Wow, people are putting money into 0% yield investments? I agree with weakonomist. It seems smarter to just put your money in an FDIC insured checking/savings account or just pay off debt. If you can stomach the thought of putting money into the financial turmoil of the current markets, you could do well (in a few years) by dollar cost averaging into some index funds.

Xin,

You forgot one: Gold. The metal itself is up for the year. Yes the mining stocks have been crushed (they're coming back), but gold itself is up.

Bonds don't pay anything, stocks are being hammered, Real Estate is still headed down, your bank isn't safe, all commodities are off their highs, but gold is up. I don't think anything else is up.

You can invest in gold in small ways. Having the actual metal in your possession is the safest - in the form of coins. You could buy an ETF linked to the actual metal - CEF, a canadian fund is the safest.

One thing you can say about gold is that it will never go to zero. I'm surprised with your heritage, you omitted this investment.

"Wow, people are putting money into 0% yield investments? I agree with weakonomist. It seems smarter to just put your money in an FDIC insured checking/savings account or just pay off debt."

The people that you refer to are not actually people but large institutions and money managers. The FDIC only insures up to 250k. The money going into T-Bills is much larger.

Because the large players control rates and prices the question becomes, where do you put large amounts of money with little or no risk. According to the rate action, the T-Bill seems to be the answer.

What about CDARS, CDs that spread amongst among banks that can be up to 30 million dollars per person. I think that would be the smarter thing to do then getting 0%

Gold is not a risk free investment. You're logic is the same as the people who believed that stocks only go up in the 90's. Just because something happens most of the time or has been happening a lot recently does not make it risk free. I suggest you read the book Fooled by Randomness. Also, read up on the concept of expected return. The probability of an event happening is only half the story. You also have to take into account your potential gain/loss in accordance with that probability.

Also there are many possible reasons for high interest in the auction. Almost all of the volume in auctions are generated by banks or other large financial companies through a primary dealer. Many of these institutions have to adhere to strict risk profiles which may require the bond even if it yields 0% or negative. It may seem strange that anyone would be willing to "invest" in an instrument that loses money. However, you have to consider that banks have a variety of operations. If you can generate a 10% yield through a combination of activities(trading cash bonds, swaps, swap futures, etc) and lose 1% on buying a bond to hedge out part of your risk, then it's still worth it in the end.

As for individuals, I would recommend TIPS over the I bonds. One of the big problems with I bonds is that they cannot be sold in the secondary market. Also, there is only one maturity: 30 years. This means that you're basically locking up your principle for 30 years unless you want to pay the penalties previously mentioned. TIPS on the other hand can and are often traded in secondary markets. Granted, these are not the most liquid markets and crossing bid/ask combined with commissions can add up to be a bit, but in most cases it will still be less than the penalties of the I bond