I recently wrote a short take on TDFs for BankRate.com. The moral of the story: these products may harbor more risk than it appears. You can read the story here.
Daily Archives: August 11, 2010
BETTER LIVING WITH DERIVATIVES?
Yes, it’s possible. Unless the Dodd-Frank Wall Street Reform and Consumer Protection Act throws a wrench or two into the machine.
BENIGN NEGLECT
The Federal Reserve recognized that the economic recovery has slowed in recent months, according to the FOMC statement issued yesterday. The central bank also said that inflation has “trended lower in recent quarters” and that pricing pressures are likely to remain “subdued for some time.” What will the Fed do to a) help keep deflationary pressures from gaining strength and b) bolster growth? Two things, according to the FOMC announcement. One, it will keep Fed funds at a zero-to-25-basis-point target rate for an “extended period.” Two, it will invest the proceeds from its bloated mortgage and agency debt portfolio in longer-term Treasuries to help keep long rates low. The question, of course, is whether this will suffice to offset the downshift in economic momentum of recent months? No one really knows, but the argument that this is enough looks thin.