Felipe Rezende — Banks, Capital Markets, and Institutional Investors as Providers of Long-Term Finance

This is the second in a series of blog posts on financing infrastructure assets.

Multiplier Effect
Banks, Capital Markets, and Institutional Investors as Providers of Long-Term Finance

Felipe Rezende | Director, Economics and Finance Program, Bard College and Research Fellow, The Levy Economics Institute

Detroit Dan — Something's Rotten

In a poll of 67 economists in April 2014, every single one of them predicted that the 10-year Treasury yield (U.S. government bonds) would rise in the next six months. Every one of them was extremely wrong. The 10-year yield fell sharply for six months (and has fallen even more steeply in the 7th - 9th months). I have invested my life savings in long term U.S. Treasury bonds, and saw these predictions when they were made. Yet I never seriously considered changing my position. I was somewhat intimidated, but after a bit of thought concluded that I was right to believe that the 10-year yields would move in the opposite direction of 100% of economists. My faith has been rewarded handsomely, as yields have plunged, and my investment (PRULX - a long term U.S. Treasury bond mutual fund) has soared. Either I am a freak genius, or there is something dreadfully wrong with "economists".

Mindorenyo
Something's Rotten
Detroit Dan