Richard Marston - Faculty Research in Knowledge@Wharton

Obama's Regulatory Plan: Too Hot, Too Cold, or Just Right?

Wed, 24 Jun 2009 16:27:19 EST

Five months into his administration, President Barack Obama on June 17 unveiled his complex, sweeping financial proposals to create a "21^st century regulatory framework" for the U.S. The proposed regulations give the Federal Reserve more power to watch over Wall Street and also create a new agency to curb abuses by mortgage and credit card lenders. Wharton professors and other experts say that while the new framework does not hamper financial innovation, it is also "too timid" and fails to address serious problems.

Deflation Fears: Could Falling Prices Let the Air Out of a Recovery?

Wed, 13 May 2009 16:53:27 EST

Experts are far from unanimous on the question, with some arguing that deflation could be widespread, while others insist an economic rebound and government stimulus efforts make deflation less likely. Some fear that a stimulus-driven recovery could trigger the opposite: inflation.

Why Economists Failed to Predict the Financial Crisis

Wed, 13 May 2009 16:53:27 EST

A sense that they failed to see the financial crisis brewing has led to soul searching among many economists. While some did warn that home prices were forming a bubble, others confess to a widespread failure to predict the damage the bubble would cause when it burst. Some economists are harsher, arguing that a free-market bias in the profession, coupled with outmoded and simplistic analytical tools, blinded many of their colleagues to the danger. A recent paper from a conference of economists calls for changes in the way they are trained.

The $2 Trillion Question: Will Investors Buy the Government's Toxic Asset Plan?

Wed, 01 Apr 2009 17:13:39 EST

The Obama administration aims to move $2 trillion in toxic assets off financial institutions' books by offering taxpayer-backed loans to hedge funds and other investors, trying to improve on earlier strategies that have failed to rekindle trading in securities backed by mortgages and other debt. The goal is to thaw the credit markets -- to get banks to lend money the economy needs to grow. Will it work? Experts have mixed views.

After Dodging Many Bullets, Hedge Funds Are Back in Regulators' Sights

Wed, 18 Mar 2009 16:34:51 EST

The hedge fund industry's long history of avoiding tougher regulation may be coming to an end, as the Obama administration and Congress look for ways to avoid another financial meltdown. Although it is not clear that hedge funds actually played much of a role in the current crisis, the industry's sagging performance, combined with investors' and regulators' heightened demand for transparency, will likely cause big changes in the way these secretive investment pools operate, according to several Wharton faculty members.

Worry in the West as Eastern and Central European Economies Head South

Wed, 04 Mar 2009 14:25:43 EST

The world financial crisis is unraveling the gains made by many Central and Eastern European economies during their post-Cold War resurgence. With the region no longer isolated, an economic collapse could reverberate in the West, as Central and Eastern European borrowers default on an enormous volume of loans that Western banks were all too eager to grant just a few years ago.

The Other Banking Drama: Those Secret Swiss Accounts

Wed, 04 Mar 2009 14:25:43 EST

Tax authorities in the United States have challenged long-standing Swiss banking secrecy laws, demanding that UBS AG release the names of 52,000 Americans suspected of opening secret accounts to evade taxes. The bank agreed to release client information on 250 U.S. citizens and pay a $780 million fine as part of a settlement, but that decision has put the entire Swiss banking system in jeopardy, according to Wharton faculty.

A World Transformed: Panelists Look Beyond the Crisis

Wed, 04 Mar 2009 14:25:43 EST

Most Americans don't need a university professor to tell them the economy is in trouble. But many still are wondering when the tide will turn, and what can be done to make sure another economic crisis never happens again. During a recent University of Pennsylvania panel, hosted by Penn president Amy Gutmann, faculty shared cautionary tales from the Great Depression and Japan's "lost decade." They also said they expect to see new rules for the financial sector -- and new attitudes among consumers.

Trade Wars: Will Protectionism Win out over Recovery?

