I’ve received several questions from readers about the safety of Treasuries. The two questions below paraphrase some of the most relevant ones.
Q. I saw comments from other experts that “Treasuries are not safe.” What do you think?
A. I’ve seen similar comments. But in most cases, when you review them more carefully, you’ll probably see they’re not referring to Treasury bills, which have virtually zero price risk. They’re talking about Treasury notes or bonds, which can — and probably will — suffer serious declines in their market value.
Q. I’ve heard more chatter recently about a possible future default by the U.S. Treasury. Plus, as you yourself have noted, the cost of insuring against a Treasury default (specifically, the premiums on 20-year Treasury bond credit default swaps) has gone up. Do you also believe a Treasury default is now more likely?
A. No. It didn’t happen in the Civil War, World War II or the banking panic of the early 1930s. Even in the worst-case scenario, the chances of a default are extremely small. But no matter how improbable it may, we do expect more investors to start fearing a default — one more factor that could drive down the market price of medium- and long-term bonds, while driving their yields up.
{ 43 comments… read them below or add one }
What is happening here? Is gold being forced down in coordinated effort trying to persuade investors into equities? Last summer throw the baby out with bath water was the joke of an excuse in crisis. Now it goes down wether the market goes up or down. people are feeling safe? -It goes down. Folks get scared? -It goes down. Something ain’t quite right in Kansas.
You got to love Martin. The FED is completely out of control of it’s own printing press. We should all read The Island of Jekyll and Hyde.
This is for anyone who may want to answer. I have $35,000 in an IRA fund. Yes, I have watched it go down and up….but more down than anything. What should I do right now - should I withdraw all of the $35,000, and pay the 10% penalty next year - any thoughts, anyone?
Mark
tracyinfo@gmail.com
Hi Mark,
There is a difference between selling what you have in an IRA and withdrawing it from the IRA. If you are in stocks, ETF’s, or mutual funds in your IRA, you should be able to buy and sell them whenever you want while keeping you funds in the IRA. There should be no 10% penalty to pay. If you actually withdraw funds from the account, then there is a penalty. Where I have my IRA’s (Fidelity), each IRA has a money market account within it, so when I sell something, the money goes in there but stays in IRA and there is no penalty.
So…to answer you question, my suggestion (for what it is worth) would be this: You should probably use this bear market rally to sell what you have but keep it within the IRA. There is no penalty to pay if you do that. (Only if you really, really, really need that money should you withdraw it from the account and pay the penalty.)
The only things I would stay in is gold, gold stocks, and oil (which has a good chance of going up over the next few years I believe).
This rally could go on for a while, or it could turn very soon and head further down to new lows. One possibility is that you could put trailing stop-losses under what you have (maybe 7-10% under the current price?). That way you could perhaps capture further gains if the rally continues for a while, but you could also minimize the amount you could lose if things tank tomorrow.
Some people say that in a few years, the market will return its prior highs and that you should just wait it out. My opinion - I think there is too good a chance that this could go much, much lower, and go on for a long, long time before we climb our way out. And when we come out, it’s going to be a bit of a different world.
Just my opinion….hope it helps! Good luck in your decisions in these complicated times…
best regards,
Nick
As many of us are aware nearly all of the T-Bill money market funds have been closed. I was told by one financial institution, by government demand. Is this yet another means to keep money moving into less safe banks and the markets? Is the SPDR ETF of 1 to 3 month T-Bills (BIL) a possible substitute for deposits in a T-Bill Money Market (without the availability of a checking account or ATM of course). Or would it be better just to buy T-Bills at the auctions. I have the ability to purchase those without any fees through our investment brokerage.
Dear Dr. Weiss,
Thank you for the Safe Money Reports and all of your insight.
Do you like TIPS as an inflationary hedge? And if so, what percentage of your portfolio would you advise putting into TIPS? Currently, I am leveraged short the market with inverse ETF’s. Pretty painful right now.
Thanks for your time.
Sincerely,
Greg Cowell
CT, USA
You have recommended investing in money market accounts that invest only in short term treasuries.
We have done this with Fidelity.
Do you continue to believe that Fidelity is safe and is the best place to place these funds or should we consider diversifying with other investment firms? If so, which firms?
I assume 3 to 6 month treasuries are also considered safe.
You recommend Treasury Bills, but why did Warren Buffet recently sell (as reported on Yahoo) 5 million dollars worth of T Bills?
I tx ALL of my IRA and personal assets to Vanguard Treasury MM. How can one tell if their mutual fund Co. is stable? And is there a safer company to have ones funds?
