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all right welcome back to two stupid guys trade stocks i'm vinnie i'm dylan and we got a fun one here we're gonna break down michael bury's like little inflation treasury kind of bet here uh from his last 13 filing and we talked about it briefly in our video about you know his most recent 13 filing but i kind of wanted to delve a little bit deeper and look at where these positions are now compared to when he entered them and that sort of stuff and talk about them a little bit more in depth so if you guys are new here and kind of enjoy this entertaining stock market content please consider subscribing below for us well dylan and i are just kind of like two normal guys trying to figure this thing out make a little bit of money at the process so yeah i felt like a lot of a lot of people went over his stuff but no one talked about the actual like how important these positions are and what his actual bet is so yeah exactly yeah the uh you know the tesla headline was was all the rage but like i think that's an interesting play but like the treasury one is definitely interesting to me especially when you look at where these positions have traded since the quarterly filing uh so this is to kind of give you a little illustration i found this picture actually on facebook i thought it was interesting about uh lumber prices and inflation just to give you an idea and i've been looking at building a deck and like this it keeps me up at night how crazy lumber prices have gotten that is absolutely crazy that's a that's a good photo yeah yeah uh this is you know like a lumber mill had posted this on on like their facebook page has been turned into a meme yeah yeah absolutely insane especially trying to build anything so you know one of the things that kind of plays into this whole inflation story and treasuries is that as inflation increases which is measured by the consumer price index here some people argue it's not the best measurement of inflation but it's the one that's most widely used as the inflation as inflation increases with cpi the jerome powell mr like money printer himself is going to have no choice at all but to you know start cranking up the interest rates where it's sitting at historically low interest rates um so he's going to have a have to increase interest rates and when that happens you see the treasury yield uh start to spike here treasury yield represents like what percentage you're getting paid right you know like throw an example out there dylan um you know if i want to borrow 100 bucks from you and i was going to pay you back next week what do you what would you say is a reasonable interest rate for that like how much more money would you want me to give you in a week for one week yeah one week a dollar yeah a dollar right so 101 bucks right so we're talking about a yield here of basically 99.
you know because inverse yield is what we're looking at here now imagine you know if if i were to borrow 100 bucks for you and i'm going to pay you back in 30 years like you'd probably want a little more interest right 102. you want at least 102. that's basically what's priced into the market right now that's insane that's how cheap money is for life oh wait i was joking i went way more than that oh yeah but that that's really not far from what the reality is right now in terms of how cheap money is i mean look at these uh you know mortgage rates are like three percent it's insane uh the i think this uh swedish government issued a hundred year bond for one percent rate a hundred year bond hundred year bond one percent yeah that was last year but things have come up a little bit but it's still pretty stark so this is to kind of highlight the the inverse relationship here of interest rates and yields as the interest rate rises the actual like price of the bond false because they're they're opposite of each other in terms of how the bond is priced what does that mean like yields rise the treasury yield yeah it's the percentage that you're ultimately earning on your money got it okay so the interest percentage yeah exactly the interest percentage is the yield and the prices and and the uh yield are opposite of each other got it all right so uh these are the positions from michael burr's latest 13f filing he had four treasury positions uh so he's got a put on tlt uh a he's got actually long shares in this tbt and then he bought a call on both tmv and triple t here we're going to talk about what they are and look at where they are since this filing so tlt is a 20 plus year treasury bond etf etf exchange traded fund this is a fund that's designed to kind of basically mirror the barclays capital 20 plus year treasury index all right okay remember well sorry we're going to ask a question dylan do i what what's a bond uh so a bond is like a long-term uh loan instrument i guess if you will it's a way to exchange money it's another way of thinking of a loan but it's usually too government it can be awesome to municipality or even to companies but that's typically what you're thinking of treasury bond is to a government entity got it all right and in this one he bought a put now uh you know what a put contract is dylan so if he bought a put he is expecting um the 20 plus treasury bond etf to go down exactly yeah he profits if the price goes down because a put contract gives him the right to sell uh shares of this tlt etf at a specific price on or before a certain date all right so he's betting that the treasury bond is going to go down with this bet so then he will make money as long as the okay exactly exactly yeah these positions definitely a little complicated so this is that tlt this is the the year-to-date chart now we know that berry held this position as of the end of march march 31st that's when the quarter ended and it's traded pretty flat since then so we knew he was still in this as of that point right but it hasn't you know had a decent move towards the bearish side which would have been profitable for a put uh during the first quarter but it's been flat since then all right you're gonna notice that trend here without with everything else pretty much so tbt um this is a pro shares ultra short etf all right so meaning they are actually a bearish meaning they expect the 20-year