Thirteen years ago, Jason Trennert wrote a Journal column about TINA. There Is No Alternative to stocks, the idea went, because the Fed's bond buying had left too few safe things that paid. In Monday's Journal, he took it back. Treasury yields have climbed enough in two months, he writes, that there are reasonable alternatives now. He calls it TARA.
Trennert runs Baird Strategas, a research firm in New York. His case is simple. The Fed says it's serious about 2% inflation, a target it has missed for more than five years. Growth is strong. So Treasurys are finding their real price again, and yields come with it. Monday's numbers back him up. A 13-week Treasury bill cleared at 4.195% at Monday's auction. The 10-year note closed at 5.135%.
He's blunt about the years of cheap money. The Fed's bond buying was an old trick with a new name, he writes, and he calls it financial repression. Borrowers won, in his telling. Savers living on interest lost. Cheap loans paid for stock buybacks, he says, which pumped up share prices without building anything new. Ben Bernanke once called the Fed the “only game in town.” Trennert says it was never meant to be.
What it means for pensions
The part public employees should read twice is about private equity. Those funds get a price check only once a quarter, he notes, and their own managers often do the pricing. That makes the ride look smoother than it is. Much of their extra return comes from borrowed money, and pensions and endowments came to count on it. Now the companies are hard to sell, and the cash coming back to investors has nearly dried up. Some trustees are learning their return assumptions may be too optimistic. He ends with a stage cue. “TINA is leaving the stage, and TARA is entering the limelight.”
Our read
This is Fixed Income IN02, and it's an opinion piece, so take it as one man's argument. It happens to match how the desk runs money. Our safe money sits in Treasury bills and floating-rate notes, SGOV in 49 books and USFR in 14, held at weight, nothing added. We still avoid long bonds. TLT sits in 4 older books with nothing added. A 4.195% bill doesn't make anyone rich. It does mean cash isn't dead weight anymore, and that changes the math on how much risk you need to take.
Here's the line in your own plan this touches. Your emergency fund, and any cash parked at the bank. Many savings accounts still pay a fraction of what a bill pays. This week, find the rate on your savings or sweep account and set it beside 4.195%. If the gap is wide, that's interest you may be leaving on the table. If you're a public employee, note a second number too. Your pension's assumed return shapes how well funded the plan looks, and Trennert says many of those numbers may be too high. You don't fix a leak in a storm. You find it on a dry day, and we're glad to look at both numbers with you.