Using Series I Bonds as a One Year T-Bill Alternative

With one year Treasury Bills yielding 0.35% and even the highest yielding one year Certificate of Deposit paying under 2%, investors are searching for higher returns on idle cash while maintaining safety of principal. There have been very few options available for investors in recent months and the luxury of holding cash has meant suffering negative real returns. An interesting opportunity now exists for investors to obtain higher yields for small amounts of cash.

Using Mortgage Debt to Hedge Against Inflation

Most value investors tend to avoid the use of leverage in their portfolios due to the old saying: “The market can stay irrational longer than you can stay solvent.” An investor can be entirely correct about his or her investment choices but the market may fail to recognize this before ruinous margin calls result in forced asset sales at depressed values. While there are many successful hedge fund managers who skillfully employ leverage and engage in short selling, most individual investors should stay far away from such strategies.

In light of this general conservatism on the part of value investors, an article suggesting the use of mortgage debt to improve investment results may seem a bit odd. In most circumstances, my view is that investors should not only avoid leverage through margin accounts but should also attempt to be free of all forms of personal debt. Excessive debt obviously played a large part in the real estate meltdown and has ruined the finances of many families. Nevertheless, opportunities now exist for intelligent use of mortgage debt for certain individuals. Read this article for more information.

Bernanke Forecast Implies Tough Policy Choices in 2010

A very brief video clip of Federal Reserve Chairman Ben Bernanke announcing that the recession is over has been seen on nearly every nightly newscast this evening. What is more relevant are the comments Mr. Bernanke made prior to stating that the recession is nearly over and the implication of his statements on Federal Reserve policy in 2010. Read this article for a video of Mr. Bernanke and analysis of the implications of his views.

Warren Buffett on “Greenback Emissions”

Warren Buffett’s latest op-ed article in the New York Times warns about a surge in “greenback emissions” which could result in high inflation over the next several years. This is not Mr.Buffett’s first warning about inflation. In his latest annual letter to Berkshire Hathaway shareholders (discussed on The Rational Walk in February) , Mr. Buffett warned about a potential “onslaught on inflation”. How should investors react? Read this article for more …

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