Noah Blackstein, B.A., CFA iShares 20+ Year Treasury Bond ETF TLT-Q TOP PICK Jun 27, 2003

When and if the Feds ease, bonds will move. Fell like a brick when rates went up, now in a period of easing in Canada and potential easing in US. Won't happen overnight, but a relatively safe trade, and you'll earn a bit of interest as you wait.

Chart shows a symmetrical triangle -- higher lows, but lower highs. A consolidation. When it breaks out, will almost certainly be to the upside, especially after a mega-downtrend. And you'll probably get a good move, which may take a year or just 3 months.

TLT, he believes, is a leveraged play on the bond market and he wouldn't do that. 

When you buy any bond fund or ETF, you have persistent rate risk. Very different from buying a bond that matures. If you want to take advantage of falling yields, you have to own long-term bonds that don't mature for a long, long time. So if interest rates fall, you get the advantage of that.

For a bet on falling interest rates, long bonds are the way to do it. ZFL contains long-term federal government bonds in Canada. In the US, use TLT. Best bang for your buck, but highly volatile and highly risky. Long bonds right now are facing a tremendous wall of supply, and he's not sure they're going to fall that much in price. He's quite cautious on long bonds right now.

Has sold shares. Technical resistance around $100 suggested a sale. Might buying again around $95. 

It is near its support zone so he has it as a potential trade in their aggressive account. He has a tight stop at $91.75 so if it goes below that for three or more days then he will sell at a 2 or 3% loss. The idea is that in the long term bonds will go up.

In his aggressive strategy. Doing nothing, struggling. In a longer-term base. He'd buy it for his conservative strategy if it broke out. If breaks below $92 and stays for a few days, he'll sell. His position is only 2%.

Must look at total return. Those that focus on the yield and don't understand the return are doomed to risk. Just hold TLT or ZTL -- US bonds at the long end of the treasury curve -- and don't go chasing yield.

He doesn't like the stock market, so he's looking for alternatives. This is one. Likes that there's the possibility of rates coming down in the US. His downside sell level is ~$86. First target is $95, second target is $100. Not correlated to stocks, so it will march to its own drumbeat (inflation, USD, and interest rate policy). Small dividend.

ZFL is Canadian long bonds. TLT is made up of Treasury long bonds. Both great vehicles in the context of trading and looking out for a recession. We're in a trading range for interest rates in general for the next few years. Bound on one end by colossal amounts of government debt, and on the other side inflation is driving rates higher as well. And all with the prospect of a slower global economy.

If you think there's going to be a harder economic landing, federal bonds will outperform provincial bonds as a rule of thumb. But you'll get a bit more yield in a provincial bond in the long run. 

Most recently he's been adding duration and maxing out long-bond exposure. After the markets rally a bit, he's trimming that back. He wouldn't say buy and hold. If you were to see the US 10-year get back to 4.75%, and the US long bond get back to 5%, those are great opportunities for longer-term trades.