Question about T-Bills

[pangaia]

I have a T-Bill ladder with my Fidelity IRA-- 12 1 year T-Bills. So one matures every month. I figure this is the safest place outside of a safe in my house, which I also use, plus a cash brokerage acct at Fidelity and a bank safe deposit box.

Will these T-Bills continue to be as 'safe' as they have been historically due to the new oligarchy/dictatorship/police state?

[lapfog_1]

1. they are safe unless these assholes start defaulting on US debt.

[pangaia]

2. THAT and something like it is my concern...

Last edited Wed Dec 27, 2017, 09:32 PM - Edit history (1)

I can put more into them from my cash acct to earn a little..

I suppose I could just buy 3 or 6 month bills.. the yield spread between 3 mo and 1 year is not that much 1.41% and 1.8% not a deal breaker...

[Hoyt]

3. Not an investment adviser, but if T-Bills or other treasury securities go south, we are all screwed.

With any short-term debt obligation, there are interest risks, and out of control inflation could be an issue. But the risk is not nearly as great as in longer-term bonds. I'd consider T-Bills about as "safe" as one can get as long as you can afford to handle inflation, interest risks, and "lost opportunities" in other investments.

Supposedly knowledgeable investors don't seem too worried, and the gold market doesn't indicate any great fear.

But, I'd re-evaluate often.

Hope someone with better info comes along.

[pangaia]

4. Thanks Hoyt,

Yes, safety is my #1 concern, which is why I have been in T-Bills the last year, reinvesting as they mature, after doing not too poorly in mutual funds the last 30 years or so.
I am retired and with SS and Medicare shortly to be on the chopping block, I can NOT afford to lose any of what I have, even at the current risk of not keeping up with inflation...

[Hoyt]

6. I'm still working, but as soon as I sell my house and down-size (from something that wasn't that big

to begin with), I hope to retire by 70, or at least cut back a bunch. I understand fearing losing what you have.

[progree]

5. I had to take a peek at the treasury bill / bond yields ...

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Sorry I can't answer your question. But "they" say (the conventional wisdom) it's the safest investment with a guaranteed (or at least stated) return in the world. I don't know what would be safer that provides some kind of return.

And since you own the bills, you don't have to worry about interest rate rises causing their prices to fall, since you are presumably holding on to them until maturity. (Unlike bond mutual funds, which never mature, except for a few called "defined maturity" closed end ones that I've read bad things about).

And since they are short term, your not missing out much on "opportunity costs" at least as far as other fixed income investments.

[pangaia]

7. Thanks progree..

That has been my understanding for some time, which is why I am in T-Bills.

They should be safe unless, as lapfrog and hoyt bring up.... if they go we are all screwed anyway..

[progree]

8. One other things come to mind -- the bonds of a sane developed country

whose Prime Minister or whatever is not named Donald J. Caligula. Though off the top of my head, European countries with good fiscal situations have negative or close to negative yields. Probably Japan is not much better yield-wise and their debt to GDP ratio was well over 200%. But their yields stay low because the Japanese people for the most part have faith in them and keep buying them in large quantities (and thus their government bond market is less dependent on the whims of foreign investors). Or so I read a few years ago.

[pangaia]

9. I never thought of foreign markets.. I'll do a little research thanks..

[A HERETIC I AM]

15. Fidelity has 88 different international bond funds

https://www.fidelity.com/fund-screener/evaluator.shtml#!&ft=TBND_IB%2CTBND_EB&ntf=Y&expand=%24FundType

Several yielding over 5% with "Total Return" rates of almost 15% for the last year on some.

One thing about buying bond funds is that you don't have to worry about the reinvestment risk found with buying individual bonds. The fund manager is taking care of that for you. They aren't without risk, however.

[pangaia]

17. I was in PONDX for the last few years, not international but...

It did well for me..

For me now, the thing with funds, of ANY type, stock, bond, index, etc..., is the risk of the fund dropping.
I invested quite in a few Fidelity funds from about-- 1980 or so.... did ok..

Ah, those years of CONTRAFUND were fun...

[A HERETIC I AM]

19. Bond fund prices usually do not fluctuate all that much.

Since bonds have a fixed maturity date, there is no potential for a dramatic increase in fund share price. Not like an equity or blended fund. The only way a bond funds share price will plummet drastically is if the manager has a large position with a particular bond or series that goes south in a big way. It's pretty unusual though.

[pangaia]

20. Thank you...

That certainly was and has been the case with PONDX.. Even at the end of 2008, it's drop was minimal compared to the S&P and DOW..

[Kilgore]

10. Safe, but horrible rate of return

Current 180 day rate is 1.48%

[A HERETIC I AM]

12. You know that you don't get that 1.48% for the 6 months, right?

[pangaia]

13. Right. But safe is what I need. I can not lose it.

[A HERETIC I AM]

11. You don't have anything to worry about.

There won't be any default because too many powerful people know what that would mean. If the US Treasury were to default on even a single series of ANY Treasury paper, the results would be catastrophic and world wide.

Ever heard the term "Risk free rate of return"?

Many, MANY financial calculations and benchmarks use this term and it's underlying security.

Want to know what the worldwide accepted security is that establishes this rate?

The United States ten-year note.

Why? Why the ten year and not a 2 year? Or the 90 day or the 30 day or the 30 year?

Because it is a substantial bond that pays a coupon. Anyone can borrow money for 30 days and pay it back. Ditto 2 years. Not everyone however, can do it for 30 years. But ten, as Goldilocks said, is just right. It is a substantial length of time but not too long. The bonds pay a significant interest payment and the bonds are redeemed at par when they mature. Treasury debt paper is also one of the most, if not the most liquid securities on the planet. All Treasury bonds settle "Same Day" as opposed to "Trade plus 3" like almost everything else.

If the Ten Year is safe, then so are your 12 month bills. Your ladder of 12 month T-Bills are just about the safest securities you could own.

[pangaia]

14. Thanks Heretic.

I asked here because, although I know most the 'standard information,' I tend to trust folks here to have a ... different take on 'world affairs' (meaning the fascist oligarchs), than perhaps some financial adviser --Blechk, (my sister was one for decades and is now-- VERY WELL OFF. :&gt , or brokerage adviser, or.. the tried and true rules..

For instance, your first paragraph I did not know and that is encouraging... (On the other hand, catastrophe seems to be the aim of certain 4 limbed, biped beings )

And the considered opinion so far here seems to be, keep with the T-Bills if what I need is safety, which I do...

As I posted above, when SS and Medicare go down... I/we/many/most of almost all fucked.
My savings and IRA are what I have. Many folks are much worse off, but.. still.. it ain't a lot...

Thanks for taking the time...

[A HERETIC I AM]

16. My pleasure.

May all your trades be net gains!

[pangaia]

18. And the wind off your port quarter....

[bucolic_frolic]

21. It's a question that touches several areas

Will foreign investors be less likely to invest in US debt? Perhaps, on the margin.

What could the government do if there were a calamity, or a currency war? Look to South America for clues.
Capital controls, redemption limits, export controls, currency devaluation. Some of these things impact the value of the
US dollar relative to foreign currencies.

I saw a guru recommend a US dollar ETF as a place to park liquidity, this was about March 2017. He recommended
UUP, a bullish US dollar fund. Check the chart, it's down about 8% for the year last I looked. We are now stimulating a full employment economy as if inflation is impossible. Sure things are never sure things. Not in 2018.

Nothing is safe anymore, not rock solid in the way we knew 20 years ago. Everythiing floats, and risk management
is paramount. This is what real-time data, Wall Street, and hedge funds have done to our financial system.