Wed, 18 Feb 2009 17:51:20 EST

When governments around the world spend vast sums to stimulate their economies, it seems only reasonable for each to invest at home. Why should the American taxpayer pay for steel from Canada when U.S. steelmakers are struggling? So it was hardly a surprise that the $787 billion stimulus plan just signed by President Barack Obama included protectionist language. But economists and political leaders in the U.S., Europe and elsewhere worry that such sentiments threaten free-trade principles that are crucial to any global economic recovery.

The Financial Crisis: Bad and Getting Worse, but Put Away that D-word

Wed, 21 Jan 2009 16:32:55 EST

It began as the "subprime crisis" in 2007, and then mushroomed into a full-blown global recession in 2008. And still, despite mammoth government intervention, the bad news keeps getting worse. Are we now teetering on a precipice, ready to plunge into another Great Depression? Can the latest proposals pull the economy out of its nosedive? There is plenty to worry about. But while many experts say this crisis is the worst since the Depression, that doesn't mean it will be as bad.

Getting It Right: Making the Most of an Opportunity to Update Market Regulation

Wed, 21 Jan 2009 16:32:55 EST

As the global economic crisis continues, politicians and investors are escalating calls for new regulatory scrutiny of financial markets. After decades of a cat-and-mouse game between the industry and regulators, Wharton faculty say a dramatic overhaul of the Depression-era regulatory system is needed. At the same time, they warn that meaningful reform will be enormously complex and require long and careful consideration, not a quick fix to appease voters looking to place blame for the meltdown.

Global Economic Forecast for 2009: Will Demand for Good News Outpace Supply?

Wed, 07 Jan 2009 17:01:05 EST

After a year of financial shock and sharp economic loss, 2009 is likely to be extremely difficult for the global economy, with investors, business leaders and policymakers struggling to find signs of recovery. Wharton faculty and other experts interviewed by the Knowledge@Wharton Network discuss the outlook for the U.S., Europe, Latin America, India, China and Japan.

The Fairness Issue: How to Cope with the Flood of Foreclosures

Wed, 26 Nov 2008 12:34:08 EST

Is the cavalry coming to rescue troubled homeowners? Despite soaring foreclosure rates, President Bush and other Republicans have not made this a top priority. But this could soon change: President-elect Barak Obama and fellow Democrats say reducing foreclosures is crucial to attacking the financial crisis. As one expert notes: "The financial sector weaknesses all originate in the housing market. If we don't solve the housing problem, then the weaknesses in the financial sector are going to continue to multiply."

The G-20 Economic Summit: More Symbolic than Substantive?

Wed, 12 Nov 2008 15:45:28 EST

It seems sensible: Bring leaders of the 20 largest economies together to discuss a coordinated plan for dealing with the world financial crisis. But the upcoming G-20 Economic Summit in Washington, D.C., has some commentators wondering what can be accomplished with so little preparation time, while others express concern about the formation of any new regulations when the causes of the crisis are still not thoroughly understood. Wharton faculty and other experts discuss some potential outcomes of the November 15 gathering.

A Billion Here, A Trillion There: Calculating the Cost of Wall Street's Rescue

Wed, 29 Oct 2008 13:34:46 EST

How will the U.S. pay for its plans to prop up the financial sector? Answer: by borrowing -- raising worries about how the country's ballooning annual budget deficits and aggregating debt will affect the economy and financial markets. Some guidelines, such as interest rates and the ratio of debt and deficits to gross domestic product, suggest the new debt will be digested easily. But some experts think those guidelines are misleading, warning that obligations are piling up like tinder on a forest floor.

Richard Marston and Jeremy Siegel: Will the Bank Plan Revive Global Markets?

Wed, 15 Oct 2008 17:08:35 EST

With stock markets in free fall, U.S. Treasury Secretary Henry Paulson announced on Tuesday that the government's effort to unlock credit markets would include direct investments of $250 billion in bank equities. He also warned bankers not to hoard the money, but to use it to make the loans that lubricate the nation's economy. In separate interviews, Wharton finance professors Richard Marston and Jeremy Siegel tell Knowledge@Wharton that while the investment is not without risk, it appears to be the best hope for restoring confidence in credit and stock markets -- and reducing the severity of a recession that is all but certain to come.

