Please Discuss TWO of the Following Topics:
1. This week, we discuss capital budgeting methods and processes. Could you apply the knowledge you learned this week to make better personal or professional decisions? Please elaborate on your answer with examples.
2. We discussed the term structure and yield curve last week. Yields on longer-term U.S. Treasurys have fallen further below those on short-term bonds than at any time in decades, a sign that investors think the Federal Reserve is close to winning its inflation battle regardless of the cost to economic activity. (please refer to the article: “Yield Curve Inversion Reaches New Extreme” and the WSJ video” Why Inflation Has Lasted for So Long” https://www.wsj.com/video/series/news-explainers/why-inflation-has-lasted-for-so-long/5CAFFC5A-BBDC-4B6C-A34E-57491576E9B9Links to an external site.).
What does an inverted yield curve indicate about the market’s future expectations for short-term interest rates, and why? Does the current shape of the yield curve indicate an impending recession or that the Fed is winning the war against inflation and the economic outlook is stabilizing? In your opinion, will the economy be in trouble in the next 6-12 months? Please discuss.
3. Walt Disney Co. DIS fired back against activist investor Nelson Peltz, saying Tuesday that he didn’t understand the company’s business and shouldn’t be granted a seat on the board. The entertainment company offered shareholders a 16-page slide deck that defends its Chief Executive Robert Iger against a monthslong campaign by Mr. Peltz to “challenge Mr. Iger’s legacy.” The company said, “Nelson Peltz does not understand Disney’s business.” (Please refer to the article” ” Disney Defends Board, CEO Robert Iger Against Nelson Peltz’s Criticisms” and the WSJ video” Why companies bring back their CEOs” https://www.wsj.com/video/series/news-explainers/from-robert-iger-to-steve-jobs-why-companies-bring-back-their-ceos/E16B8610-9B30-4269-A624-60210310703ALinks to an external site. )
So, why is Nelson Peltz seeking a seat on Disney’s board? Describe the key events that precipitated the current proxy contest. What arguments have Nelson Peltz (and Trian) put forward to support his candidacy for the Disney board? Do you agree with Nelson Peltz’s arguments? Please explain.
4. For the last two decades, officers and directors at U.S. public companies seeking to trade illicitly on inside information had an almost infallible get-out-of-jail-free card. All they had to do was use prearranged trading plans when they bought and sold their companies’ shares. The odds that the government would target them for enforcement actions were slim. It was an unintended consequence of a regulation adopted in 2000 called Rule 10b5-1 that some executives abused academic research shows. That regime is about to change. (Please refer to the WSJ article” “New SEC Rules Target Corporate Insider Trading”)
Insider trading is the buying or selling of a publicly traded company’s stock by someone who has non-public, material information about that stock. Where would you draw the legal and ethical lines on when trading should be considered fair and when it should be considered illegal/unethical? What did you find the most ethically troubling of all the issues raised in the article? Please offer reasons for your response.
5. Investors big and small are betting on bonds after debt funds in 2022 posted their worst performance on record. The steep selloff in fixed income means that bonds pay their highest yields in over a decade. Fund giants such as BlackRock Inc. and Vanguard Group say that makes high-quality corporate and mortgage bonds attractive compared with stocks, which stand to extend their losses from last year if the U.S. economy enters recession.(Please refer to the article: “Bonds Over Stocks: The New 60-40 Portfolio”)
Why are some experts now recommending a departure from the traditional balance portfolio model of 60% stocks and 40% bonds? What factors led to the poor performance of bonds in 2022? A portfolio manager interviewed in the article recommended short-term bonds over long-term bonds. Why? Would you change your portfolio based on the recommendations from the article?
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