At a time when the economy is weak, earnings growth is slowing and central banks all over the world are printing money, demand for so-called safe havens is outpacing supply. Simply put, there are not a lot of good, low risk places to park money anymore, and that especially applies to U.S. treasuries.
"I don't think Treasuries are the place to be at all if you're trying to protect your buying power over the long term," says Marc Lichtenfeld, Associate Investment Director at the Oxford Club and author of the book, Get Rich With Dividends. "They are safe in that you'll very likely get your money back, but they're not safe at all in terms of buying power," he adds in the attached video.
His double reference to "buying power" is an acknowledgement that a dollar is worth more today than it will be in 3, 5 or 10 years from now. That's the risk, and why he says "you're losing money every year" that you own a 10-year Treasury paying 1.5% in a 2-to-2.5% inflationary environment. And the losses only get worse if you factor in taxes, or the chance that inflation might heat up from historically low levels.
"You're going to lose a lot of money over time," Lichtenfeld warns, as he rightfully scratches Treasuries off of his safe haven list, not to mention Gold, Money Market funds, and even putting money under your mattress. Sure it'll be there when you want it, but you won't be able to do as much with it.
"To me, gold is a rock" he says. "Gold is only worth what people say it's worth."
It's all part of why Lichentenfeld is "very biased towards dividends" especially those from blue chip companies like McDonald's (MCD), which has raised its payout to shareholders every year since it was initiated in 1976. And best of all, their latest pay raise, so to speak, was 15%, more than enough to offset inflation and taxes and retain buying power.
"What I like about the dividend raisers is you're getting more money year after year," Lichtenfeld boasts.
Are safe havens too risky? Let us know your thoughts on our Facebook page.
- Investment & Company Information