1.   We saw an extreme setup in mid-June (futures traders LOVED bonds), but we waited.
 
2.   We got "confirmation" of our idea by mid-September (an uptrend in TBT).
 
3.   The "free money" was gone by mid-November (our extreme disappeared), so we got out.

That's how you trade. That's how you make 19% in two months – in something like boring Treasury bonds.
 
I hope you can learn from this... It's how we handle most of our trades and investments:
 
1.  Find a setup you like.
 
2.  Wait for the uptrend to confirm your idea.
 
3.  Get out when the setup (or the trend) is gone.
 
Doing this made us 19% in two months – in bonds. And it has worked for us for decades. It should work for you, too.
 
Good investing,
 
Steve
 
P.S. Saving My Life update: I enjoyed Thanksgiving with the family – maybe a little too much. I ended up a couple pounds heavier since my last weigh-in. I'm 230 pounds now. But I'm back on the program and hope to have a strong finish into Christmas.




Further Reading:

"You might think that your investment has hit rock bottom if every headline you see is shouting about how terrible it is," Steve writes. "But believe it or not, there IS something even worse than being hated... and when you see it, you know it's time to get serious." Learn more here: The Only Thing That's Worse Than Being Hated.
 
Steve has been keeping close tabs on interest rates lately. Read his latest thoughts here and here.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
MetLife (MET)... health insurance
UnitedHealth (UNH)... health insurance
Bank of America (BAC)... banks
JPMorgan Chase (JPM)... banks
Goldman Sachs (GS)... financial services
E-Trade Financial (ETFC)... discount online broker
FedEx (FDX)... shipping
United Parcel Service (UPS)... shipping
Union Pacific (UNP)... railroad
Boeing (BA)... airplanes
Spirit Airlines (SAVE)... airline
General Motors (GM)... cars
Harley-Davidson (HOG)... motorcycles
Tiffany (TIF)... jewelry
Las Vegas Sands (LVS)... casinos and resorts
Booz Allen Hamilton (BAH)... "offense" contractor
Northrop Grumman (NOC)... "offense" contractor
AK Steel (AKS)... steel
Caterpillar (CAT)... heavy machinery
Chevron (CVX)... oil
Halliburton (HAL)... oilfield services
Ritchie Bros. Auctioneers (RBA)... oil-equipment auctioneer
Applied Materials (AMAT)... semiconductors
Corning (GLW)... high-tech glass
Microsoft (MSFT)... software
Comcast (CMCSA)... cable TV
Sprint (S)... telecom
Wendy's (WEN)... fast food

NEW LOWS OF NOTE LAST WEEK
 
Coca-Cola (KO)... soft drinks
Guess (GES)... clothing
Hanesbrands (HBI)... clothing
Estee Lauder (EL)... beauty products
Fitbit (FIT)... fitness trackers
TripAdvisor (TRIP)... travel website

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