Category Archives: Economics in Brief

Are Treasuries Overpriced?

Dr. H. Nejat Seyhun, contributing writer to The BusinessThinker magazine, is the Jerome B. & Eilene M. York Professor of Business Administration and professor of finance, Ross School of Business, University of Michigan. He is an internationally recognized authority on financial issues and Derivatives.

All I read these days is how much Treasuries are overpriced.  At the beginning of 2011, Bill Gross, the famous bond fund manager at Pimco, predicted serious losses for Treasury investors and he publicly announced that Pimco had sold its massive Treasury positions.  In addition to fund managers and newspaper columnists, recently some well-known economists have also joined this chorus.  Their argument is simple and appealing:  At an annual yield of 1.9%, with actual inflation running over 2%, these experts are telling everyone that expected real Treasury returns are negative and that anyone who buys Treasuries is likely to be disappointed over the next ten years or longer.

Inflation worries are certainly real.  Some suggest and worry that faced with a massive and ever-increasing debt, the U.S. Government is likely to inflate even further in the future to reduce the real debt burden similarly to what it did in the 1950s by pegging the interest rates below the inflation rate.  In fact, Charlie Plosser, president of the Philadelphia Fed, has also publicly expressed his inflation worry. If the Fed were to carry out such monetary policy, this would further erode the real returns to long-dated Treasuries.

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Signaling Equity Performance Shifts by Size and Style

Mr. Richard Rush is a Vice President at PNC. He has over 24 years of financial services experience including serving as managing director at Wi Trust; divisional director at Alliance Bernstein; portfolio manager and director of research at Fox Asset Management; and national director of institutional consulting at Prudential Securities. Richard currently serves a Investment Advisor at PNC Wealth Management. He is an invited contributor at The Business Thinker, llc.

Leadership does change. Whether it’s in a car race, in a classroom or even in a country — whoever or whatever leads — eventually changes.  That’s history.

In this context, it is easy to understand then, that changes or shifts occur in all things.  By virtue of this certainty, and the ability to exploit that change, does it not warrant some important considerations in investing behaviors as well? For example, the premise that there aresignificant and sustained leadership changes in the stock market’s three primary equity capitalization groups called: Large, Medium and Small Capitalization stocks, is a given. That’s also history.  Each capitalization group has led the market, and each has trailed the market, in sustained fashion but always in random rotation.  Clearly, fertile territory exists within which to exploit this certain but random change. Continue reading Signaling Equity Performance Shifts by Size and Style

GIULIO TREMONTI: In the “Eye” of the Market and of Berlusconi. (a commentary on the Italian financial situation).

Ms. Katerina Kapernarakou is a journalist for the Greek newspaper “Kathimerini”, and a contributor to the BusinessThinker.com covering the international business, economic, and financial issues.

Giulio Tremonti seems to have received multiple attacks, finding himself in “the eye of the storm.” The Finance Minister of Italy has to handle the rising borrowing costs of the country and all the questions that the markets raise in their usual compelling manner; these questions refer to the ability of Italy to respond to its debt and fiscal deficit obligations. At the same time, Tremonti’s relations with Silvio Berlusconi, the Prime Minister, are strained, as the latter accuses him of “lack of teamwork” in his already fragmented government. Also, he has to oversee the promotion of the austerity measures he has prepared in order to prevent the bad scenario about an Italy’s bailout. Although most of the measures have been put off until after the 2013 elections, he may have to implement them hastingly in advance because of the pressures of the market. Moreover, Giulio Tremonti should face another challenge.

Italy’s Finance Minister is considered by the international financial community as the guardian of fiscal discipline in the country and is identified as the shield against Berlusconian populism and extreme expenses. However, he made an error incompatible with his overall political stance, according to which he has strongly affirmed his intention to crack down on tax evasion. Marco Milanese, Tremonti’s former close associate who is investigated on alleged corruption, has testified he had provided Tremonti a luxurious apartment in Rome on 1,000 euros rent per week.

Continue reading GIULIO TREMONTI: In the “Eye” of the Market and of Berlusconi. (a commentary on the Italian financial situation).