AOL Money & Finance

risk aversion posts

Feed

Flight-to-safety lowering interest rates, helping U.S. finance deficit

Posted Dec 15th 2008 10:29AM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Recession, Financial Crisis

Imagine paying the United States government to hold your money for three months.

The condition appears to turn investment theory on its head, but that's what investors are doing in today's uncertain, risk-averse markets.

Foreign investors are accumulating Treasuries at the fastest pace since 1988, up 12% since September, Bloomberg News reported Monday, citing U.S. Federal Reserve data. They are becoming institutional investors' mattress. The tactic is driving Treasury rates to record lows: the 2-year note has fallen to 0.76% from 3.11% on June 13, while the 3-month Treasury turned negative on December 9 for the first time.

Meanwhile, the 10-year and 30-year Treasuries have fallen to 2.55% and 3.04%, respectively -- not much return on your investment, but that's beside the point: investors currently are more concerned about the return of their investment than the return on their investment.

Still, economist David H. Wang said there's an upside and a downside to the lower interest rates for Treasuries.

Continue reading Flight-to-safety lowering interest rates, helping U.S. finance deficit

U.S. 10-year bond quickly becoming an electronic 'mattress' for savers

Posted Nov 21st 2008 1:18PM by Joseph Lazzaro (RSS feed)
Filed under: Forecasts, Economic data, Recession

To look at it optimistically, it's a period of risk aversion.

Economists, business executives, analysts, and certainly employees are hoping it doesn't become an 'era of risk aversion' - - a longer period where businesses shun expansions and new projects, and investors avoid stocks.

Further, the risk-aversion theme is prompting investors large and small to flock to the 10-year U.S. Treasuries bond, also called 10-year notes, the yield for which was 3.05% on Friday at mid-day. (Bond prices move in the opposite direction of yield. Hence, when demand is strong, such as now, a rise in bond prices pushes their yield lower.)

Moreover the 10-year yield is likely to fall further in the next two quarters, as more investors flock to safe investments amid the U.S. recession, so says economist Richard Felson.

"We're seeing the value of safety come to the forefront. In this climate, investors don't care about yield, their primary concern is capital preservation," Felson said. "And despite the increase in debt the United States is likely to record over the next two years, the lowest risk investment remains U.S. Treasury notes. It's quickly becoming a sort of electronic mattress, the way savers used to store money in mattresses decades ago. Investors are saying, 'Here, take my money and store it until conditions improve.' "

Continue reading U.S. 10-year bond quickly becoming an electronic 'mattress' for savers

Who's the risk-averse investor: gramps or the young whippersnapper?

Posted Nov 4th 2007 1:10PM by Zac Bissonnette (RSS feed)
Filed under: Personal finance

We know that younger drivers are more likely to get in accident than drivers in their forties. This probably is due to a combination of factors -- a lack of experience plays a role, but also teenagers tend to process situations and evaluate risk differently than their older counterparts.

Is the same true for investing? Money's Jason Zweig looks at the ways that senior citizens are likely to differ from younger investors: "New research by finance professor Alok Kumar shows that the average investor exhibits an 'abrupt and significant drop in performance around the age of 70,' probably because of fading memory and rising impulsiveness."

It turns out that older investors may actually be less risk-averse, and more willing to gamble, than their younger counterparts. Combine this with the tendency for memory problems and less agile mental processing in the later years, and you have a group of people who are extremely vulnerable to hucksters and charlatans selling life insurance, stocks, or business opportunities.

If you are concerned about your aging parents being targeted by con artists, check out Fraud.org's page on elder fraud and the Consumer Action's Elder Fraud Leader's Guide.

Symbol Lookup
IndexesChangePrice
DJIA+20.0310,246.97
NASDAQ-2.982,151.08
S&P 500-0.071,093.01

Last updated: November 10, 2009: 07:40 PM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

WalletPop Headlines

AOL Business News

BioHealth Investor Headlines

Sponsored Links

Most Commented On (14 days)

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

  • My Portfolio
  • Create a New Portfolio

BloggingStocks Partners

More from AOL Money & Finance