How much do you have to invest to get 12.64$ 3 months from now?

Thanks to the FT

US Treasury bills sold at nearly 0% on safety search

By Michael Mackenzie in New York

Published: December 9 2008 00:36 | Last updated: December 9 2008 00:36

The US Treasury sold three-month bills at nearly zero per cent on Monday as investors sought the security of short-term government debt for virtually no return.

The Treasury sold $27bn three-month bills at a discount rate of 0.005 per cent. That means investors put up $999,987.36 to receive $1m in three months’ time, a return of $12.64 cents.

Bills are sold at a discount from their face value. This means that the interest rate reflects the difference between the purchase price of the security and the sum received when it matures.

The rate for the bills was the lowest according to records dating back to 1934 at the Federal Reserve. The rate for three-month bills peaked at 17.14 per cent in December 1980.

“We will know the financial and economic crisis is ebbing when investors turn their back on US Treasuries,” said Tony Crescenzi, strategist at Miller Tabak. “This of course has not happened yet.” Demand for the latest weekly bill sale was strong at 3.33 times the issue, while non-dealers, including foreign central banks, bought more than half of the issue. Investors are looking to close out the year holding Treasury bills on their balance sheets as a sign of safety and assurance.

Rick Klingman, managing director at BNP Paribas, said the bills enhanced balance sheets as the year ended.

The three-month bill was been consistently quoted at yields below 1 per cent since late October. At the previous weekly auction, three-month bills were sold at a discount rate of 0.05 per cent, down from 0.15 per cent.

Bill traders said because the Treasury was not selling as many cash management and supplementary bills, which were recently issued to help the Fed fund its liquidity programmes, there was a growing shortage of securities to meet demand.

The sale of $27bn six-month bills came at a discount rate of 0.3 per cent, down from the prior week’s level of 0.43 per cent.

What's another trillion or two?....or 7?

From Realclearpolitics.com

November 29, 2008

Bailout Spending is Out of Control

By Dennis Byrne

Has anyone bothered to ask: Why $700 billion? Why not $800 billion to bail out the economy? Or a trillion? Jeez, as long as the dam has burst, why not make it a cool $7 trillion?

Okay, $7 trillion it is, and if you think that's an exaggeration, you're wrong. In this year alone, we have committed an amount that is more than half of our entire annual gross national product to assorted bailouts and guarantees. No, that doesn't mean that we have diverted half our GNP for bailouts; it means that we have created half our gross national product virtually out of nothing.

Tuesday it was the Fed saying it would buy up to $600 billion more in mortgage-related assets and will lend up to $200 billion to holders of securities backed by some consumer loans. That $800 billion is more than what Social Security lays out each year, and twice as much as the federal government annually collects in corporate income tax. It is about three times as much the entire federal deficit.

That's just in one day. Who knows what Wednesday will bring?

Consider: President George W. Bush has been passionately faulted for "breaking the bank" by conducting the Iraq War. But the non-partisan Congressional Research Service figures that the total cost of the Iraq War and the rest of the global war on terror, including the war in Afghanistan since Sept. 11, 2001 is $864 billion. Now, we can whistle past that in a single day, and few seem to worry. There are no metaphors for this because there is nothing comparable to the rapidity of our plunge into national hock.

I didn't make up that $7 trillion number; it comes from the Associated Press and includes funds to guarantee certain corporate assets and debts, even though--if we're lucky--they won't be spent. The figure, in chronological order, includes: $200 billion in Fed loans to prop up risky mortgage-backed securities as collateral; a $20 billion loan to JP Morgan Chase & Co., and that's just in March.

In May, the Fed increased the size of those earlier loans and decided to allow banks to put up less secure collateral. July brought the collapse of IndyMac bank, costing more billions to cover insured deposits, and a $300 billion housing bill for government backing of cheaper mortgages.

After a short break, September rolled around with: The Treasury saves Fannie Mae and Freddie Mac for $200 billion; another $85 billion goes to save American International Group; yet another $70 billion pumped by the Fed into the financial system to ease the credit crunch; the Treasury temporarily guarantees money market fund losses up to $50 billion, and the Fed makes another $330 billion available to central banks and $225 billion to other financial institutions.

