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If you think you know something about the value of treasuries in the future there is a fortune for you to make in the financial market.

• dragonwriter 11y ago
  > If you think you know something about the value of treasuries in the future there is a fortune for you to make in the financial market. No, if you actually know something about the value of treasuries in the future, there is a fortune for you to make in the financial market. If you merely think you know something about the value of treasuries in the future, that's a different story. But, anyway, the grandparent post wasn't expressing knowing something about the value of treasuries in the future, they were expressing a perception of risk, which is exactly the opposite.
  • eru 11y ago
    Oh, if you know that risk is going up, you can buy (long term) credit default protection now, and sell it once the market recognizes the risk, too. (You don't need an actual default for the credit default protection to appreciate in value, just more of a perception that the risk of a default has gone up.)
    • fiatmoney 10y ago
      Buying credit default swaps on US treasuries is like buying suntan lotion in anticipation of a nuclear attack. No counterparty can credibly insure such an event & the money you would make in a cash-up-front variant would be incredibly likely to become worthless.
      • eru 10y ago
        Oh, I don't suggest holding to maturity. I suggest selling when the market's perception of risk has crept up to the level one feels justified by fundamentals. See also http://www.bloomberg.com/view/articles/2013-09-26/why-would-anyone-buy-credit-default-swaps-on-the-u-s- http://www.bloomberg.com/view/articles/2013-09-26/why-would-...
      • hueving 10y ago
        A CDS can pay the difference if a government decides to pay a fraction of the full value. This has happened in other countries without total financial collapse and could feasibly happen in the US if it has a president that actively wants to negotiate debt down. You could also purchase PUT options on a bond ETF like TLT where the counter-party will be the OCC, which will have little exposure to the turmoil in the bond market like a bank that would underwrite a CDS.