Sunday, April 17, 2005

Discussion of Investment of Money with Mitch

i would like to donate some of the winnings to a favorite charity
the donation is tax deduction anyway
nathanstravels@hotmail.com says:
interesting that you would not invest in US treasury bonds -
mitch says:
10 yr bond yield is like 4.25%
that's bad
nathanstravels@hotmail.com says:
but you CANNOT lose
mitch says:
yes
nathanstravels@hotmail.com says:
and with that much money 4.5% is a lot of money
mitch says:
but i would stay shorter term...because i feel rates won't go lower
mitch says:
i can get 2.5% on 1 year t bill...same security and not tied up for 10 years
mitch says:
your biggest enemy is inflation
mitch says:
what will your dollars buy in 10 years with 2%/yr inflation?
mitch says:
times like these ...low interest rates..uncertainty...you wanna keep liquid
nathanstravels@hotmail.com says:
and treasury bond is not liquid
mitch says:
if you put your money in 10 yr treasury...you have committed to that for 10 years
you can sell early..but there are penalties
there are TIPS
nathanstravels@hotmail.com says:
how will inflation go if another recession hits
nathanstravels@hotmail.com says:
what are TIPS
mitch says:
those are inflation adjusted treasuries
nathanstravels@hotmail.com says:
how do they predict the inflation rates for 10 years in advance
mitch says:
they just adjust their yield to the known inflation change..year by year
mitch says:
but every country is different
nathanstravels@hotmail.com says:
they sound like a smart option at least for some money
mitch says:
india might still be ripe for real estate speculation
nathanstravels@hotmail.com says:
yes but if you get that kind of money you invest in American treasury bonds
mitch says:
well
nathanstravels@hotmail.com says:
india is too corrupt
mitch says:
not necessarily
mitch says:
for example
nathanstravels@hotmail.com says:
at least some of it
mitch says:
australia is pretty stable
nathanstravels@hotmail.com says:
invest some of it
mitch says:
their yields are higher on treasuries
mitch says:
but then you have currency risk
nathanstravels@hotmail.com says:
they have TIPS too
mitch says:
probably us investments (dollar denominated) are not the way to go
mitch says:
dollar has been in freefall or some time
mitch says:
so much so that foreign govts are getting hurt investing in us dollar denominated treasuries
this problem means that foreign buyers of us treas might dry up...and bond prices will fall and yields go up

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