Scary day...

7:45am EST Yesterday was pretty scary for those watching the structural integrity of the American economy. We saw a spike in the ten year treasury note rate yesterday and it spooked the equity markets in the afternoon. The market was working it's way higher and then fell off a cliff mid afternoon, right in step with the spike in the treasury yield.

The spike in the treasury rate was scary because of it's impact on the overall economy. Higher treasury rates lead to higher mortgage rates. That makes it more expensive for borrowers. In a weak housing market, we need more buyers to put a floor under prices. With more expensive money out there, we are taking away the incentive for borrowers.

Higher treasury rates also mean that the government pays out more in interest on the trillions it is borrowing, further burdening a budget that is bulging like an overstuffed sausage. None of this recent development is good for the overall state of the market and the economy as a whole.

That said, we still need to make money. Here is what I am looking at. The (PALM) trade from yesterday is now up 20%. I am fine with a nice little profit like that. I am still hanging on to it for now, but I will be looking to sell in a week or so. I am specifically looking at the week of 6/6 when the Pre is officially launched.

The longer term trade I am looking at is the Double Short Treasury Long Term ETF (TBT). This takes advantage of the fall in the price and rise in yield of long term treasury. That is a longer term trade I have had on for a while. Longer term readers know this already. I think it continues to head higher from here. Until next time, stay low risk..