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Volatility, inflation risk are compelling investments in 17 Pimco


NEW YORK Risks of both rising stock market volatility and inflation coupled with substantial underpricing on both fronts make both areas compelling investments for 2017, Pacific Investment Management Co said on Tuesday."Today's cheap implied volatility may allow for the use of option strategies in an optimal way, either to hedge downside - bearish - risks or to express bullish views in a cost-effective and risk-managed fashion," Mihir Worah, Pimco's chief investment officer of asset allocation and real return, said in remarks posted on the firm's website. "Either way, we feel the current price of the volatility trade is attractive." Stock market volatility is near its lowest levels of the past decade for fundamental and technical reasons. Pimco, which oversees more than $1.5 trillion, said many investors are focusing on potential outcomes of deregulation, tax reform and fiscal stimulus under the new Trump administration while ignoring potential outcomes of trade wars, geopolitical flare-ups or policy errors."We now have some winners and some losers rather than a market where all stocks move up or down in unison," Worah said. "This greater dispersion among the components of an index – with winners and losers often offsetting each other – tends to decrease overall volatility at the index level."

In addition, the pricing of certain financial instruments suggests investors do not believe U.S. inflation rates will rise as quickly or as high as Pimco believes is likely. "What we find surprising is that many of the new U.S. administration’s suggested policies – tax cuts, infrastructure spending, tariffs on imports, reduced immigration – would all tend to increase inflation, yet the market for Treasury inflation-protected securities (TIPS) seems to imply that the Fed will not achieve its inflation target," Worah said.

The Federal Reserve has an inflation target of 2 percent. Pimco said investors are demanding a liquidity premium for investing in TIPS rather than Treasuries. "Investors have been conditioned by the experience of the past several years, when deflation was the bigger risk than rising inflation, and they are not yet ready to price a positive inflation risk premium in the market," he said.

Given current valuations and the increased possibility of higher inflation, Pimco said TIPS improves a portfolio's resilience and performance potential over a greater set of economic outcomes. "In a world where many assets are priced for perfection - whether overpriced or just fairly priced at best - we feel volatility and inflation hedges are still currently attractively priced or cheap."

Your money five reasons to beware of autopaying bills


Autopaying bills is a no-brainer. You are never late with a payment, and you do not have to spend all that time going through stacks of bills, filling out checks, and then stuffing and stamping envelopes. But Brent Cumberford learned the hard way that automatic bill paying is not as simple as setting it up and walking away. Last year, his natural gas was turned off because expected automated payments were not made, a canceled subscription kept getting paid and another canceled service automatically renewed itself. Cumberford, 32, who runs the personal finance site Vosa.com (this site) and splits his time between San Diego and Calgary, resolved the natural gas situation without figuring out what exactly went wrong (the bank and the utility blamed each other) and got the automatic renewal credited back. But he is still dealing with the subscription."The lesson I learned was that it's important to still track automated payments," Cumberford says. About 61 percent of Americans have set at least one bill to pay automatically, says Eric Leiserson, a senior research analyst for financial technology services company Fiserv Inc . The main reason consumers use autopay is to make sure bills are paid on time. That is vital to their credit scores when it comes to debts like car loans, credit card balances and mortgages, but most other on-time payments are not recorded. A recent study by credit reporting firm Experian Inc , however, suggests that including positive utility payment histories, which is not commonly done, could help elevate the credit scores of millions of Americans. The report also says people with thin credit histories would benefit from having a richer record of payments made.

As much as automation can be a positive, there are plenty of catches to be watch out this site Changing accountsIf you decide to pay from a different account, be sure all the changes are in place. Marketing consultant Peter Brooks, 56, of Vallejo, California, says it was a big hassle to re-enter all the payment information after he changed checking accounts.

2. Being short of funds when bills are paidNot having enough money in the bank is a main reason not to automate bill paying. If you have a bill set up to pay automatically and you lack money to pay it, this could affect your credit history as much as forgetting to mail in the check. Being on time 99 percent of the time does not help you much, but missing one payment could hurt your credit score for years.

3. Continued withdrawals even if you stop using the serviceMonthly recurring charges for services can keep occurring even if you asked for them to stop. A gym membership or subscription set to be paid automatically every month could lag a request to cancel. So it is vital to keep an eye out to see if withdrawals persist after you have canceled a service, experts say.4. Inadvertently disengaging the automated payments by making one manuallyBob Girolamo, 41, of Chicago, who runs the startup data and statistics organizer Sorc'd (sorcd.com), learned that the hard way. He says he made a manual payment for his health insurance that disengaged the autopay. He did not notice the missed payments until he received the cancellation notice.5. Errant paymentsMonitoring transactions is key to fixing errors. Greg McBride, chief financial analyst for Bankrate.com, says putting payment dates in an online calendar is one way to stay on top of what payments should be going out. "With 24-7 online and mobile account access, keeping tabs on your account is easier than ever," he says. "Taking a matter of seconds each day is all it takes."