Como suele suceder, Business Week publicó un articulo muy interesante sobre inversiones. Quizas sea conveniente leerlo con el articulo "5 ways that Wall Street's Mess Hurts Main Street" que se puede encontrar en http://www.greenfaucet.com/the-market/5-ways-that-wall-streets-mess-hurts-main-street/89122.
Por el momento, podemos leer este articulo escrito por David Bogoslaw y que se encuentra en http://www.businessweek.com/investor/content/sep2008/pi20080926_686123.htm.
Investing: Are 'Safe Havens' Still Safe?
Issue of more Treasury bills to pay for the Wall Street bailout may impact investor confidence in U.S. bonds as a safe haven. Time to consider some alternatives
In finance, safety isn't what it used to be. After a couple of money-market funds came perilously close to breaking the buck last week, and given the unsettling inflationary prospects of the government flooding the market with additional Treasury notes to finance the Wall Street bailout, investors are reevaluating what constitutes a "safe haven."
The yield on the three-month Treasury note dropped to zero on Sept. 18, so great was demand for short-term T-bills by nervous investors fleeing equity and money markets. That was of course before Treasury Secretary Henry Paulson announced plans to take toxic mortgage-backed securities off investment banks' balance sheets.
The yield on 10-year U.S. Treasury bonds, at 3.83%, is currently very close to the long-term inflation rate, which means investors would barely preserve their purchasing power if they reinvested all the coupon payments to buy new Treasuries, Marc Schindler, a financial adviser at Pivot Point Advisors in Bellaire, Tex., wrote in an e-mail message to BusinessWeek. He's not alone in believing it's inevitable that yields will rise as the Treasury piles more than $700 billion onto the national debt, which is certain to stoke inflation and weaken the dollar's value.
Bailout Impact
Not everyone is convinced the issuance of a mound of additional Treasury notes will be all that inflationary. Some see it as a much better alternative to printing money to buy distressed assets from banks. The increase in the supply of Treasury notes in and of itself won't spark a big inflation hike unless the bailout helps to resolve the credit crisis and speeds an economic recovery, says James D. King, president and chief investment officer of National Penn Investors Trust Co. in Reading, Pa. If the bailout doesn't work and credit markets don't thaw, further deterioration in business activity will cause unemployment to rise and wages to stagnate or drop, which would offset any increased inflationary pressure, he predicts. The pullback in oil and other commodity prices from summer peaks has already helped relieve inflation risks. The surge in borrowing could also put the Treasury's triple-A credit rating at risk, Pivot Point's Schindler warned in his e-mail.
Investors can buy U.S. Treasury Inflation-Protected Securities (TIPS) to ensure the value of their investment keeps pace with inflation, but they take the chance of lower returns if inflation doesn't climb significantly, since the yield on 30-year TIPS is much lower than on comparable T-bills not adjusted for inflation. TIPS are also less useful for investors in higher-income brackets who tend to report a brisker pace of inflation for the goods they buy—closer to an 8% to 12% rate—than the inflation rate measured by the Consumer Price Index deflator, says Frank Trotter, president of Everbank Direct in Jacksonville, Fla.
A separate risk, though related to inflation concerns, is what damage the further ballooning of the national deficit might do to foreign investors' confidence in U.S. government bonds. One of the prime motivating factors for the nationalization of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) was the government's need to assuage foreign investors that had loaded up on the agencies' debt. There is so much foreign money invested in U.S. Treasury bonds that it would only take a small portion of it to retreat to spark a major crisis for U.S. coffers, says Kirk Kinder, a certified financial planner at Picket Fence Financial in Bel Air, Md.
"This is a huge, watershed moment, not just for managing the dollar, but this is the biggest government intervention into our market-based economy," says Kinder. "[Overseas] investors are going to be nervous about investing in the U.S. because we've showed we can change the rules midstream."
In his view, the U.S. has gone from being the puppet master to the puppet, afraid of the consequences for the dollar were China to de-peg the value of its currency from the greenback and allow it to float.