Do you have a recommendation for me to invest in Gold? I am interested in raw gold and not a fund or depository.
Thanks,
Hi Martin:
I am retired and I sold all my paying dividends equities and transfer to Treasuries bill.
But I need income, to pay my expenses of daily life.
I am sure a lot of your followers are concern about income, when waiting for the market to go down.
SH ha gone down since contrarian instructions.
What do you recommend, I do.
Truly,
Francisco
my IRA tied up in Govt And Corp Bonds insured, for maturity valve. These are in for the long haul. I may start drawing interest this year. FHLA called one Govt Bond. Govt.
Corp Bonds that are insured are hard to find. Valve is off 30% my Maturity valve open to inflation is insured.
Do you think that i can withstand inflation @7% interest as long as 2035.
Martin Is it still safe to put our cash in short-term treasury securities or also in a money market fund that owns US short-term treasury securities exclusively
ThanKS WILLIAM
I just sold some of my mutual funds and bought SDS index funds. Will this go up if the market tanks?
Also, I still have half of my money in corporate bonds? Should I sell them and put the money into Treasury bills.
Honestly, I fear that our government is looking to become part of the new world government–something that is new in our history. How should this be factored into the equation?
Many thanks.
Per recommendations in your recent book i moved my 403b funds all into a Fidelity Treasury MM account.
I’m rather confused … recently received Sayonara Treasury Bubble! by Mike Larson. In that posting it appeared he was recommending to stay AWAY from Treasuries.
Any insight would be much appreciated.
Martin,
I’m reading your book and trying to transfer money currently in stock mutual funds to safer ground. My broker transferred our IRA’s and joint
account to TIPS with Hartford is this safe. He says there will be inflation
and when that happens the rate will go up?
Hello Marty,
I’m retired and just lately finished closing out my Treasury Bill Accounts and Annuities and jumped into CD’s to conserve my income. Was this a wise move? It seems to me that getting 2-3% for 6 months to a year is better then .3%.
Note: I’m not a stock person.
JHC
how do i use my Scottrade acct to sell the funds there i have in my Roth and IRA and buy the Weiss MM only acct? Is this Weiss acct still open? pf
Hi, Martin. I’m learning a lot from your book. But I’m wondering: Your list of Treasury money funds is entitled “Money Market Funds Investing in Short-Term U.S. Treasury Securities OR EQUIVALENT”. Can you please define “equivalent”.
Also the T. Rowe Price US Treasury Money Fund, which is on your list, has 6 of their 10 largest holdings in “Tri-Party Repurchase Agreements” (called Repos) with banks. I’m told these represent loans to the banks which are secured by collateral of Treasury securities and thus have the full faith and credit of the federal govt. Is this correct? Can you expound? I’ve not been able to learn whether they would have first priority for payment as you indicated Treasury bills have.
Thank you,
Debra
Mr. Weiss,
I have been reading your columns, etc. for several years and I tell my husband–we will be able to retire and it is because of this man (you!). I have one question: I have my money in short term treasuries. When I am ready to switch to longer term, can I just buy a bond fund or do I need to go to the treasury site and buy the actual bonds? Thank you.
Assumptions:
* the Dollar will continue to cheapen over time
* taxes will increase
* we have not met the enemy yet - the worst is yet to come
* The rift between Big Gov’ts desire to control and the average American’s tolerance for expensive foolishness will increasle and with increased hostility
Therefore:
1. Get out of traditional tax-deductible retirement funds - the taxes when you withdraw will be higher
2. Do get into a SEP - pay your tax now, save when you withdraw
3. Do not keep liquid assets in dollars - Gold, better collectibles (if you know the market), good property that you will (later) inhabit, foreign currency deposit accounts - all are better
4. Cut expenses, eliminate debt, build resources
5. Build a war chest - virtually no one is immune to being fired or ousted
Finally:
Have an Emergency Plan for each of several scenarios:
* Loss of income
* Foreclosure
* Civil unrest
* Terrorist attack or anarchy
Include resources needed, family communications, medical necessities (90 days of all critical meds), pet needs, contacts, info and referral sources
Remember:
Better to act too soon and too sharply than to miss the tipping point - once a crisis visits, it is too late to manage around it.
Thanks for the help over the years Martin.
In January I had to transfer a Defined Benefit plan ( it had “reached maturity”) into an IRA.