How the Credit Crisis Could Forge a New Financial Order

Wed, 15 Oct 2008 16:48:07 EST

As officials worldwide scrambled to contain the spreading financial virus, hopes are rising that the latest government plans to purchase equity stakes in banks may finally offer the right medicine. And with the patient showing intermittent signs of improving, thoughts turn towards next steps, including new restrictions on the markets. In addition, expect individuals and business to have a tougher time getting loans for years -- not just months. And watch for authorities to prescribe greater transparency, stricter capital requirements to reduce leveraging, and more standardized financial contracts to push opaque securities into the sunlight.

The $700 Billion Question: How Much Is That Exotic Security?

Wed, 01 Oct 2008 17:12:09 EST

Economists and financial experts don't all agree that the Bush Administration's $700 billion Wall Street rescue plan -- a taxpayer-funded purchase of troubled mortgage securities -- is the best way to attack the credit crunch. However, even those who support the plan acknowledge that there is an unanswered question at its core: How would the government know if it is paying the right price for the exotic securities it plans to buy?

Huge Reserves, Emerging Market 'Challengers' and Other Forces Are Changing Global Finance

Mon, 22 Sep 2008 16:32:49 EST

Rapidly developing economies have become drivers of change -- and sometimes disruption -- in global financial markets. That has important implications for companies in the U.S. and Europe as new players emerge, including sovereign wealth funds, state-controlled entities and acquisition-minded corporations. According to experts at Wharton and The Boston Consulting Group, these entities will increasingly look to buy assets beyond their borders, including controlling stakes in foreign companies.

Note to Investors: Don't Play Games with Asset Allocation

Wed, 17 Sep 2008 20:25:57 EST

Big market downturns and jarring volatility have left small investors feeling whipsawed -- and nervous. But it would be a mistake to abandon classic long-term personal finance principles in the face of recent challenges. The 60% stocks, 30% bonds and 10% cash approach remains the best strategy. Wharton finance professors Jeremy Siegel, Richard Marston and Franklin Allen explain why.

After the Bailout: How Can the Fed Clean Up the Fannie and Freddie Mess?

Wed, 17 Sep 2008 20:25:57 EST

The government's refusal to save Lehman Brothers begs a question: Why did it step in only a week earlier to risk up to $200 billion in taxpayer money to shore up mortgage giants Fannie Mae and Freddie Mac? Wharton faculty say the government made the right move -- and offer suggestions for the next step.

The Candidates on Taxes: Finding the Devil in the Details

Wed, 03 Sep 2008 17:03:03 EST

The two U.S. presidential candidates may paint themselves as agents for a new, more bipartisan attitude in Washington, but Republican Sen. John McCain and Democratic Sen. Barack Obama both tend to adhere to their parties' usual approaches to tax policy. Obama proposes to raise taxes on the wealthy and reduce them for the middle class; McCain proposes to sustain the tax cuts enacted by the Bush administration. But neither candidate fully explains how they will pay the bills. This is the first in a series of articles from Knowledge@Wharton examining economic and fiscal policies proposed by the candidates.

Obama and McCain: Different -- and Evolving -- Visions for the U.S. Economy

Wed, 25 Jun 2008 15:56:24 EST

Presidential candidates John McCain, Republican senator from Arizona, and Barack Obama, Democratic senator from Illinois, are staking out contrasting positions, mostly along traditional party lines, in their campaign to win election in November as the 44^th president of the United States. One thing they have in common: Both offer tax and spending plans that would deepen the deficit. Wharton professors, as well as commentators from around the globe, weigh in on the economic views of each candidate.

Credit Crisis Interview: Richard Marston on Risk

Fri, 20 Jun 2008 12:29:35 EST

Wharton finance professor Richard Marston discusses the markets' perception of risk in this video interview. Marston is one of seven Wharton professors whom Knowledge@Wharton spoke with for this special report on the credit crisis.

