For over a hundred years Wall Street has marketed one assurance to its customers above all others.
The line: That U.S. Treasury bonds, the IOUs issued by Uncle Sam to pay for national debts, are utterly without risk of default. When I was being trained as an analyst, many years ago, professors from Harvard and Insead, the posh international business school, explained that the interest rate on those bonds is technically known as the “risk-free” rate of return, and that they underpinned absolutely everything else in the financial world, from the price of mortgages to the decision by Amalgamated Widgets to open a new factory.
Read Full Article »