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September 17, 2009

Was there a place to hide?

It's been said this recession hit almost everyone everywhere, particularly investors. Most stocks, mutual funds and even bonds suffered big losses as the severity of the recession unfolded. Did any kind of investment do well?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, just to review, in 2008 the numbers really are dramatic. In that year stocks were down about 40 percent, commodities like basic metals were off 30 percent, and even municipal bonds - which are considered very safe and have a tax advantage - were down 7 percent. There was one place to hide, though. There was one investment that did very well. It may seem ironic to many people; it was actually investments with the federal government - treasury securities. Why? Because people wanted safety. Treasury securities - despite what people might say about how the federal government manages or doesn't manage money - treasury securities, which are simply the debt issued by the federal government, are always considered very safe. So in 2008 if you invested in treasury securities, you gained 27 percent on your money. What this does, of course, is suggest that the natural thing in times of great economic stress like we had last year, continuing somewhat this year, people do flee to safety. And they consider the federal government to be the safest entity still left."

Posted by Dave at September 17, 2009 08:00 AM