Subprime Crisis: Did Bernanke Go Too Far, or Did He Not Go Far Enough?

Fri, 20 Jun 2008 12:30:21 EST

To restart the economy, the Federal Reserve created new channels of lending, cut target rates. The prompt and aggressive action was spurred by Chairman Ben Bernanke's research on the Great Depression. How will history judge his strategy?

Subprime Crisis: Could New Rules Avert Another Credit Crisis? Perhaps, but Be Wary

Fri, 20 Jun 2008 12:30:17 EST

An unusual alignment of economic conditions -- and some very careless and risky bets -- triggered the meltdown. Should regulators step in to prevent a repeat? Should the government rescue the wounded? Experts say some new rules may be in order, but the details will be important. A concern: Bailouts may encourage risky behavior.

Yanked from Obscurity: Why Finance Experts Are Rethinking LIBOR

Wed, 11 Jun 2008 16:37:46 EST

First, U.S. Bankers raised questions about how the daily London Interbank Offered Rate was calculated, and then The Wall Street Journal demonstrated that the rate was inexplicably diverging from what the data suggested it ought to be. Getting it right is important, because LIBOR is the basis for many kinds of loans. The British Bankers Association says it will make changes.

Market Manipulation, or Just Business as Usual?

Wed, 02 Apr 2008 17:52:07 EST

The financial markets are in turmoil. Inflation is picking up. Home prices are falling. More companies are laying off workers. Oil prices are sky-high. It's getting harder and harder to borrow money. It seems like a nest of conspirators is preying on America. Even Washington is reinforcing the impression with talk of sweeping reforms to the system of economic oversight. Indeed, economic commentator Ben Stein has promoted the notion of market manipulation from the shadows, largely in the form of hedge funds. Yet Wharton faculty reject that idea, saying instead that the market is suffering a hangover from the easy-money excesses of recent years.

The Economic Stimulus Package: Will It Work, and for Whom?

Wed, 20 Feb 2008 15:24:45 EST

Congress and the White House recently settled on an economic stimulus package with unusual speed, pushing the throttle to pull the economy out of a nosedive. Is this just election-year grandstanding, or does economic stimulus really work? While some experts argue that priming the economy now is unnecessary or even counter-productive, others support the $168 billion package and its emphasis on low and moderate-income recipients. As for the health of the economy overall, experts agree that no economic boom is in the near-term forecast.

Advice to Investors: Sit Tight and Batten Down the Hatches

Wed, 23 Jan 2008 16:49:57 EST

The worldwide collapse of stock prices has many victims -- pension funds, insurance companies, hedge funds, financial services firms. But those are players who, if they are smart, have the wherewithal to withstand a steep sell-off. What about the small investor, the individual who is socking away modest sums for retirement or college costs? Should small investors rush for the sidelines? Or should they view this as a buying opportunity? Knowledge@Wharton asked six experts for advice on investment strategy.

What's Ahead for the Global Economy in 2008? Reports from the Knowledge@Wharton Network

Wed, 09 Jan 2008 16:49:19 EST

Though the subprime mess and rising oil prices slammed the U.S. economy during much of 2007, other emerging markets -- especially China and India -- seem to be on a roll. China's growth rate of more than 11% is likely to continue, and India, too, should be able to sustain a high rate of GDP growth, even if it slows from last year's 9%. Latin America, meanwhile, is cautiously optimistic but could see a moderate decline in 2008. The Knowledge@Wharton Network sites -- including Universia Knowledge@Wharton, China Knowledge@Wharton and India Knowledge@Wharton -- spoke with Wharton faculty and other experts about what to expect during the coming year.

A Closer Look at Sovereign Wealth Funds: Secretive, Powerful, Unregulated and Huge

Wed, 12 Dec 2007 14:42:26 EST

The Abu Dhabi government is buying a 4.9% stake in Citigroup for $7.5 billion. UBS is selling a 10.8% share to the government of Singapore and an unnamed Middle Eastern investor for $11.5 billion. Two Middle Eastern government funds now own a third of the London Stock Exchange. Governments, through investment pools known as sovereign wealth funds, have put tens of billions of dollars into Western financial firms this year. But is foreign ownership -- or, more precisely, foreign government ownership -- really a good thing? Many experts think this mushrooming trend bears watching, especially for any sign that these funds are evolving from pure investment vehicles into tools for exerting political pressure on the "target" countries.

