Treasury Direct Safety

Discussion of the Cash portion of the Permanent Portfolio

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Jeffreyalan
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Treasury Direct Safety

Postby Jeffreyalan » Tue Aug 22, 2017 12:16 pm

I know a lot of the members here use Treasury Direct for their cash and/or bonds. I would like to get some opinions here on the safety of it. By safety I do not necessarily mean someone stealing my password, logging in as me and transferring my money to themselves. I mean safety in the terms of some sort of accounting error or computer glitch type of scenario.

The reason to use a treasury bond instead of a bank cd would be for safety. But I cannot help feeling that if I woke up some morning and logged into my bank or brokerage account and saw I suddenly had a zero balance, that I would have much greater chances of remediation from them than I would if the same happened to my Treasury Direct account. I would have monthly bank and brokerage statements and I would have legal systems at my disposal to get back any funds that were lost or taken. For some reason I just do not have that confidence in Treasury Direct. Can anyone talk me thru this worry???

Thanks!
grapesofwrath
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Re: Treasury Direct Safety

Postby grapesofwrath » Tue Aug 22, 2017 3:33 pm

..and I would have legal systems at my disposal to get back any funds that were lost or taken

I guess when main street banks "take" your money you need all those legal avenues. :(
If treasury "takes" your money then I guess this is when you need your gold, canned food and ammo.... :)
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jhogue
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Re: Treasury Direct Safety

Postby jhogue » Tue Aug 22, 2017 7:21 pm

Jeffreyalan,
I have purchased savings bonds (paper and electronic) through Treasury Direct for 7 years. My father-in-law owned them for at least 40 years before that. He always said he never lost a nickel on them because US savings bonds are guaranteed not to down in value, unlike marketable bonds that fluctuate in price every day.

First, the big picture. Believe it or not, the people who work at the U.S. Treasury running the US savings bond program have a mandate to help and encourage individual savers. That mandate is periodically monitored by members of Congress and the General Accounting Office (GAO). GAO works for Congress and Congress works for the American people. Ultimately, if you have a problem with your account you can always ask your Congressional representative for assistance.

Your Social Security number and Treasury Direct Account # are unique to you and your account. If you wake up some day and your balance somehow reads “0” you should immediately contact Treasury Direct (see “Contact Us” on the Treasury Direct website), and they will help you reconstruct your account and replace any missing savings bonds.

I keep a homemade spreadsheet of my savings bonds that includes my account information as well as purchase date/updated value/bond serial #/etc. for each bond I buy. If you are uncertain, you may want to begin by purchasing paper I bonds with your tax return. Turbotax has easy do-it-yourself instructions on how to submit an electronic extension along with an estimated overpayment that allows you to buy up to $5,000 in paper I bonds each year. I keep my paper I bonds in our safe deposit box at a local bank along with an updated copy of my spreadsheet. The Treasury guarantees that they will replace them if they are ever lost or stolen.

I hope this helps you get started with savings bonds. I think they are ideally suited for establishing a “deep cash” position in Cash in the Permanent Portfolio.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
drumminj
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Re: Treasury Direct Safety

Postby drumminj » Tue Aug 22, 2017 8:58 pm

Jeffreyalan wrote: I would have monthly bank and brokerage statements and I would have legal systems at my disposal to get back any funds that were lost or taken. For some reason I just do not have that confidence in Treasury Direct. Can anyone talk me thru this worry???!


Thank you for asking this question, as you have uncovered an oversight in my asset accounting/documentation. I have either physical copies of statements for my accounts in a fire-resistant safe, or electronic documents backed up in multiple locations, but I do not have any such accounting for my TreasuryDirect holdings as they don't send out statements. Your post made me realize I am relying wholly on their accounting, and have nothing to back up my assertions should their accounting go awry.

(off to see if I can download an account statement with bond #s or some such...)

EDIT: added some missing spaces
Last edited by drumminj on Tue Aug 22, 2017 9:34 pm, edited 1 time in total.
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ochotona
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Re: Treasury Direct Safety

Postby ochotona » Tue Aug 22, 2017 9:32 pm

I would at least take screen captures.
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jhogue
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Re: Treasury Direct Safety

Postby jhogue » Wed Aug 23, 2017 10:40 am

Jeffreyalan,
Another alternative you might consider is to skip Treasury Direct entirely and hold both your short and long term Treasurys in a brokerage account. There are both advantages and disadvantages to doing this.

The principal disadvantage is that you cannot buy savings bonds through a brokerage account, so you would not have access to the inflation protection of I bonds, the deflation protection of EE bonds, 30 years of tax deferral, and all the other cool features of savings bonds.

There are several advantages to brokerage accounts over Treasury Direct , however. The first is access to the secondary market in Treasurys, which means you can buy or sell your securities any time the markets are open and the brokerage firm will provide records of transactions and regular statements. The second advantage to holding Treasurys through a brokerage account is that you can hold them in either a Traditional or a Roth IRA. You can’t do that in a Treasury Direct account.

Of course, many investors on this forum have both brokerage and Treasury direct accounts. While that means some additional administrative chores, it also provides a measure of institutional diversification and reduced counterparty risk. If holding your Treasurys in a brokerage account makes you sleep easier at night, go for it.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
Jeffreyalan
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Re: Treasury Direct Safety

Postby Jeffreyalan » Thu Sep 21, 2017 12:27 pm

Apparently others are even more paranoid about this:

https://www.bogleheads.org/forum/viewtopic.php?t=225415
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jhogue
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Re: Treasury Direct Safety

Postby jhogue » Mon Sep 25, 2017 12:07 pm

I have heard plenty of stories of people who lost savings bonds because they misplaced them through their own error. I have never heard of anyone losing money because of an error made by Treasury Direct.

Or, to put it another way, who do you trust more: the people who brought you savings bonds, or the people who brought you Equifax?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Xan
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Re: Treasury Direct Safety

Postby Xan » Mon Sep 25, 2017 12:27 pm

jhogue wrote:Or, to put it another way, who do you trust more: the people who brought you savings bonds, or the people who brought you Equifax?


It's hard to say. On the Internet, nobody can tell you're a dog. How is everything behind the scenes at Treasury Direct as opposed to Equifax? I don't think we have any way to know, really. Before this fiasco one might have said "surely Equifax has better security and practices than (for example) Target".
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jhogue
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Re: Treasury Direct Safety

Postby jhogue » Tue Sep 26, 2017 12:55 pm

Is "digital risk" a new form of risk that we all have to live with holding investments in the modern economy?

You can buy physical gold, physical cash, and paper I-bonds, but (as far as I know), you can no longer buy stock or LTT certificates.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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jhogue
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Re: Treasury Direct Safety

Postby jhogue » Tue Sep 26, 2017 5:49 pm

Xan wrote:
jhogue wrote:Or, to put it another way, who do you trust more: the people who brought you savings bonds, or the people who brought you Equifax?


It's hard to say. On the Internet, nobody can tell you're a dog. How is everything behind the scenes at Treasury Direct as opposed to Equifax? I don't think we have any way to know, really. Before this fiasco one might have said "surely Equifax has better security and practices than (for example) Target".


Looks like no place is safe:

"SEC chair grilled by Senate panel over cyber breach, Equifax"

https://www.fidelity.com/news/article/t ... BY-OUSIN_1
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"

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