With both Hurricane Katrina and Rita now in the history books, local, state and federal government to issue more debt will need to issue debt for reconstruction efforts and so forth. This bearish fundamental coupled with the yield curve not inverting any longer suggest the risk-reward of short positions in the long-end bond is quite good.
From a technical perspective, we want to keep it simple. We note that TLT as it is forming a bearish "double top" and further resides right upon its bull market trendline. We expect lower prices to be confirmed on a breakdown through $91.25 level, with a swift and material decline towards our target at $86.
In our letter we are currently short, and will look to add to the trade in the weeks ahead.
2005 Performance:
ETF Portfolio - +8.6%
Paid-to-Play Portfolio - +15.3%
