This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is Uncle Sam Really Wiping Out Grandma and Grandpa?

NEW YORK ( TheStreet) -- With the confirmation hearing of Janet Yellen this week, Quantitative Easing has once again become the most popular topic of conversation in the financial media. We are hearing renewed complaints about how the Fed's creation of an artificially low interest rate environment is hurting -- in some cases destroying -- the dreams of retirees and savers. This argument is not only ignorant but misses the true risk to this American demographic.

I believe the true risk to the 80-year-old owner of bonds and CDs is not that their income stream today is so low, but that they are being given a once-in-a-lifetime trading opportunity and missing it. When interest rates -- and therefore yields on newly issued debt -- decline, the price of existing, higher-interest paper improves.

So even as the current options for fixed income investment and reinvestment (as bonds mature or are called) look about as appealing as the Griswolds' Christmas Turkey, something much juicier may be appearing in the "unrealized gain" column of these portfolios.

Below is a chart reflecting the interest rate on the 10-Year U.S. Treasury Bond going back twenty years.

You can see that as recently as 1995, Uncle Sam was paying 5 percentage points more than he is today to borrow your money for ten years. Of course a 10-year bond issued in 1995 has long since matured; however, many other types of debt are issued at rates based on the 10-year Treasury. Some of these investments -- Corporate Bonds, Government Agencies, and Municipal Bonds -- may have appreciated dramatically for those who purchased when rates were much higher. That appreciation, though, is temporary and should be treated as such.

The long-dated Treasury Bond Index (TLT), for instance, has doubled over the past ten years.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs