In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.
The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead.
Investors accepted the zero percent rate in the government’s auction Tuesday of $30 billion worth of short-term securities that mature in four weeks. Demand was so great even for no return that the government could have sold four times as much.
In addition, for a brief moment, investors were willing to take a small loss for holding another ultra-safe security, the already-issued three-month Treasury bill.
How Clare College is taking advantage of the economy
Clare College is the second-oldest College at Cambridge, having been founded nearly 700 years ago. One of the benefits of this kind of longevity is that banks are more able and willing to make loans to you.
From the student newspaper about a month ago (sorry, no link):
Clare College has borrowed £15 million to invest in the stock market. The unprecedented inflation-linked loan is due to be repaid in 2048 and the College expects to make a profit of around £36 million.
This is the first time Clare has borrowed to invest in its 700-year history. Hearn acknowledged that it was a potentially dangerous strategy, but said the forty-year time frame brought security.
“Most Colleges have a very long-term perspective, which gives them an advantage over city funds which often have a short term focus.”
Both of these stories are just unprecedented. The economy truly is upside-down.