ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Investing in Stocks, Bonds, Real Estate, More

Why Not to Invest in Treasury Bills, Notes, Bonds

Updated on February 4, 2011

Avoid Treasury Bonds, Notes, Bills

With stocks going up and down so erratically, many people are putting their money into a safe place like bonds and treasury bills. But just because everyone else is doing it doesn't mean you should too. Following the herd may seem safe, but not if it is heading off a cliff.

First, lets review the common interest bearing investment securities. T-bills, T-notes, and T-bonds are similar in that they are issued by the government. However, they differ in their time to maturity. T-bills are usually 3 months to a year, T-notes are 2 to 10 years and bear interest every 6 months. T-bonds are for 30 years and pay interest every 6 months. You can also get TIPS ( treasury inflation protected security) that are adjusted for inflation by the CPI (consumer price index).

The U.S. government began issuing securities to cover major expenses like wars and great construction projects. Originally, these securities were bought by U.S. citizens. Today however, most of these securities are bought by foreigners.

The United States owes over $11.5 trillion dollars to it's creditors. These creditors include China for $800 billion and Japan for $677 billion, United Kingdom for $164 billion, and Brazil for $128 billion. During the Bush administration (2001 to 2009), federal debt almost doubled from $5.7 trillion to $10.6 trillion mainly due to fighting three wars (Iraq, Afghanistan, and the war on drugs) simultaneously.

Currently, the U.S. is paying very little interest on these securities. A 3-month T-bill earns only around 0.16% in interest and a 10-year T-note pays 3.65%. Even the 30-year bond is going for a measly 4.54%. This amount of interest does not even come close to the real inflation rate. Even TIPS do not keep up with inflation due to the mismatch between the CPI and the real rate of inflation. You can check out the real rate of inflation at shadowstats.com.

As the federal government tries to cover its debt with more money, the value of the dollar will depreciate and eventually interest rates will start to rise. When interest rates start to go back up, securities will rapidly drop in value. The longer the maturity, the greater the drop.

So what should you be investing in? Stocks with a lot of foreign sales will pick up with the loss in the value of the dollar. Mining stocks will take advantage of the gains that will be made in different metals. Oil companies with plenty of reserves to tap.

Another safe place to put your money is in precious metals like silver and gold. You can make sure you have a couple extra months of groceries to save money on food purchases before the next food price hikes take effect at the supermarket. Food commodity prices have already risen quite a bit in the last year and those price increases should be hitting the stores soon.


Comments

Submit a Comment

  • Pente profile image
    Author

    Pente 7 years ago from Planet Earth

    You are so right Mr Tindle. I don't have a lot of savings, but I keep what I have in silver and gold. I only keep enough cash on hand for my monthly expenses.

  • Mr Tindle profile image

    Mr Tindle 7 years ago

    Pente,

    Good points, I think you are right, Treasuries are not the safe bet like so many believe.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)