It is currently in an MM with Wells Fargo (Wachovia’s wealth Mgt Group)…then I had to leave the country for two months. I,m back in the country and having digested your news letters am feeling less confident about Well’s Fargo, despite Warren B’s comments. Where should I move this IRA to be “safer”? Are Fidelity or Vanguard treasury MMs. the safest places?
Should I move all the money ( there’s also a TIAA/CREF account) to Australia since I am a citizen of both countries? There is a mutual tax agreement between both countries and I am wondering if this might be one way of reducing the tax penalty for moving the money.
I am also looking for a reputable international tax expert that knows of this tax agreement between these two countries if you could suggest some sources.
Sincere thanks.
I am in Perth, Australia. How do I proceed to purchase inverse ETFs via online methodology. Thank you .
Hi,
I transfered a rollover 401k out of US mutual funds and into less conventional stock such as: agriculture, oil, coal, utilities, transportation, water stocks in foreign countries. It made sense to me at the time, these seem like such basics, but since doing it I’ve felt uneasy. I’m feeling very uncomfortable with any stock in any market and imagining that we’ve got a long way to go til we reach the bottom in any market, not just the US. I feel bad backing out of these, since I got into them with a new firm less than 2 months ago (I know, this sounds really lame), but obviously, I can’t base my decision on that. Thanks for your thoughts,
Carol
I plan to purchase stocks for my grandchildren and great grandchildren, such as Harley Davidson for the boys or McDonalds, maybe Disney for everyone. is this a good idea to do right now. How about a reinvestment with those stocks? Thanks for all you are doing!!!!
Lee
I’m wondering if it’s OK to stay in TIPS. Or should we sell them and buy back after the downturn? I fear investors will flock to TIPS after the downturn and drive the share price up very quickly. I own these bonds in Vanguard’s TIP mutual fund.
Thanks for your guidance in this trying time.
Several questions please:
1. If the dollar tanks shouldn’t we have our monies in foreign currencies in the form of CDs rather than in cash and inverse funds which will only deliver the over-inflated dollar?
2. If the bulk of my money is in a 401k fund, is there any way that the government could take it if all heck breaks loose, you know “for the good of all”?
3. Do you believe in investing in actual gold in the Perth Mint?
4. It is difficult watching the stock market surge when I sold at such a low rate even though I suspect it is temporary.
Many thanks.
My advisor just suggested I put more monies into a fund that holds corp. bonds, few equities, not sure if that was the best move according to what I am reading. I am feeling very unsure with Smith Barney I have for some time and now they have been bought by MS and wondering where to put monies. Vanguard or Fidelity. Thanks very much for this blog and what you are doing.
Your readers vary from keeping all liquid assets in gold to wanting to buy Disney and Harley Davidson stock now. Americans, gotta love ‘em.
This is how I see it. B.O. is deconstructing the United States. The blueprint was done before the election by powers greater than he; he’s just carrying it out- and quickly. In every segment of our society, things are “changing” and/or falling apart. What is working better than anywhere else in the world (our healthcare system) is targeted for dismantling and socialization by June 15. This is amazing. The propagandizing tv ads started today. As we willy-nilly about our savings, and comment on the B.O.’s spending $20K on the American taxpayer in NYC this weekend, the earth is moving under our feet. His expensive date was not bad timing(was poor taste,) it was Celebration as GM sank to the bottom. Nationalization, government takeover, socialism, Muslim under wraps, we just don’t get it. He’s in our faces, telling us what he is doing, bowing to the Arab king, and we just don’t believe it is happening. Because we were such a great nation, the death throes are violent; the market surges, gasping for air, but be assured, we are living through the demise of America and democracy as we’ve known it for 233 years. B.O. is the Jack Kervorkian of the moment - hastening our death as a free enterprise capitalist democracy. Personally, I’m withdrawing what is left, downsizing in the countryside, saving seeds, buying ammo and chickens, and praying for a miracle.
P.S. Thank you for your excellent insights. They have helped me make financial decisions. Please continue to testify before Congress telling them that the emperor is wearing no clothes. Please stay with us through this.
What are the people that are stuck in 401(k)s that have very few alternatives as to what they can put there contributions in? I have a nephew who is an hourly employee at GM whom I’ve been helping. Right now there’s only a couple of bond funds that he can put his contributions in and no government security funds.
He was in the stock funds, but we moved him into the bond funds in late 2008. He’s reduced his contribution to 1% so that we can get him into a self directed IRA.
It seems like his only alternative boils down to a lesser of two evils!
What have you heard about a Global Currency being created? How would this effect the current economic situation or would it? The note I was reading went on to say that they (the government) would replace current US currency with the new Global currency but at a sharp difference in value. They’re by deferring inflation somehow.
