"Safe Money" Banks on Treasury Fund

03/31/2020 5:00 am EST

Focus: BONDS

Mike Larson

Editor, Weiss' Safe Money Report

Our "safe money" investing approach involves emphasizing lower-volatility, recession-resistant stocks and U.S. Treasuries over risky forms of debt. It involves emphasizing lower-volatility, asserts Mike Larson, income expert and editor of Safe Money Report.

I’m confident that our more-defensive, more-conservative approach will weather a likely recession this year. With this in mind, we are now recommending a 5% position in the Vanguard Extended Duration Treasury Index Fund (EDV) for your Bedrock Income Portfolio.

This is one of the highest-“duration” Treasury ETFs or mutual funds on the market, with an average duration of 24.5 years. In plain English, that means it rises the most when long-term interest rates fall.

Between the Federal Reserve buying Treasury bonds hand over fist, the economic data coming in extremely weak, and credit market dislocations likely to re-emerge, I see plenty of reasons for bond prices to rise and rates to fall. That’s despite enormous issuance requirements to fund the stimulus efforts.

In fact, at the very short end of the U.S. yield curve, yields have actually slipped into negative territory this week. Yesterday alone, the yields on the 1-month bill, 3-month bill, and even 6-month bill all traded below zero.

That tells me the U.S. is likely following Europe and Japan into ZIRP/NIRP Land – zero and negative interest rates — with even long-term rates slipping toward zero/negative territory. The price move accompanying that would allow you to pocket solid gains in EDV.

Here are your order instructions: Buy a 5% position in the Vanguard Extended Duration Treasury Index Fund in your Bedrock Income Portfolio at the market.

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