Inflation is Coming

At Blue Chip Options I've been lecturing from the soapbox about U.S. Treasuries, and recommending an ETF ultrashort fund called TBT. This is a low risk way to potentially gain a 40% profit on the impending collapse of the U.S. Treasury. It's our new bubble. TBT, or the ProShares Ultra Short Lehman 20+Year Treasury ETF will inversely doubly short the inverse of the U.S. Treasury Index. This means: when treasuries tank, and they will, this ETF should soar.

At Blue Chip Options (www.bluechipoptions.com) we've also recommended a specific option on this index that could hit 100% returns. During the 5 short weeks we've played it at Blue Chip it's returned 20 to 39% each time, in tight trades.

The U.S. Treasury cannot get away with 0 interest rates forever. Even Fat Americans will soon realize they are investing in nothing, for nothing, and will begin to demand a return.

There is also no doubt to me that inflation is coming. The FEDS will flood the market with fake money to cover the economic stimulus plans, and inflation will begin, at which time the Feds will begin raising interest rates on U.S. Treasuries. And as that happens, the investing public will become less fear oriented, and begin wanting returns.

With this said, Friday the market fell again, to the same just above 8000 support line. I've been watching VIX fall all of this last week as it declined. This can be interpreted that the trading floor and public are beyond the fear, more complacent, and that a trade range is developing, as we've noted. Typically the market would now surprise us, provide more fear, and the market drops could deepen. A deeper downturn, back to our 7700 and lower lows of last November is very possible, around whipsaw. Some chartists see the downside as so over extended that an upside run is likely, after hitting support lines, while others think a deeper level of fear may need to occur, a retesting of lowest lows, in order to "clean" the market.

We have an open position to the Feb400C, with two buys made, and will continue to hold through Wednesday or Thursday of this week, depending upon your buy time. Remember, # of days stop loss begins the day after you've bought the option, or if a second buy, the day after the second buy is made and is sold no later than the end of the 4th trading day from there.

Follow futures carefully. We will also list today an out of the money put as a potential buy, looking for a whipsaw trade. In market conditions as volatile as we are seeing them please take prudent risk. Each time we've had a market turn up this past month it's been short, and with no follow through.


And from trader JK:

Define: Liquidity

Liquidity: When you look at your investments and wet your pants.