On 12/30/09 a curious thing happened-- US Treasury T-bills were auctioned at an interest rate payable of 0.0%. And if you don't find that odd, let me tell you that about $5Billion worth of these things were sold! Furthermore, this information was not considered newsworthy enough to be reported in the media.
Don't believe me? Click here: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20091230_1.pdf
Why would anyone give the US Government $5B so that they can get the same $5B back at maturity?
(1) US Citizens feeling patriotic and lending Uncle Sam some walking around scratch?
(2) Financial institutions being forced to buy T-Bills whether they want to or not?
(3) Things will be so bad in 2010 that just getting your money back will put you ahead of the game?
This is the equivalent of putting your money in a mattress.
In these times, perhaps it is best to turn to the largest single holder of US dollars and debt-- the Chinese government to see what they are doing.
Here is what I found in the WSJ (12/29/09):
"BY JAMES T. AREDDY
SHANGHAI—A group of financiers is trying to put a U.S. mattress maker now under bankruptcy-court protection into play by encouraging Chinese bidders to top an already arranged offer for Simmons Bedding Co., according to people involved in the effort."
Somehow I feel these two items are connected...
Purchasing power notwithstanding, capital preservation is not a bad thing.
ReplyDeleteI bought a Simmons BeautyRest and hate it. It was so much higher than my old mattress I felt like I was sleeping on one of those American Indian burial mounds on the poles. A friend noticed my new mattress and asked was it Simmons and, when I confirmed this, he said he'd bought one too and hated it and wrote to the company and told them that he did not like it and got an unsatisfactory response -- I think he said they said it was not guaranteed that he would like it....
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