Readers weight in on airline stocks, Ares Capital, incoming Fed chief Kevin Warsh, and how to save Social Security.
To the Editor:
The current airline business model may be wrong (“Farewell, Ultra-Cheap Flights. What Spirit’s Demise Means for You—and Airline Stocks,” Cover Story, May 8). A hundred years ago, Boeing was vertically integrated. It manufactured the airframe and engine, owned an airline, and operated its airliners. The antitrust bureaucrats and the courts forced Boeing into being only an original equipment manufacturer. Maybe there will be an opportunity to replicate such a model in the future.
Roland Giuntini
On Barrons.com
A Capital Investment
To the Editor:
“This Big Private-Credit Fund Is Riskier Than It Looks” (May 6) correctly flags Ares Capital’s lower cash portion of net investment income and higher price-to-net-asset-value versus some peers. However, these metrics don’t tell the full story. ARCC’s payments-in-kind, or PIK, are largely structured at origination with strong credits, and its nonaccruals remain elite. The company offers unmatched scale, superior long-term NAV stability, and consistently covered dividends. By contrast, the peers highlighted as cheaper on a price-to-book basis have shown greater NAV erosion and credit volatility despite lower nonaccruals in some cases. ARCC’s slight premium reflects quality, not vulnerability. Thanks for the analysis—I’m keeping my money in Ares Capital.
Bob DiNozzi
Londonderry, N.H.
The Warsh Plan
To the Editor:
Nicole Goodkind states that Kevin Warsh’s plan to shrink the Federal Reserve’s $6.7 trillion balance sheet will result in selling off bonds, which could push interest rates higher (“Kevin Warsh’s 3-Part Plan Could Prove His Fed Critics Wrong,” The Economy, May 6). This would probably result in an increase in the interest rate on the 10-year Treasury and a corresponding increase in the 30-year mortgage rate. In addition to the deleterious impact this would have on the housing market, asset prices are likely to decline since they are inversely related to long-term (10-year) interest rates.
David I. Kass
College Park, Md.
Social Security Solution
To the Editor:
The suggestions offered in your Other Voices essays on saving Social Security (May 8) have merit, but a better answer might be: 1) raising the payroll tax rate by a small amount, 2) increasing the amount of current wage/salary income subject to the payroll tax, and 3) raising the age of eligibility for receiving the full Social Security benefit to 70. All of these measures could be phased in. This solution has the advantage of simply adjusting existing elements of the system, rather than introducing entirely new features.
John Hashagen
Sarasota, Fla.
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