US Treasury Bonds were known in financial textbooks as a risk free asset because of its AAA rating.
Nearly all formulas and assumptions are based on the rate of US Treasury bonds for computation purpose.
Now that Standard & Poor has cut the AAA rating, it means that the rating agency is very concerned with the way the US government is handling the debt problem.
After the Wall Street brought down the stock markets around the world on Thursday and Friday, and the slight fall in gold and silver price, the loss of AAA rating is the latest to shock the investors.
Since investors are fleeing out of stock markets, commodity market, and S&P is telling them that US Treasure bond is no longer risk free, what can the investors invest in?
It seems that cash is king. However, keeping cash is not a good choice if you are working and living in United States.
The problem is that the USD keeps on falling.
Euro is not doing very well at the moment either.
The real estate market is still down.
Now is the time for everyone to pray for a guru to tell the investors on what to invest. If such a guru appears, he better tells the US government how to get the economy to full employment.
The only certainty is that the economy in US is not recovering anytime.
It will take a very long time to reach full employment.
The near certainty is that USD will keep falling against major currencies of the world.
That means gold and silver prices will increase in the longer term. However, the short term volatility is scary.
It seems that a major correction for gold and silver is not far off.
The question is: when?
The question is: what should you invest now?
If we take a step back, and look at big corporations listed in NYSE, we can see that many companies are making record profits.
The current share price is not a good indicator of the performance of these companies.
The current drop in stock markets worldwide is an indication of fear, and the mistrust in the ability of US government to manage its debt.
If you have cash on hand, it is time you make sure of this opportunity to buy companies that are making huge profits.
You can look forward to healthy dividends payout.
If you have interest in gold and silver, you may like to monitor the situation for the time being.
The average price for gold per Troy ounce for year 2011 till date is $1,469.80.
The average price for silver per Troy ounce for year 2011 till date is $35.45.
If a major correction happens to bring gold and silver prices to the average price for the year 2011, you should not miss the buying opportunity.
If your risk appetite is extremely low, buying US Treasury bonds is still a choice, even though it is not a good choice.
Losing AAA rating does not mean the US government is going to default on the payment of dividends on Treasury bonds.
It just means that US Treasury bonds should not be considered as a completely risk free asset.
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