Wrong policy

Bondholders have a new risk to contend with -- the Obama administration’s policy of “shared sacrifice.”

The government’s approach to the bankruptcies of General Motors Corp. and Chrysler LLC illustrates how this new, unstated policy works: Bondholders are told to give up legal rights, and cash, as part of a government-mandated tradeoff that favors a politically connected special-interest group (the unions).

Bottom line. This socialist policy will raise interest rates for corporations. Why? Because lenders will price in the risk of government intervention. This is not anymore a free market system.

If local governments follow the wrong policies will the bond holders have to share in the "sacrifice"? Lenders are bound to raise interest rates to include the "government intervention premium"? What happened to the rules of law?

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, since 1977