October brings $150 billion more in loans to banks, an underdetermined sum to buy commercial paper (as much as $1.3 trillion of the outstanding short-term business loans might qualify); $38 billion more for AIG; $250 billion of TARP funds into banks, etc.; temporary guarantees of inter-bank loans of up to $1.4 trillion, and $540 billion for liquidity for money market mutual funds.

Some November's moves may already seem like ancient history, but here's just some of it: $33.6 billion in capital to 21 banks; $20 billion to Citigroup; Fed and FDIC pledges to backstop possible Citigroup losses on $306 billion in real estate assets....

I've run out of space to provide a complete list, but Washington apparently hasn't run out of money. Which is to say, Washington thinks that it hasn't run out of people and countries that will lend it money. At the rate that money is fleeing into Treasury notes, maybe Washington is right, but if we're ever to get the economy to stop sagging, some of that money will have to flow back into equities.

"Talk about throwing money at a problem," said Sheila A. Weinberg, founder of the Northbrook (Ill.) based Institute for Truth in Accounting. "The better question is where is all this money coming from? The people I ask either don't know, believe that it's money we have on hand or will come from taxing the wealthy. We're borrowing it. About half of the borrowings are coming from foreign entities."

She noted the irony of the Treasury having to borrow money to bail out companies that can't borrow money. "It is very scary to see the rate that our national debt is increasing. On Sep. 30, the official debt reached $10 trillion. Then in less than a month, we had borrowed another half a trillion. Now the official debt is $10.655 trillion."

But that's just one way--the easy way--to look at it. The real debt, when you include the more than $47 trillion of commitments for retirement benefits, is a staggering $57 trillion. That amounts to $188,000 for each American.

The economic sages advise us that we can't worry about how to repay the debt and how it will affect future generations. We have no choice if, we want to save the economy, but to spend money blindly. As if we were a family that found itself so far in debt that it had no other choice but to borrow ourselves further into the hole.

In just eight months, we have made a fundamental change in our financial system and our form of government, without much debate or with, I dare say, no foresight. I'm glad I don't have to make these kinds of decisions, but I can't help think that we have lost something in our national character; we have become so fearful of the present that we are willing to mortgage our future, to risk the kind of calamity that could far surpass the present one. It's perhaps the most high-risk bet our country has made since we stood down the Soviet Union in the Cuban Missile Crisis.

Dennis Byrne is a Chicago Tribune op-ed columnist. dennis@dennisbyrne.net.

Good Job Consumers?!

I thought it was going to be a horrible year for retailers...then again we are not very good about waiting for sales to be really good, we're normally ok with just pretty good.

Holiday Weekend Shopping Grew Despite Weak Economy, Reports Show

By Ylan Q. Mui
Washington Post Staff Writer
Monday, December 1, 2008; A05

Consumers swarmed the nation's stores over the weekend in search of deeply discounted electronics and apparel, sending sales rising and giving retailers a little Christmas cheer, according to early reports released yesterday.

Market research firm ShopperTrak reported that sales on Black Friday grew 3 percent to about $10.6 billion. Last year, sales on that day grew 8.3 percent.

"Under these circumstances, to start off the season in this fashion is truly amazing and is a testament to the resiliency of the American consumer, and undeniably proves a willingness to spend," said Bill Martin, ShopperTrak co-founder.

A more comprehensive picture is expected on Thursday, when national chain stores are scheduled to report November sales, which should offer more insight into how the holiday season is going.

The weekend after Thanksgiving is the traditional start of the holiday shopping season and a crucial barometer of consumers' mindset. Retailers have been struggling to entice shoppers into their stores in recent months as the economic crisis has intensified and were counting on a solid showing this weekend to build momentum for Christmas. ShopperTrak has predicted a 10 percent decline in mall traffic this holiday season and a meager 0.1 percent increase in overall sales, both record lows.

