Searching for Safety (Part 2)

Where can investors find safety?

Traditionally, safety was found in the bond market. Treasury Notes and Bills offered the highest possible credit protection, and their short maturities protected against inflation. The more conservative investors wanted to be, the shorter the maturity they would choose.

But short doesn’t equal safe anymore. Inflation is running between one and two percent, based on what measure you use. And the Fed has kept short-term rates at zero for four-and-a-half years now. Through the magic of financial repression, the Fed has taken a 10% haircut off of these safe assets.

In addition, with Congress and the President playing political hot-potato with the debt-ceiling, the willingness of the United States to fully honor its debt obligations isn’t as sacrosanct as it used to be.

Safe assets aren’t safe if they’re overpriced. Finding safe investments is a dynamic process—and like any process, it’s subject to change.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-06-04T09:38:06+00:00 June 4th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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