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URL:  http://boards.fool.com/madcapitalist-writes-ltltltthen-enron-18476036.aspx

Subject:  Re: Asset Allocation for Retirement Date:  1/23/2003  3:57 PM
Author:  intercst Number:  35610 of 78037

MadCapitalist writes,

<<<Then Enron, Quest, and WorldCom hit the fan. I imagine their bonds went from AAA to junk overnight. Thus, I'm sticking with CDs for that fixed rate of return.>>>

Nope, they certainly weren't AAA. I know the point you are trying to make though (although an intelligent investor would have noticed that these companies weren't generating cash flow commensurate with their supposed earnings).

In any case, Treasury bonds are guaranteed by the government. Most CD's only go out to 5 years, but Treasury bonds go out to 10 years and provide a higher rate of return.


Actually most "intelligent investors" know that's not true. The current yield on the 5-Year Treasury note is 2.89% and 3.95% on the 10-Year Treasury note. The highest yielding 5-Year CD at www.bankrate.com has a yield of 4.35%, see link:

http://www.bankrate.com/brm/rate/high_ratehome.asp?web=brm&prodtype=high&sort=2&product=5&Submit1=GO

FDIC insurance offers essentially the same gauranty as the "full faith and credit" promise attached to US Treasury debt.

intercst

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