Elizabeth C.
Martin,
The Vanguard Short Term Treasury Fund, VFIRX, contains treasuries from 1-4 years. I know that you recommend TBills with less than 1 year maturity, but I’m having a hard time finding a fund that I can purchase through my 401K. Is VFIRX acceptable, or can you recommend a better choice?
I am extremely concerned about the deficit/possible insolvency of the government/the
collapse of the dollar and hyper-inflation. I fear that all dollar-based investments are
extremely “shaky” right now and could possibly lose up to 75% of their value. I do not
feel that the government-based media has been honest and that we are being given
totally unbiased/truthful economic information and that anyone really “cares”. As a retired disabled professional I only wish I had received more education on the economic/financial side of life. For example, should I take out monies from my retirement account to pay off my mortgage? Some people fear that the government
will soon nationalize IRA’s & 401k’s. Thank you.
Martin,
I have enjoyed reading your new book.
Tell me, do you see the interest rates for 30 year conforming loans settling back now or will they continue to go up?
Thanks for answering this question. It has really been bothering me as I have followed your advice about treasuries for most of our money.
martin,
I AM A 75 YR. OLD WIDOW AND HAVE 1 LARGE IRA IN- FORETHOUGHT INSURANCE - HAVE ONLY BEEN WITH THEM SINCE 10-07. ANOTHER IN- OLD MUTUAL- SINCE 12-05. THE LAST ONE WITH STANDARD LIFE SINCE JAN.09 . I WILL HAVE TO PAY A LARGE PENALTY TO MOVE THESE-ANY SUGGESTIONS? ALSO WHERE CAN I FIND OUT ABOUT THE SAFETY OF THESE INSURANCE CO. AND CREDIT UNIONS? I HAVE LOOKED AT -The Street.com.- BUT DIDN’T FIND THEM. THANKS FOR ALL YOUR INFO AND FOR EXPLAINING THE US TREASURIES BILLS VS NOTES, AGAIN.
New to MCP and interested in seeking short term gains while waiting for the market to turn but wonder what % of available $$ would be prudent to use. Will this be covered in your 1 hour program?
Hello,
I’m not sure how t-bills are valued. I found an article on wikipedia which provided an equation that can be used to calculate the percent yield on a t-bill. For example, a t-bill that is worth $1000 face value can be purchased for $100 (which is the minimum purchase price) that matures in 28 days would yield 1157 %. Does that mean that a person would receive $ 1157 after 28 days? Is it correct to conclude that a person would receive that much of a return on their investment in such a short amount of time?
Thank you.
How long do you think the US government can continue to manipulate the Pricing and Yields on Treasury Bonds and Notes? I just don’t get it!Is the government buying up their own junk? It just is not logical that yields have gone down. I would think there are better investments to hold in a deflated economy. Then there are the rating agencies that should have revaluated the rating of US Bonds. The rating system reminds me of Bear Stearns just over a year ago. I think Mr. Weiss discussed the rating agencies bias in his book. Perhaps Mr. Weiss can provide insight into the ratings of the US government Bonds by the rating agencies. I guess the rating agencies are going to wait until the US government is bankrupt?
Hello,
I have a few quesions, and would be greatfull if tey were answered.
1- I have a 401k, and saved some money by getting out of the company stock and moving it out to money market 9within the 401k) before the big down turn in 2008. Since then a short term treasury fund has been added to the 401k. I would love to move the money from the money market fund to the short term treasury fund but there are restrictions. They tell me that since the money market fund and the short term treasury fund are considered similar investments (safe) I have to first move the money to another fund for 90 days before I can move it to the short term treasury fund. Any suggestions? 90 days is a long time and I do not like any of the other invetments. The company 401k is with TRowe Price.
2- any suggestions as to where I can buy gold coins from? are there any banks that sell gold coins? I live in NY.
I recently moved considerable amount of money from my Vanguard MM to Vanguard TIPS. What is your opinion on Tips at this juncture in the economy.
The only way out of this world wide mess is an international currency backed by either gold or a combination of gold, silver, oil, coal and other raw minerals that have value. That would stop the world’s printing presses and force people into “conservative consumption”, and force countries into a balanced budget. We would have to find some combination of higher taxes and less benefits (cuts in Medicare, Medicaid and the hundreds of line item government programs in Social Security like WIC, food stamps, etc.) We need to tear down this “disposable economy and society” of ours and go back to the work ethic and value system of our grandparents.