While far from exciting, Treasuries are hot investments nowadays. As an indication of this, the yields are at rock-bottom levels as fearful investors seek a safe haven.
Even the Federal Reserve is bullish on Treasuries.
But could this actually be a problem for the country -- as well as the stock market? Former Fed governor Frederic Mishkin says there are definitely some risks (this is according to an interview on CNBC). Basically, he said that the monetization of the debt could lead to a bout of inflation.
But is this really a bad thing? After all, the US economy is having problems with overall demand. If inflation increases, it is really a reflection of growth in the economy. That is, consumers will be spending and borrowing again -- which will, in turn, spur investments from companies. And top-line growth would certainly be a welcome thing for investors.
Keep in mind that moderate inflation is usually not a problem for stocks. Instead, it's only when it gets to excessive levels that investors pull-back. And in light of the sluggish growth in the US economy, this seems fairly unlikely now.
Tom Taulli is also the author of several books, including the Complete M&A Handbook and the upcoming book, All About Short Selling.
First time? A confirmation email will be sent to you after submitting.
Members enter your username and password.
Enter your AOL or AIM screenname and password.
Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.
When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.
To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.
Find out why more people track their portfolios on AOL Money & Finance then anywhere else.
Read Full Article »