Doubts About U.S. Financial Superpower Status
Brett Hellerman, chief executive of Wood Creek Capital Management, a hybrid hedge and private equity fund, sees the financial crisis and the call for such a huge bailout as just the latest in a series of misguided policy decisions over the past eight years that have severely eroded confidence in the U.S. "The price of the U.S. is going down. If we were a stock, we'd be for sale," he says. "I think the dollar is going to come under increasing attack here."
That kind of apocalyptic thinking is by no means confined to people on the margins. On Sept. 25, Germany's Finance Minister, Peer Steinbruck, predicted that as a result of the financial crisis, the U.S. will cede its role as a superpower of the world financial system to better-capitalized centers that are emerging in Asia and Europe, according to the Financial Times. That doesn't mean the dollar will lose its reserve currency status, but rather that it will become a more relative store of value, Steinbruck added.
Many investment professionals disagree, however. William Bellamy, director of fixed income portfolios at Thompson, Siegel & Walmsley in Richmond, Va., says he thinks the issuance of additional Treasury bills to pay for the bailout will have minimal impact on investor confidence in U.S. bonds as a safe haven. "Issuance will go up to fund the bailout but it will be over time. And if it corrects the underlying credit markets and unfreezes them, I don't think much concern at all should be put on the additional issuance," he says. "The U.S. is still the safest place in the world to invest and will remain that way."
If the bailout eventually tops $1 trillion, however, the size of the Treasury issuance could cause people to start questioning the credit quality of the dollar, he adds.
Other Countries' Bonds
The key to how much confidence foreign investors continue to place in the U.S. will be whether the bailout is structured to ensure the Treasury can recover a significant portion of its investment later on, in contrast to the Chrysler bailout of 30 years ago, says King at National Penn. That can be accomplished either by the government taking equity stakes in the banks it's buying securities from, or buying them at low enough prices or charging a sufficiently high interest rate on loans, he says.
Still, with the future supply and quality of Treasury bonds unknown, it's not a bad idea for risk-averse investors to consider some alternative vehicles.
Money-market funds remain a safe bet for those who want to preserve capital and get some extra yield since the Treasury said last week it will guarantee those accounts.
Buying bonds of other developed countries, such as Switzerland and Australia, which are known for better balancing their budgets and managing their national debt, is another option, financial advisers say. The T. Rowe Price International Bond Fund (RPBIX) is a relatively low-cost way to get exposure to an assortment of countries' bonds. The fund requires a minimum initial investment of $2,500 and currently yields 3.78%. Others planners recommend emerging-market debt, whose yields tend to be higher, but these also carry too much risk to be considered safe havens.
King thinks the best opportunity right now is Fannie and Freddie bonds, whose yields are 1.42% higher than corresponding Treasury notes. That's quite a draw when you consider those bonds would be expected to trade much closer to Treasuries after the government made its guarantee of the agencies' debt explicit, he says.
"Perfect" Bond Asset Class?
Bill Larkin, portfolio manager for fixed income at Cabot Money Management in Salem, Mass., advises people to stay away from Fannie and Freddie debt except for shorter-dated maturities, since the agencies' fate remains to be seen. If they become part of the government, investors will win, whereas if they are broken into pieces, investors will lose because the debt will be much less liquid. He recommends other government agency debt such as that issued by the Federal Home Loan Bank or Ginnie Mae. He also suggests people buy these bonds to hold until maturity instead of buying them to trade them.
Kinder at Picket Fence questions whether there is a perfect bond asset class that can qualify as a safe haven right now. Over the long term, he thinks diversification of your portfolio is the best strategy, even if certain asset classes are currently getting hammered.
Larkin sees Treasury bills primarily as a "fear trade," which unfortunately has come to replace longer-term strategies for many investors overreacting to the abrupt escalation of the financial crisis. People who have fled into T-bills need to figure out a long-term plan, because otherwise they'll just be chasing returns, he says.
He also likes short-term corporate bonds of companies with high credit quality, which provide a low real (inflation-adjusted) return but with less volatility than stocks. This is a good time to buy them because by the time they mature in mid-2009, investors will know if the U.S. economy is in recession or poised to come out of one. As those short-term bonds mature, people can use the returns to dollar-cost average back into a balanced investing strategy comprised of stocks and bonds, he says.
Bogoslaw is a reporter for BusinessWeek's Investing channel.
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