Here's a little something I happen to agree w/:
BUY HIGH, SELL LOW-The U.S. Treasury, citing a recent sharp drop in the annual U.S. account deficit, announced Wednesday that it will no longer be issuing three-year notes, and will be reducing its auctions of five-year notes. This means that the U.S. government has chosen not to borrow additional money when these intermediate-term rates are close to a postwar low and the worldwide demand for Treasurys is close to an all-time high, buoyed by strong demand for U.S. assets resulting from the powerful U.S. equities market. Since the deficit has been reduced primarily because of increased capital gains revenues created by the soaring bull market, a bear market is certain to cause the deficit to return to pre-euphoric levels. When this happens, these Treasurys will surely have be issued once again-and with inflation unlikely to decline further, probably at a higher rate of interest. It should be noted that the Treasury is at least consistent in its dislike of borrowing cheaply, having reduced its 30-year borrowings substantially since 1993, and thus missing an ideal opportunity to finance at the lowest long-term rates in more than a generation. In contrast, corporations such as IBM and Disney are making the greatest long-term borrowings in their corporate histories-to the extent of issuing 100-year bonds. Either U.S. government bureaucrats will prove to be right, or the country's most experienced and profitable corporate treasurers will end up right. Take your pick.
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