07/01/2004
Inflation-linked bonds are in vogue since the government announced that it would issue new 5- and 20-year Treasury Inflation Protected Securities (TIPS) to supplement its current 10-year offerings. While inflation is a serious concern, TIPS are not tax-efficient, and some worry they may be overpriced. Should I invest in TIPS or find other ways to hedge against inflation?
The IRS has demanded client information from KPMG as part of its investigation into allegations that the accounting firm offered “abusive” tax shelters. A federal judge has ordered KPMG to provide the records. Does this set a precedent? Will my advisors be able to keep my records confidential?
Private equity firms are raising substantial amounts of investment capital via public offerings of stock. Some of the biggest firms, including KKR and Blackstone, are reported to have issues waiting in the wings. Are these shares a good investment? How do they compare to my traditional private equity investments?
Many investment banks’ profits now depend on proprietary trading (that is, the bets they make with their own capital). With interest rates on the rise, many formerly profitable prop-trading strategies are losing their luster. If my bank suddenly suffers losses, will it cut back its credit lines, as many banks did in response to prop-trading losses in Asia and Russia in 1997 and 1998? Should I diversify my sources of credit?
A virulent computer worm called Sasser, which attacks Windows-based computers, disrupted operations at several global banks in early May. How do I assess my bank’s systems security to ensure its services are available when I need them?
The 10 countries that joined the European Union
on May 1 will soon align their tariffs with those of the other 15 EU members.
They will raise some trade barriers and eliminate others. Will this affect any
of my business interests or investment opportunities in Europe or
elsewhere?
The catastrophe bond market is booming; $1.73 billion of these
instruments (bonds that fall in value in the event of specified natural
catastrophes such as earthquakes or hurricanes) came to market last year. These
investments have performed well in recent years. Should they be a part of my
portfolio?
Growing concern that China will rein in its burgeoning economy by
tightening monetary policy has some investors worried that the bull-run in
commodities—spurred in part by demand from Asia—may be nearing an end. How
exposed am I to the energy, metals and other natural resources
markets?
Telecom companies are purchasing voice-over-IP technology developers
(which devise ways to place telephone calls over the Internet) at a rapid pace.
If this technology delivers as promised, what dangers would it hold for my
investments in traditional telephone utilities? What opportunities would it open
for new investments?
Warren Buffett excoriated mortgage giants Fannie Mae and
Freddie Mac for their use of financial derivatives, which he believes puts these
government-sponsored entities (GSEs) in serious danger. How much GSE debt do I
hold in my portfolio? Are Buffett’s criticisms valid, and if so, does it make
sense to reduce my exposure to these entities?