Putting a Cap on a Sweet Deal
The U.S. Treasury is cutting deeply into how much you can sock away in U.S. savings bonds. Starting on Jan.1, 2008, savers may put away $20,000 per year: $5,000 each in traditional Series EE and inflation-indexed Series I bonds you buy online, another $5,000 each in paper bonds you get through a bank. The current limit is $120,000, so if you want more than $20,000 worth, buy soon.
The I-bond cap makes it harder for individuals to hedge against inflation at a time when rising prices are a threat. Yet many finance scholars argue that inflation-indexed bonds should be the foundation of a long-term retirement portfolio. "The U.S. Treasury is deliberately making I-bonds more difficult to acquire and hold," says Boston University professor Zvi Bodie. The government says it isn't. "We're trying to redefine the program toward the small investment," says Joyce Harris, a Treasury spokesperson. The lure of the I-bond: Your savings compound tax-free, so you don't pay taxes until you cash in. There's no cap on purchases of Treasury inflation-protected securities, but TIPS don't defer taxes unless held in a retirement account.
Investing's Next Hot Spot: The Mideast and North Africa
Move over, BRICs, and make room for MENAs. BRICs (for Brazil, Russia, India, and China) have been hot investment markets for the past few years. Now attention is turning to the Middle East and North Africa (MENA). Algebra Capital, a Dubai investment firm partly backed by fund giant Franklin Templeton (BEN), opened a $500 million Alpha MENA portfolio on Oct. 7. The fund, which requires a $100,000 minimum, focuses on financial services, construction, oil, fertilizer, and transportation companies in the region. Permal Group, Legg Mason's (LM) fund of hedge funds, launched a fund on Nov. 30 with an emphasis on MENA countries. Investors with lesser sums can play the MENA wave through T. Rowe Price's Emerging Europe & Mediterranean (TREMX) mutual fund or the SPDR S&P Emerging Middle East & Africa (GAF) exchange-traded fund, though both have much broader investment mandates (MORN).