Once-boring Treasury securities are now the hottest investment items

Everybody wants to own Treasury securities. Thanks to guaranteed repayment by Washington, they're almost the only assets that haven't fallen into the toilet. The Wasatch-Hoisington U.S. Treasury Fund owned Treasuries when they weren't cool.

The fund, advised by Hoisington Investment Management of Austin, Texas, has been unflinching in its devotion to long-term Treasuries, which are risky when interest rates rise but do very well when the economy craters, rates fall and government guarantees are the only things investors trust.

Hoisington economist Lacy Hunt has been warning for years about deflation - the threat of falling consumer prices and evaporating demand that faces the economy now. Deflation is great for long-term Treasuries. Last year the Wasatch-Hoisington fund gained 38 percent. That's the reverse of the Standard & Poor's 500 stock index, which lost 37 percent.

The fund, which would have seemed hopelessly boring during the 1990s stock bull market, has also creamed stocks over the long term. Since 1995, it has delivered an astonishing 9 percent per year, versus 7 percent a year for the S&P 500.

Some analysts say Treasuries are the latest investment bubble, doomed to pop when inflation and the economy pick up. Hunt and colleague Van Hoisington believe the economy will continue to struggle and long-dated Treasuries will do well over the long term. They're biased, but so far they've been right.