U.S. Treasury bonds, notes and bills have long been the wallflower of the investment world: too old-fashioned, too boring -- and, most importantly, with yields stuck near zero, not very good "earners."
Despite all that, EWI's president Robert Prechter has long recommended T-bills (along with cash and other "cash equivalents") as the ultimate capital safety in these uncertain times.
Prechter's conservative investment stance has paid off -- and in more ways than one. Reports our own December 9 Short Term Update (bold added; some chart labels erased):
The 3-month T-bill yield made its 2011 high on January 20 at 0.16%. The decline from this "high" represents a flight-to-safety and a move away from risk, a signal to investors that the stock rally's underpinnings remain weak.
Even as stocks have pushed up...from the October 4 low, T-bill yields continue to scrape along at zero percent interest. Thus, the stock market bulls contend that there is no other place to invest except in equities.
However, so far in 2011, the S&P 500 has returned approximately 1.9%, with dividends reinvested, while the Bloomberg/EFFA US Government 1-3 year total return is the same.
The main difference between the two returns is that one entails market risk (S&P), while the other entails no market risk (T-bills).
And yet, still, no one wants T-bills because of the lack of yield. ...
Our Monday-Wednesday-Friday Short Term Update -- along with the monthly Elliott Wave Financial Forecast and Prechter's own Elliott Wave Theorist -- are full of independent insights like the one you've just read.
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