Meanwhile, the National Retail Federation, a trade group, said yesterday that about 172 million people have shopped in stores or online since Thursday, spending an average of $372.57 per person for a total of roughly $41 billion. That's a 7.2 percent increase over the same weekend last year, when about 147 million shoppers spent $347.55 per person.

"I would say people were putting off a lot of purchases, waiting for the best deals, knowing that retailers would obviously reward them," said Scott Krugman, NRF spokesman.

The group estimated about 73.6 million people hit stores and websites on so-called Black Friday, the busiest day of the long weekend. According to its survey conducted by BigResearch, about 23 percent were at the stores by 5 a.m. and nearly 58 percent arrived by 9 a.m.

Saturday drew about 56.9 million people, while another 26.2 million planned to shop yesterday. The number of people who shopped on Thanksgiving Day grew 48 percent to 16.2 million.

Retailers kept largely mum on details of their performance over the weekend. In a statement, JCPenney acknowledged the difficult economic environment for its customers and the intense competition but said it was well-positioned.

"We don't believe that reporting sales data for any one day (or weekend), including Black Friday, would provide a meaningful barometer of our business," JCPenney said.

The shopping marathon is expected to continue today -- dubbed Cyber Monday -- as consumers return to work and make online purchases at their desks. Research firm ComScore reported online sales on Thanksgiving Day and Black Friday grew 2 percent from last year to $822 million. However, sales this holiday season are down 4 percent from last year, the group said.

A change in strategy.

I have decided to try to do daily posts of news articles that people may find interesting. So let's start it up!

People always ask me how scared everyone out there is and this seems to be the best way to track how scared people are:

Treasury Yield Curve

November 2008

Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
11/03/08	0.20	0.49	1.07	1.31	1.45	1.69	2.71	3.21	3.96	4.73	4.33
11/04/08	0.29	0.48	1.03	1.28	1.39	1.59	2.56	3.06	3.81	4.58	4.20
11/05/08	0.16	0.40	0.90	1.22	1.36	1.64	2.50	2.99	3.73	4.49	4.13
11/06/08	0.13	0.32	0.83	1.17	1.28	1.63	2.46	3.01	3.75	4.52	4.19
11/07/08	0.13	0.31	0.83	1.20	1.33	1.71	2.56	3.11	3.83	4.57	4.25
11/10/08	0.11	0.29	0.91	1.16	1.27	1.78	2.51	3.06	3.82	4.50	4.21
11/12/08	0.10	0.18	0.75	1.03	1.19	1.60	2.37	3.00	3.75	4.44	4.17
11/13/08	0.08	0.22	0.93	1.16	1.24	1.62	2.43	3.07	3.84	4.57	4.34
11/14/08	0.06	0.15	0.90	1.14	1.22	1.53	2.33	2.94	3.72	4.43	4.22
11/17/08	0.06	0.12	0.81	1.08	1.22	1.53	2.32	2.92	3.68	4.42	4.20
11/18/08	0.10	0.12	0.76	1.05	1.15	1.44	2.22	2.79	3.53	4.32	4.14
11/19/08	0.09	0.07	0.66	0.97	1.09	1.36	2.08	2.64	3.38	4.17	3.96
11/20/08	0.05	0.03	0.52	0.87	1.00	1.20	1.94	2.43	3.10	3.87	3.64
11/21/08	0.03	0.02	0.45	0.83	1.09	1.35	2.02	2.53	3.20	3.93	3.70
11/24/08	0.01	0.13	0.54	0.95	1.31	1.53	2.24	2.71	3.35	4.01	3.78
11/25/08	0.04	0.10	0.53	0.95	1.15	1.41	2.06	2.49	3.11	3.85	3.63
11/26/08	0.02	0.05	0.48	0.93	1.09	1.38	2.01	2.43	2.99	3.77	3.54

Interesting that for a one month period people are willing to take .02% annualized yield for the government just to hold their money. Even for the three month at .05% yield seems to be low...I wonder how far out you have to go to even keep up with inflation...

• “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.” - Thomas Jefferson

The world is ending!