Bank CD rates...WTF?

[BlueStreak]

85. There aren't any great options for the person who grew up on CDs. Be very careful.

Tbills are only slightly higher, and none of them (not even the "inflation protected" bonds) even keep up with what I believe is the ACTUAL inflation rate, just based on my own observations.

GNMA funds pay a little better.

Corporate bond funds pay 4-8% and are thought to have low risk, but wait ... It turns out they are all highly leveraged, which doubles or triples the tradition risk -- plus you have the big gorilla: interest rate risk. See below.

Public utilities are pretty low risk, and many of them pay a 4% dividend, plus there can be some capital appreciation. Traditionally the big utilities have very steady prices, but that can be changing as we move more into the world of alternate energy sources. They may not be as as safe as they once were. But I still think these are pretty good bets. Look at SO, WGL, and ED for starters.

INTEREST RATE RISK -- BEWARE !!!!!

A lot of us think there is a very high probability that all this money flooding the economy will ultimately end up in a big inflation cycle. The only thing forestalling that now, IMHO, is the stranglehold businesses have on wages, but that will break if we get down to 6% unemployment. And then, watch out. All hell could break loose. Before investing in any interest-bearing (or dividend-driven) instrument, please understand what inflation does to those investments. If you are holding a 20-year corporate bond, for example, that pays 4%, when inflation goes up, the value of your bond will drop like a rock. Same thing for funds, dividend stocks and anything else that focuses on yield. So don't get greedy. There are funds with average maturities of 3-4 years. For me, that's a reasonably safe bet .