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Start Your Weekend Reading WSJ’s Jason Zweig

Posted by Larry Doyle on June 16, 2012 6:27 AM |

It is not quite 6am on Saturday morning.

How did I start my day? The same way I start every Saturday morning. I just read my favorite columnist, The Wall Street Journal’s Jason Zweig.

Long ago I inducted Zweig into the Sense on Cents Hall of Fame. He earns that honorable distinction regularly. How so? Zweig takes his readers into corners of Wall Street not often traveled. After reading his work, I always come away impressed and more informed.

For example, over the last few weeks, Zweig wrote of a portfolio manager at Blackrock who perhaps had “too much skin in the game”. That is, “investors’ skin” in “his game”. Conflict of interest, perhaps? If there is any doubt that Zweig is an impact player, do you think it is pure coincidence that after Jason Zweig broke this story two weeks ago, the PM just stepped down from his responsibility managing the fund. 

I strongly recommend you read A Fund Manager’s Home Cooking.

On another topic, why might interest rates stay lower than otherwise expected for a protracted period? A bubble perhaps or are there other factors at work? Jason Zweig provided fabulous insight on this topic in another recent commentary.

…much of the demand for U.S. debt comes from “uneconomic” buyers who scoop it up—and hold on to it—at any price. Only 23% of Treasurys are held by individual and institutional investors—down from 55% in 1982 and 31% a decade ago. Today, foreign holders—largely central banks desperate to stabilize their currencies and banking systems—own 34% of Treasury debt. That is up from 13% in 1982 and 18% a decade ago. The Federal Reserve, meanwhile, holds 11% of Treasurys, twice its share in 2008.

With so much demand from price-insensitive buyers, “Treasurys are priced like fire insurance gets priced after the buildings are already burning,” says Dan Dektar, chief investment officer at Smith Breeden Associates, which manages $6.4 billion in bonds in Durham, N.C.

Zweig provides a level of detail and analysis not often found today. Read more of why Zweig questions, Are Bond Rates on a Road to Nowhere?

I strongly recommend you add Jason Zweig to your weekly reading. You will be more well informed and prepared as you “navigate the economic landscape.”

I know I am.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Bill

    This difference in ownership structure of US govt debt will probably result in a demise of the bond vigilantes in exercising some discipline over the profligate govt and fed, as the goals are largely different from private holders.

  • Ray Wahl

    Hi larry,

    Here’s a PBS link on How Much Did the Financial Crisis Cost?

    • coe

      Ray – terrific reference…for my two cents, the cost of unemployment is “priceless” – not only is it an economic hairshirt for many of us who have been forced to leave productive jobs, it is a tax on the psychic spirit of the individual, the families directly affected, and all those service providers who become collateral damage…take a look at the tables of executive compensation in this weekend’s Barrons…perhaps if someone published a side by side table showing how many have lost their jobs at these companies run by these wonderful titans of industry – well, maybe eyes would be open and the CEOs driven by shame to a deep dark corner in hell. Shame on them, and shame on the cult of celebrity that elevates them to rock star status.

      I wonder how that should make the developers of credit derivatives and designer mortgages feel? Just how many trillions of dollars have these two wonder drugs of capital markets cost?

  • Barry

    Thanks, Larry.

    Regarding Treasuries, I think the end game is on in Europe – an “inter-European” negotiation over who pays for the existing and recently issued debt is taking place and once concluded, the ECB will negotiate with the IMF and sovereigns about the issuance of Eurobonds.

    Once that occurs, the US Treasury bubble bursts, the dollar declines and continues its diminishing role as a reserve currency.

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