Good, Bad or Ugly --Is It Impossible to Predict What's Ahead for the U.S. Economy?

Wed, 14 Nov 2007 15:21:26 EST

At the end of October, the Federal Reserve gave the financial markets just what they had been asking for: a 0.25% cut in the federal funds rate. But in early November, stocks plunged and the dollar hit a new low. Applause turned into hand-wringing -- then back to applause as the markets rebounded in the middle of the month. Why can't the experts make up their minds? Is the outlook good or bad? According to Wharton faculty, forecasting is particularly hard now because some of the key factors -- such as the credit crunch arising from the subprime mortgage mess, spiking oil prices and the plunging dollar -- have little historical precedent. The result: Finance experts, including the Fed, may not be able to see too far down the road.

The Impact of Good Governance on International Investing: The 'Home Bias' Effect and Other Issues

Wed, 25 Jul 2007 14:40:29 EST

Following accounting and governance scandals at Enron and other U.S. companies, policymakers in the United States and elsewhere responded by establishing new corporate governance rules, including the Sarbanes-Oxley Act. Now, after complaints from the business community that regulations are hurting profits, some countries are taking a second look at post-Enron reforms. But according to research presented during a recent conference on international corporate governance -- sponsored by the Weiss Center for International Financial Research at Wharton -- countries should think twice about loosening governance regulations.

Hedge Funds Escape Regulation: Should Investors Be Worried?

Wed, 07 Mar 2007 14:51:20 EST

When the Lilliputians came upon the sleeping Gulliver, they didn't know if he was friendly or hostile, but he was so big it seemed prudent to tie him down. Should the 9,000 hedge funds -- the secretive investment pools controlling $1.4 trillion in assets -- be treated the same way? The President's Working Group on Financial Markets doesn't think so. In a late-February report, the group urged vigilance but concluded that new regulations are not needed. Was this the right decision? Wharton faculty weigh in on the issue.

What's Ahead for 2007? Knowledge@Wharton Network Surveys the Globe

Wed, 13 Dec 2006 16:02:13 EST

On the financial front, 2006 has been a pretty good year all around. Stock markets in many countries have rallied, energy prices have fallen, inflation is relatively low and growth in GDP ranges from respectable to robust. But the economies of most countries also face a number of threats -- some predictable, some not -- that could derail recent gains in our increasingly connected global markets. What's ahead for 2007 in the U.S., India, Europe, Latin America, China and other parts of the world? We offer a roundup of reports from the Knowledge@Wharton Network, including India Knowledge@Wharton, Universia Knowledge@Wharton and China Knowledge@Wharton.

May's Market Collapse: What's an Investor to Do?

Wed, 31 May 2006 14:58:22 EST

American investors have poured money into foreign stocks in recent years, lured by the hope of outsized gains. They have been well rewarded in the past 12 months, but in May, markets plummeted around the world. Mutual funds investing in foreign stocks, for example, lost more than 8% in the two weeks ending May 25, although their previous stunning performance left them up nearly 31% for the 12 months ending on that date. The late-May plunge was especially severe in emerging markets. Is this another bubble bursting, the way the tech-stock bubble collapsed several years ago? Wharton professors offer their take on the downturn and its implications for nervous investors.

Why Oil Prices Are Up, and What We Can, and Can't, Do about It

Wed, 03 May 2006 15:49:45 EST

Rising prices for crude oil and gasoline have alarmed many consumers and put President Bush and other U.S. politicians in a position where they feel they have to do something -- anything -- in response, especially in an election year. But members of Wharton's finance department and private-sector economists say it's a good time to look rationally at the reasons for the price hikes and their likely effect on the economy and on energy policy. They also say that as long as the United States continues to rely on oil producers in other parts of the world, high prices and price volatility will be the norm. Bolivian President Evo Morales's decision, announced this week, to nationalize the country's natural gas sector, only underscores that point.

