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Betting on Treasuries in falling market

Find the best air fares online

BY PETER KING

May 4, 2008

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If you believe the stock market is headed for a fall, you may be thinking about putting money in U.S. Treasuries.

The main attraction of Treasuries is their safety because they are guaranteed by the U.S. government. While stocks can lose value, Treasuries held to maturity return their full face amount. And unlike bank-issued CDs, interest earned on Treasuries is not taxed by New York State. You will owe federal taxes on interest earned.

But there's a price for Treasuries' safety: They don't pay much in interest these days. After the Federal Reserve cut interest rates for the seventh time in seven months last week, the yield on the two-year Treasury note was about 2.25 percent. The 10-year Treasury note's yield was about 3.70 percent. Still, those yields are near three-month highs as some investors bet the Fed is done cutting rates.

"Some of the higher yields of late have presented a buying opportunity to those who think the credit crisis is not over and that the economy is in recession," bond analyst Kim Rupert told Reuters. If it becomes clear the economy is getting weaker, Treasury yields will probably go lower.

For investors convinced a souring economy will lead to a multiyear decline for stocks, owning Treasuries keeps at least a part of their portfolio out of harm's way.

Finding the best air fares online

May is a good time to start planning your summer trip to some breathtaking vista, assuming you don't already have shortness of breath after looking at skyrocketing airline fares.

How to find the best deals this season? Try Kayak.com, which Kiplinger's calls "the Google of travel," or Cheap flights.com. Both are "meta-search" sites, meaning they fetch fares not only from carriers but from other search sites.

For flexible fliers, Kiplinger's says check out

Farecast.com. Its "Smart Travel Search" feature predicts whether fares will rise or fall on a specific route over the next few days.

BULLS AND BEARS

Wal-Mart Stores (WMT)

Last: $57.50

52-week return: +21.4%

Where are you spending your $600 tax rebate? Analysts at Merrill Lynch believe many will go to Wal-Mart. They upgraded shares to "buy" and raised their target price to $65.

Las Vegas Sands (LVS)

Last: $72.89

52-week return: -10.9%

KeyBanc Capital is betting that cash-strapped consumers will not use those rebates at the casino. KeyBanc's target price of $50 for LVS shares is a stunning 31 percent lower than Friday's close.