Taleb: Shorting Treasuries Is A No Brainer

Thursday, 04 Feb 2010 03:11 PM

By Dan Weil

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Financial guru Nassim Taleb says everyone on earth should short Treasuries, thanks to the exploding U.S. budget deficit and potential inflation.

He said at a conference that investors should keep a majority of their portfolio risk free and apply maximum risk to the rest.

As for Treasuries, “It’s a no brainer, every single human should short U.S. Treasury bonds,” said the hedge fund adviser and financial author.

“So long as you see the picture of Larry Summers going to Davos, you have to stay short U.S. Treasuries for another year. It means they (the Obama administration) don’t know what’s going on,” Taleb said.

“Every time you see the picture of what’s his name, (Federal Reserve Chairman Ben) Bernanke, and he still has that job, you have to run to make sure your position is active. So long as these two guys are in office, that’s the trade.”

Taleb also recommends betting on hyperinflation using options to buy gold and silver and sell Treasuries.

“You have a very small probability of making money,” he said.

“But if you’re right, you’ll never see a public plane again.”

Taleb isn’t alone in his bearishness on Treasuries.

Hedge fund heavies such as John Paulson also see Treasury yields rising.

“It will be difficult for the government to withdraw the economic stimulus,” he said in a recent speech.

“An increase in the monetary base leads to an increase in the money supply, which leads to inflation.”

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