Foreign Stocks Are In, and So Is Indexing

Wed, 19 Apr 2006 17:26:19 EST

Foreign stocks are soaring and Americans are pouring money into them. But although overseas equities have captured investors' fancy before, there's a twist this time: More investors are embracing passive, index-style investing, ignoring the long-held belief that active managers can beat indexers by uncovering bargains in inefficient foreign markets. Have conditions really changed enough to make indexing pay off as well in foreign markets as it has in the U.S.? It may be too soon to know for sure. But international equity markets and American investor behavior are clearly evolving, according to Wharton finance professors.

Germany's Angela Merkel: A 'Continental European Politician in the Making'

Wed, 08 Mar 2006 08:42:04 EST

During her first few months in office, German Chancellor Angela Merkel has attained the kind of approval rating that politicians the world over dream about, largely due to the way she has handled herself on international matters in visits to Washington, Moscow and Brussels. But her main challenge is Germany's economy, Europe's largest and the world's third biggest. It is a challenge that has been staring German leaders in the face for a long time, for a number of reasons: lackluster GDP growth over the last five years; a vast, overburdened welfare state; an anemic service sector; stubborn protectionist sentiment, and an aging population that will place greater strain on the nation's budget in years to come. In whatever policies she proposes, Merkel will have to tread softly to avoid alarming citizens and trade unions wary of change, say scholars at Wharton and business schools in Europe.

What Lies Ahead for the U.S. Economy in 2006

Wed, 08 Feb 2006 16:49:21 EST

The economic growth that the United States enjoyed in 2005 will continue in 2006, as stronger business investment begins to pick up the slack on the part of consumers who will curtail the white-hot spending that has been a key factor in propelling the economy, according to Wharton faculty members and private-sector economists. In addition, these experts say, oil prices will remain high in 2006, but not much higher than they are now, the residential real estate boom will cool and American workers will be forced to deal with a volatile employment market.

New Fed Head Bernanke: Inflation Is Key

Mon, 21 Nov 2005 14:54:32 EST

Ben S. Bernanke is a superb choice to replace Alan Greenspan as chairman of the Federal Reserve, but he will have to demonstrate to financial markets that he is as much an anti-inflation hawk as his predecessor, according to Wharton finance professors and private-sector economists. These observers also say that Bernanke will speak more plainly in explaining Fed actions than Greenspan, whose cryptic, oracular comments became his trademark. Finally, Bernanke is likely to establish and publicly disclose the Fed's specific target, or target range, for the inflation rate -- a policy that Greenspan eschewed but one that is becoming more common among central bankers worldwide.

Hedge Funds Are Growing: Is This Good or Bad?

Wed, 29 Jun 2005 16:12:24 EST

When the ratings agencies downgraded General Motors debt to junk status in early May, a chill shot through the $1 trillion hedge fund industry. How many of these secretive investment pools for the rich and sophisticated would be caught on the wrong side of a GM bond bet? In the end, the GM bond bomb was a dud. Hedge funds were not as exposed as many had thought. But the scare did help fuel the growing debate about hedge funds. Are they a benefit to the financial markets, or a menace? Should they be allowed to continue operating in their free-wheeling style, or should they be reined in by new requirements, such as a move to make them register as investment advisors with the Securities and Exchange Commission?

In the Wake of the Latest 'No' Votes, Will Economic Growth in Europe Be a Go?

Wed, 29 Jun 2005 16:12:24 EST

The reasons why voters in France and the Netherlands rejected the European Constitution a few weeks ago were many. But two overarching themes of the referendums were discontent and fear: discontent with politicians' inability to revitalize the lagging economies of many EU countries, and fear of what the future may hold for people accustomed to secure jobs and generous benefits. Scholars at Wharton and at universities in Europe say that the 25-member EU must institute free-market, Anglo-Saxon-style reforms to reinvigorate the economies; in particular, they point to labor laws that make it difficult to hire and fire people. But some also say that Europe can achieve higher growth rates without completely abandoning the social welfare policies that have been in place since World War II.

