I'll add that a bearish bet on long term treasury bond prices is also, in effect, a bearish bet on the dollar. If TLT does drop as much as you think, it will probably be because the US economy sinks while that of the rest of the world stays strong, and the US dollar plummets versus other currencies. Under those circumstances, foreigners will dump their positions in US financial instruments of all kinds, and move back into their own currencies to buy presumably higher yielding bonds and better earning companies.
Nothing wrong with having a bet against the dollar, but if you are already long foreign currencies and gold, don't think that a bet against the TLT will give you any diversification, rather it is an increase in the size of that bet.
While I am bearish on the dollar versus gold, I am mainly bearish on all paper currencies versus gold. They have printing presses, gold doesn't. If foreign economies do follow the US down after a time lag, I can see the US dollar become strong versus the other paper currencies, even as gold continues to rise against all of them.
I guess I can plausibly see long term US treasury rates going to either 1% or 8% in a few years, so don't want an unhedged bet on just one of those outcomes. But as long as economies get weaker and governments run those printing presses as fast as they can (taking over a collapsed bank and insuring all deposits, as the UK did with Northern Rock is the same thing in disguise), I have trouble seeing a plausible scenario where gold will go way down versus paper anytime soon. That's one bet I'm not hedging, at least yet. |
