The Politics Of Alpha: Europe, China, And The U.S.
AllAboutAlpha | Oct 04, 2012 02:43AM ET
On the morning before the first U.S. Presidential debate of the general-election phase of this campaign season, Janus Capital hosted a roundtable on “Investing and Politics,” discussing what the outcome of the election, and other political shifts here and abroad, may mean for your portfolio.
Stephen Moore, a senior economics writer at The Wall Street Journal, and author of Bullish on Bush: How George Bush’s Ownership Society Will Make America Stronger (2004) moderated the event.
One participant, Jonathan Coleman, noting several aspects of the fiscal policy of the U.S. at present that he regards as unsustainable whoever is elected in November, observed, “We spend $750 billion a year in defense spending,” and that this isn’t merely more than anyone else in the world, it is more than the next 15 spenders combined. Such conditions “are unsustainable in the long run, the question is when does the breaking point occur.”
The panel also included: Peter W. Atwater; Gibson Smith; and John Taylor. Coleman is co-CIO for Janus, and co-author of Growth for the Long Run, a recent Janus report on the appeal of equity interests in “durable, long-duration growth companies.” Atwater is a consultant to money managers, hedge funds, foundations, and endowments. Gibson Smith, also co-CIO for Janus, is responsible for its fixed income strategies, and is a co-author of Redefining Risk in Fixed Income.
Taylor is in a sense the stand-out of the group. His research into monetary policy has led him to formulate the so-called Taylor Rule: a country or currency zone’s nominal interest rate, especially what in the U.S. is known as the federal funds rate, should track and somewhat exceed the inflation rate over the previous four quarters. Some central bankers have credited his work and namesake rule with the pharmacy benefit managers, will likely benefit from the political and policy environment whoever wins the election. He also suggested that research oriented pharmaceutical companies, those developing breakthrough therapies, are likely winners. They can price their products at “attractive levels” for investors.
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