Revaluing the Yuan: Where Politics and Economics Collide

Mon, 25 Jul 2005 16:23:22 EST

As the Bush administration continues to pressure China to allow the yuan to rise against the dollar in order to stave off protectionist legislation in the U.S. Senate, Chinese officials continue to reply that they will not be coerced into taking action by a foreign government meddling in a matter of national sovereignty. Faculty members at Wharton and other China-watchers predict that China will eventually revalue the yuan, probably this year, because it is in China's own long-term interest to do so. These experts also note that the United States, by trying to force the issue in a vociferous, public manner, is possibly delaying the revaluation. In addition, they say, revaluing the yuan will not revitalize industries that have been battered by the movement of certain jobs to China, where labor and production costs are cheap.

The French Connection: Will a 'No' Vote from France Cause Europe to Fall Apart?

Wed, 18 May 2005 15:30:26 EST

'Oui' or 'Non'? That's the question French voters will face on May 29 in a referendum on a constitution that would encompass the 25 countries of the European Union. Recent opinion polls indicating weakened support for the constitution have French President Jacques Chirac and other members of the EU elite worried, with some sounding alarms that a 'No' vote would spell disaster for Europe. But according to Wharton faculty and observers in Europe, rejection of the constitution would not derail the integration process entirely -- things are too far along for that -- and would have minimal impact on financial markets and how business is conducted.

The Economic Outlook for 2005

Wed, 12 Jan 2005 15:15:21 EST

Investors, consumers and businesses have had a fair share of concerns in 2004: high fuel prices, less-than-stellar job growth and volatile swings in the stock market, which remains well below the highs set four years ago. But by many measures the year is ending well. Oil prices dropped in December, hiring has picked up, and the Standard & Poor's 500 returned nearly 8% from the start of the year through mid-December. Will the good news continue in 2005? The smart money says the coming year will probably bring decent, but not terrific, gains in economic growth and stock prices, according to four Wharton professors, who nevertheless warn of possible fallout from the deepening federal and current-accounts deficits and the falling dollar.

Wealth Management Report: Asset Allocation and Diversification

Thu, 17 Jun 2004 15:18:08 EST

Investors today face bewildering choices about what to do with their money. As market conditions change and new financial products appear and disappear, making sense of information and innuendo about effective ways to manage wealth can be extraordinarily difficult. In this Wealth Management Report, produced in collaboration with the Institute for Private Investors by contributing editor Nina Mehta, Knowledge@Wharton readers offer a variety of perspectives on how they think about asset allocation and diversification. Future reports will focus on topics such as performance evaluation, hedge funds and estate planning, among others.

The Dollar's Weakness Is a Strength

Wed, 04 Jun 2003 00:00:00 EST

The decline of the dollar is getting everybody�s attention these days. Members of Wharton�s finance department and an economist at a U.S. financial institution say the dollar�s decline against some of the world�s major currencies will have far-reaching economic and political effects for many months to come, particularly in America and Europe. Indeed, the chain of events that the dollar�s movement has set in motion may have a lot to do with the outcome of the U.S. presidential election in 2004.

Europe�s Budget Battles Argue for a Kinder, Gentler Fiscal Pact

Wed, 26 Mar 2003 00:00:00 EST

The euro�s recent rise against the dollar disguises deepening strains in the fiscal foundations of the single European currency. Its revival, after all, is due more to the weakness of the dollar and market jitters about the war in Iraq than to any improvement in the economic prospects of eurozone countries. Germany reported just 0.5% growth in gross domestic product for 2002 while France recorded an anemic 1.7%. Both countries have exceeded the eurozone�s budget deficit limit of 3% of GDP, raising serious questions about the viability of the fiscal rules during times of economic hardship.

