Tuesday, January 20, 2015

Buy Shares in the US? A Great Idea!

Now this is some forward thinking financial engineering.
Let Treasury offer a more equity-like instrument, one that paid the investor a constant percent of nominal Gross Domestic Product ("GDP"), and nothing more, for, say, 30 years. Then the investor would have protection from inflation, Treasury would get some relief when the economy was in recession and, since it self-liquidates, there would be no need to refinance the issue; hence we would no longer burden our progeny with our profligate ways.
Indeed, we can sum up the benefits of GDP Certificates ("Certificates") as follows:
• Investors purchase a no-load, no-fee, marketable term annuity with inflation protection, growth, no counter-party risk and a low correlation with stocks and bonds during periods of inflation - a new asset class.
• Treasury raises capital, buys a financial hedge and sells inflation insurance with a self-amortizing instrument.
The idea of going long America (tax free) sounds like a great investment. The idea that if America does well your dividend increases sounds like such a great investment. You could also load up during a recession so your dividend increases when America recovers. It is so much better than endlessly increasing the debt load.

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