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Pastimes : Ask Mohan about the Market

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To: Mike M2 who wrote (15696)	5/12/1998 9:31:00 PM
From: Zeev Hed	Read Replies (1) of 18056

Mike, I fail to understand why US treasuries (bonds, bills whichever) are bad investments? They are backed by the Taxing power (what you call "confiscation") of a relatively stable sovereign entity, it happens to currently occupy the top dog position in its economic power. It pays interest at about 4 to 5% above the inflation rate. Sure safer than questionable dividends. If deflation in Asia reaches these shores in the form of mild disinflation (which is my bet), then these bonds selling now to yield close to 6% will be a good 15% to 20% higher when they yield only 5% (which will still be an excessively high rate of interest). Could you clarify this to an uninitiated turnip farmer? Zeev

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