The Perils of Hedge Fund Regulation

Wed, 26 Feb 2003 00:00:00 EST

To many investors, hedge funds seem like an oasis of positive returns in the current desert-like environment of poor returns. Whether this is true is debatable. But two trends have made the regulation of hedge funds � which so far have been very lightly regulated � a hot topic. One is the increasing availability of hedge fund products to a broader audience than before. The other is the barrage of news reports focused on hedge fund fraud and blowups, which directly or indirectly raise the question: Should hedge funds be regulated? Wharton faculty share their views.

The Economic Outlook for 2003: A Promising Start

Wed, 15 Jan 2003 00:00:00 EST

Last year marked the first time in decades that the U.S. stock market had logged three losing years in a row. Will 2003 be better? So far, the signs are encouraging. The Standard & Poor�s 500 rose nearly 6% in the first nine trading days. Historically, the start of January has been a good indicator of full-year performance, though there have been plenty of exceptions. On the down side, the threat of war, the continuing sluggishness of the economy, excess production capacity and debate over President Bush�s $674 billion tax-cut package hang over the market. In short, hold your applause for a few more months.

The Future of the Euro-Dollar Relationship Depends a Lot on the U.S.

Wed, 30 Jan 2002 00:00:00 EST

The euro, according to international finance experts at Wharton, is doing well. Completing the final stage of its three-year launch on January 1, the euro could, in fact, become an alternative to the dollar as a global reserve currency, or even provide a place of refuge if mounting U.S. debt leads to a weaker dollar. A lot depends on the U.S. economy.

What�s Ahead for 2002?

Wed, 16 Jan 2002 00:00:00 EST

What�s next? Will 2002 be like 2001, with unemployment going up, stock prices going down, the trade balance worsening and tech industries in turmoil? No one knows for sure, of course. But Knowledge@Wharton asked several Wharton professors for their best predictions about issues and trends in four key economic areas: the stock market, employment, international trade and technology.

Argentina: Can It Go From Bad to Worse?

Wed, 16 Jan 2002 00:00:00 EST

If ever the Broadway show tune �Don�t Cry For Me, Argentina� had poignancy, now is the time. The fact is, a lot of people are crying over Argentina, including the country�s bankers, government leaders and middle class, not to mention outside investors. Knowledge@Wharton looks at what went wrong with the Argentine economy and whether a recovery is on the horizon.

Japan�s Economic Outlook Remains Gloomy But Opportunities Exist for Investors

Wed, 10 Oct 2001 00:00:00 EST

Japan�s stock market - and its economy - have been in a dismal state since the beginning of the 1990s. The Sept. 11 terrorist attacks in New York and Washington made matters worse, pushing the country into what analysts say is Japan�s fourth recession in a decade. But Wharton faculty and outside market analysts add that some sectors of the Japanese economy should be attractive for long-term investors.

In Bush�s Economic Stimulus Package, Timing Is Key

Wed, 10 Oct 2001 00:00:00 EST

As the U.S. economy continues to feel the aftershocks of the terrorist attacks on Sept. 11, the focus now is on how to turn around the ensuing recession. The effect of President Bush�s recently proposed economic stimulus package is difficult to gauge given that consumer and corporate spending remain so unpredictable. Experts agree, however, that the timing of the stimulus will have a major impact on its success or failure.

U.S. Economic Outlook: Unclear, but Keep Lowering Those Interest Rates

Wed, 31 Jan 2001 16:24:30 EST

The U.S. Federal Reserve lowered the federal funds target rate on January 3. Stocks surged. Then they plunged. Then they rose a little. A further rate reduction may come on Jan 30. Or it may not. Are we most worried about consumer confidence, corporate spending, the stock market, the technology sector, the telecom sector, the spread on high-yield bonds, or all of the above? Wharton professors offer some thoughts.

European Banks on Shopping Spree in U.S.

Thu, 28 Sep 2000 08:47:15 EST

In the last two months alone, several European financial institutions have announced their interest in acquiring U.S. investment banks and brokerage firms. Why the sudden activity? And what are the chances these acquisitions will succeed? Two Wharton finance professors look at the companies involved and analyze the dynamics of the global underwriting business.