The 30-year U.S. Treasury Bond is quite possibly the worst
investment option out there right now... even your Uncle Dave's
coin and baseball card collection might offer better long-term
Let's forget for a moment about the Fed's tapering of
Quantitative Easing, which has already placed upward pressure on
interest rates (and thus downward pressure on bond prices). And
let's forget that the longer a bond's duration, the greater its
sensitivity to interest rate movements. So with every basis point
uptick, nothing will feel the pain more acutely than the 30-year
Let's even forget that Uncle Sam's credit rating has already
been downgraded by at least one ratings agency.
Even if interest rates don't rise and Congress miraculously
balances the budget -- a best-case scenario -- you're still tying
up your capital for the next three decades at a paltry rate of
around 3.5%. But here's the kicker: when your principal is
finally repaid in the distant future, those dollars will have
lost much of their purchasing power.
Just ask anyone who bought one of these bonds back in 1983.
Maybe they loaned the government $30,000, enough money to buy
three average new cars at the time. Now, when they get that money
back at maturity, it will only get them one new car.
How much do you think your $30,000 will have eroded by
So if lending money out for 30 years is one of the worst
things you can do, then borrowing it for 30 is quite possibly the
Instead of locking in today's paltry rates as the payee,
you're locking in as the payor. Oh, and the lender can't
refinance if interest rates move against them, but the borrower
can. Finally, instead of loaning full-valued dollars today and
then receiving devalued dollars back tomorrow, you'll be doing
the exact opposite: receiving full-valued dollars upfront and
then repaying with depreciated ones later.
That's the opportunity you have with a 30-year mortgage right
now. Taking out a 30-year loan is essentially like taking a short
position in the 30-year Treasury.
But here's the thing... You can even take it a step further
and buy real estate as an investment, specifically single-family
Here's why I think this is one of the best investments you can
1. While the overall national housing market has made great
strides toward recovery, thousands of quality homes are still
listed at bargain (if not fire-sale) prices. Why not take
advantage and make those borrowed dollars stretch even
2. Real estate is a durable hard asset that should appreciate
in value as the dollar slowly weakens. A maturing bond only gives
back what you paid in. No more, no less. Meanwhile, an average
home that sold for $75,300 in 1983 is worth $247,900 today.
3. That house won't be a vacant, idle asset. Find a tenant and
generate steady monthly rental income along the way.
So you could park $200,000 in a long-dated Treasury and
collect about $7,000 in annual interest. And that's all you'll
get -- capital appreciation potential is nil. Or you could invest
that cash in a 4BR/3bath Victorian home with a corner lot and
rent it out for maybe $1,000 a month, or $12,000 per year. And
it's not a stretch to say the home might appraise for $300,000
within the next decade.
Of course, these numbers are purely hypothetical. But
scenarios just like this are playing out in thousands of cities
across the country. Many of the best deals (the luxurious
beachfront condos selling for pennies on the dollar) are long
gone. But there are still plenty of attractively priced homes
that can generate impressive rental yields of 10% or more.
But don't just take my word for it. Listen to Warren Buffett.
The Oracle himself said it would be smart for affluent investors
to purchase not just a second or third home, but "load up" on
"hundreds of thousands" of single-family homes.
The "smart money" is already following Buffett's advice. You
see, for decades single-family homes were the exclusive realm of
local landlords with a handful of properties. But for the first
time, it has attracted heavy buying interest from large
Private equity groups, hedge funds, and others have already
scooped up more than 100,000 properties, investing $17 billion in
the process. By itself, Blackstone Group (NYSE:
) has sunk $5.5 billion into purchasing more than 32,000
Goldman Sachs compiled some numbers and determined that the
single-family home rental market could actually be the newest
major asset class. As of last December, there were 14 million
rental homes nationwide with an aggregate market value of $2.8
Unfortunately, most of us lack the spare cash to buy up entire
neighborhoods or invest in new residential developments. Most of
us would only be able to buy one or two rental properties to get
started at best.
That's why I've been telling readers of my
newsletter about a special asset class that allows regular
investors to get in on the action. I call them "Eisenhower
Trusts." That's because, thanks to an obscure law signed under
President Eisenhower, smaller investors have access to a
"loophole" which allows them to use the same wealth-creating
tools as America's wealthy elite.
" allow regular Americans to invest in assets like real estate
and earn yields as high as 12% -- and it only takes as little as
$500 to get started. My
readers have been profiting from these investments for years --
but I've recently finished a free report available to anyone and
everyone that wants to know about these special investments. If
you haven't seen it, I urge you to check it out now by
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