A Safe Place To Invest

U.S. Treasury Bills are as safe as you can get. They have priority over Treasury Notes and Treasury Bonds, and they pay a rate of interest about as good as most CDs and money market accounts.

The interest you collect is exempt from state income taxes, and T-Bills pay you the interest up front.

You can invest your money for as little as three months, six months, or a year, and you can invest and re-invest by mail. You can also specify how many times you want to renew the term of the T-Bill.

And here's another point to consider: A T-Bill is a traded commodity, just like a corporate stock. You can always sell it if you should suddenly need the money.

Your bank or stock broker can purchase T-Bills for you if you wish. Or, you can contact the Federal Reserve Bank and handle the transaction yourself. And you can also go to Treasury Direct on the Internet to invest at no charge.

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Anxiety On The Street

It's official! The stock market is now suffering a "correction" sparked in part by the "R" word.

Fears of recession grew after the Labor Department said on January 4 that the U.S. economy generated just 18,000 jobs in December, the least since July, 2003, and the jobless rate rose to 5% from 4.7%.

Economists at Goldman Sachs and Merrill Lynch declared that a recession had probably already begun. Even President Bush acknowledged that economic indicators had become "increasingly mixed," and talk of a stimulus package intensified.

By January 9, the S&P 500 had sunk more than 10% from its October high.

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Buffett's Buying Spree

Warren Buffett's billions seem to be burning a hole in his pocket. In nearly back-to-back deals, it was announced on Christmas Day that Buffett will spend $4.5 billion to acquire 60% of Marmon Industrial Group.

Then on December 28, Buffett announced he is moving into the bond-insurance business by spending $436 million to buy NRG, the reinsurance unit of ING Group.

On Marmon, he's planning in six years to purchase the remainder of the privately held 125-company group, which generates $7 billion a year in sales.

In bond insurance, he plans to offer coverage for government paper.

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Balancing Act

For the past several years, cash on the balance sheet has seemed like a liability; a sign that management had no clear vision for growth. Shares of highly-rated companies have underperformed those with low credit ratings by an average of seven percentage points a year over the past four years.

Now, with the collapse of the sub-prime debt market and the end of the easy-money era on Wall Street, healthy balance sheets are coming back in style. In August, top-rate companies were up 2.3% while low-rated companies lost 1.8%.

As credit markets tighten, strong companies will be able to boost market share by taking advantage of their strained competitors. And now that interest rates have come down somewhat, investors are likely to be better off with companies with low debt-to-equity ratios, for their industry, and substantial free cash flow.

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