Thursday, November 10, 2005
Short Term Investing Makes More Sense Now
This Axcess News site has some thoughts on short versus long term returns. "Currently, the Consumer Price Index is 4.7%, which against the yield of the 10-year Treasury, offers a negative return."
"This negative yield curve stands out even more when you consider the return on short term securities. For instance, according to the latest data available at Bank Rate, a one-year certificate of deposit will net you around 4.59%. When an investor is asked to take on long term risk when the short term provides the same relative yield for the risk, the Fed worries."
"The investor does have options. Moving long term money into short term securities is one. Floating rate bonds tied to adjustable rate mortgages, a risk that requires close monitoring of the mortgage interest rate, have netted the savvy investor an average of 7.2%. A word of caution: In the next eighteen months, over $1 trillion in ARMs are slated to be reset and of those newly adjusted mortgages, almost half are being held by subprime borrowers. So buyer beware!"
"We are in for an economic slowdown, the possibility of a bear market on both bonds and equities, and rising gold prices as some investors loss faith in the strength of the dollar, and the uncertainty of what Mr. Bernanke might do with the Fed Chair he inherits. All of which makes a compelling argument for diversification."
"This negative yield curve stands out even more when you consider the return on short term securities. For instance, according to the latest data available at Bank Rate, a one-year certificate of deposit will net you around 4.59%. When an investor is asked to take on long term risk when the short term provides the same relative yield for the risk, the Fed worries."
"The investor does have options. Moving long term money into short term securities is one. Floating rate bonds tied to adjustable rate mortgages, a risk that requires close monitoring of the mortgage interest rate, have netted the savvy investor an average of 7.2%. A word of caution: In the next eighteen months, over $1 trillion in ARMs are slated to be reset and of those newly adjusted mortgages, almost half are being held by subprime borrowers. So buyer beware!"
"We are in for an economic slowdown, the possibility of a bear market on both bonds and equities, and rising gold prices as some investors loss faith in the strength of the dollar, and the uncertainty of what Mr. Bernanke might do with the Fed Chair he inherits. All of which makes a compelling argument for diversification."
# posted by Ben Jones @ 1:53 PM 
