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Last month, investors from all over the world — spooked by the debt crisis — flocked to buy long-term U.S. Treasury bonds.
They bought U.S. bonds with money earned from China’s export boom. They scooped up bonds with money gleaned from the savings of millions of Japanese families … with government money … oil money … even drug money.
Investors large and small, haughty and humble — Asian central bankers, mid-East sheiks, and retired Americans living on fixed income — all piled into Treasury bonds at the same time.
And they all had a similar goal: To escape the terrifying dangers … find what they thought was a safe haven … and grasp for something — anything — better than the near-zero yields on short-term Treasury bills.
Many reached out as far as they possibly could in maturity, buying the longest Treasury bond in existence — the 4.5% “long bond” expiring May 15, 2038.
But as the Treasury bond buying frenzy reached a crescendo on December 18 of last year, they didn’t get the coupon yield of 4.5%.
Instead, they had to pay such a high price for the bond, they wound up locked into the lowest Treasury-bond yield in history: A meager 2.52%!
That was bad enough.
But the saga of woes does not end there. The real disaster came with the events that have ensued since …
For each $10,000 in face value bonds, they paid an exorbitant $14,091. And now, the value of that bond has plunged to only $12,200, delivering a shocking loss of $1,890.
The summary of these results reads like a fixed-income horror story:
Annual yield: A meager 2.52% Market loss: 12.85% Years of
interest lost:12.85/2.52 = 5.3 Time elapsed: 6 weeks
Conclusion: They lost the equivalent of more than FIVE YEARS OF INTEREST in just SIX weeks.
It was easily among the most disastrous Treasury bond investments of all time! Meanwhile, investors who followed our recommendation to buy strictly short-term Treasury bills didn’t lose a penny.
Now do you understand why we’ve been warning you not to touch long-term bonds with a ten-foot pole? And now do you see why we’ve been working so hard to find other, alternative, depression-proof sources of income and profits for you?
Mike, Larry and I tell you all about these unusual dangers — and unusual opportunities — in our video “7 Startling Forecasts for 2009.”
We explain exactly what we think is going to happen this year and what you should do about it immediately.
And we are extremely gratified with the respons so far: Just in recent days, a grand total of 65,431 individual investors have come to our website to view it.
Don’t be left behind. Especially not in these trying times! Turn up your computer speakers and click on the link below.
http://weiss.streamlogics.com/startlingforecast
Good luck and God bless!
Martin
Warning: The video comes offline Tuesday. So you only have a couple of days left to see it.
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Michelle Johncke, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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