treasury prices to drop okay so then this is essentially the same as the first bet but this is leveraged 200 percent so yes it's just a different way of playing it because in the first instance he was using an options contract um this one is not an options contract this is this is just shares within those shares yeah these are just shares he bought into this inverse etf with shares okay but same thing you he profits by the prices going down in this particular instance got it and if you notice they they had a decent move up during the first quarter here but as of the end of the quarter where he we know he's still held this position it's been basically flat slightly negative all right okay so flat since then now here's another plate this is in this instance he bought a call contract and it's on a 3x etf so a call is already leveraged 100 shares to one and this is leveraged 300 because i play these with financials so this is just leverage upon leverage upon leverage yeah leveraged upon leverage of pump leverage yes oh uh this is the kind of bet where you know you you bet a dollar and you can stand a profit you know ten dollars you know if you i can't say the exact leverage ratio because i'm not sure but uh you know this is to that degree where you're getting many times your initial investment back if you are indeed correct and once again this this was bullish throughout the whole first quarter uh so the call on this would have made money during the first quarter however same thing right at the end of the quarter here just uh march 31st uh it's been basically flat slightly negative since then man okay yeah all right so pretty pretty flat but we know for a fact that it uh you know he still held it after this period okay got it yep and his final play the t triple tri uh t triple t uh i guess etf here uh was also an ultra short uh 20 plus uh year treasury so he's betting on the long term ones that's been consistent throughout as well uh you know betting on their prices decreasing here so this is another bet so it's essentially four bets two are stocks that are leveraged 200 percent that are both going against the treasury one is a put and one is a call but both in the outcome of going against the treasury yeah it's two calls one put and uh long shares on a a leveraged etf oh boy yeah so these are all leveraged and it's really ballsy yeah i know right um you know the really interesting to me thing too is like obviously throughout the whole entire first quarter his prediction was correct all of these things moved exactly how do you expect them to um you know if you wanted to you know make money on this trade throughout the entire first quarter it's been perfect but the interesting thing to me is that we know he held them still as of march 31st and they've been flat slightly negative since then yeah this is this is that final final chart same kind of thing uh it's been flat and slightly negative and that as you know dylan with options as the time to the option expiration approaches the option loses value just from that time theta decay you lose that sweet theta yeah exactly so the real question is is like you know is this a play that's worth instituting at this point in time or you know were these long dated options to you know we don't know they don't he doesn't have to disclose that um you know in the likes obviously in the first quarter he would have been positive but the real question to me is is this a position that's worth getting into because we're going to see likely some degree of interest rate increase over the next year a year and a half at most i would think so if the treasury yield increases then he's correct yeah he's profiting exactly yeah yeah increases he's profiting and we are so low i mean it almost has to go up yeah exactly if you think of it from a mean reversion standpoint uh it you know up would be the direction that we expected to be going in to get back to its historical kind of baseline got it yeah so we're still nowhere near the historical baseline because didn't aren't they like 1.6 yes actually was down a little bit on friday because of the jobs report so the jobs the report came out and it was good but not great it was like 100 000 less than they wanted right yeah yeah exactly so you know that that was helps the kind of give jerome powell more ammunition in terms of not having to increase um the fed funds rate you know by saying like oh the economy is not quite back yet he's able to justify keeping the fed funds rate at zero all right okay well man that is just lever there's so much leverage yeah that has a lot of leverage a lot of time and it you know he still owns it so it you know he's got balls of steel he's also shorting tesla man that guy he should be an avenger or something i know that's crazy yeah that'd be that'd be quite a sight to behold that he's gotta be like a playing poker with him must be an absolute nightmare you know the thing i've been debating while i was kind of reading about all this stuff is like whether or not i am interested in following him into this trade a little bit i i might pick up a options contract uh with i would say sometime until you're ringing like a year or so now to see if i can profit from this i'll do it if you do it yeah be interesting i don't know let's just do it yeah just go dude he's never wrong he's true except for the time he was like buying a bunch of nickels or whatever um you know i will say in those graphs if you'll notice the direction that he wanted you know all those to go the moving averages were like on on any of them actually they were all the same thing the moving averages were slowly meeting the price and oftentimes you can get a push up or down so it's probably you know we could get another big leg up here yeah yeah i mean i i would not be surprised honestly we'll be waiting the next 13 hour filing to see if he's still in these positions throughout this quarter i think this may be a longer term play for him that's my suspicion at least he's obviously right in the first quarter there but you know he can have another another six months nine months maybe at least before this plays out right all right good stuff all right guys well thanks for tuning in we'll catch you on the next one have a good one
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