Re: Things change
Ann Logue
7/7/2011 3:55:35 PM
The point is, if the government defaults, then you'll see just how volatile and risky treasuries can be. Ditto if we get some real inflation.
It bothers me that so many politicians and pundits think a default is almost cute. It would be devastating.
Re: Things change
Ann Logue
7/7/2011 3:53:24 PM
I think Lynch's advice is good, but it could be a while before long-term treasurys pay 6% more than the yield on the S&P.
Or it could happen very quickly, if we default. If that's the case, though, you should probably look at the yield on European Union bonds relative to the S&P to get the combination of safety and performance that Lynch talked about.
Peter Lynch invested heavily during 1980s bond bull market. One of his investment rule is:
When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more,sell your stocks and buy bonds.
I guess we may see the history repeats itself in the next couple of years.
Re: Things change
Tenacious
7/7/2011 11:23:30 AM
I see your point Jacob. But with inflation on a slight uptick, bond investors will end up losing with the rates this low.
For a few years now I have viewed bonds as a lossing investment because the rates have been so low. If the rates ever go back up i might start investing again, time will tell.
Re: Things change
Jacob
7/7/2011 4:48:17 AM
Ann, investors are considering treasury bonds as the safest way of investment. Eventhough returns are low; it holds a minimum guarantee from either state or federal government. It can be consider as one of a regular investment plan for those who don’t want to take risk from the volatile market.
Re: Re : Treasury Bonds Lose Luster as Safe Havens
PredictableChaos
7/6/2011 11:20:51 PM
@yelanand - many people think gold and sliver are our best hedges now
@Ann - When people talk about diversification globally, the recommended exposure seems to be climbing. Maybe this is because, the non-US economy continues to grow in importance with each passing year. Do you have a target or recommended percentage? And does owning US multi-nationals count for anything on this metric?
Re: Things change
Ann Logue
7/6/2011 2:36:47 PM
Everything comes around again, yes?
But right now, people are really interested in treasurys. The probably shouldn't be. Rates are so low in part because the goverment doesn't have to offer much inducement for investors, and investors aren't comfortable with the alternatives.
We need a good old-fashioned economic recovery right about now, don't we?
Re: Re : Treasury Bonds Lose Luster as Safe Havens
Ann Logue
7/6/2011 2:34:59 PM
Dried food? Some days, it seems that way!
More seriously, I think your only safe haven is a diversified portfolio, and that includes global diversification. That's what most Americans overlook, too.
Re : Treasury Bonds Lose Luster as Safe Havens
yalanand
7/6/2011 1:30:45 PM
And, if you think the way to prevent risk is to own only Treasury bonds, think a third time.
@Ann,
If not treasury bonds, what other alternatives does an investor have ?
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