June 23, 2016 — The UK’s shocking and close decision to leave the European Union (EU), the second largest trading block in the world, after 23 years will create significant political consequences and economic challenges for the 5th largest global economy. In simple terms, this was a form of divorce from the EU and like most of them it will likely be messy, take years to finalize and involve long legal negotiations regarding trade and tariffs as well as many other things.

November 1, 2008 — Investing during the last several weeks within an environment of rapidly declining asset values and record volatility has been more about damage control than implementing a pro-active strategy. Given the extent of recent market losses, most asset allocations have seen sweeping, dramatic changes and as a result investors are now faced with difficult portfolio rebalancing and tactical investment positioning decisions. While we support the investment notion of employing a periodic rebalancing policy for strategic allocations, we would caution against an aggressive move back into equities at this time. Even given the magnitude of the sell-off across the global equity markets, when one weighs the macro environment, relative asset valuations and the probable upside and downside market scenarios, we believe a stronger case can be made for significantly enlarging allocations to the fixed income sector, especially high-grade credit, for better returns versus equities over the next six to twelve months.

December 31, 2007 — The municipal market just experienced one of the most volatile quarters in recent history. With the repricing of risk that occurred in August due to issues within the mortgage and credit markets, municipals were inadvertently hammered down with the rest of the market. Leveraged players that utilized municipal securities were forced to unwind many of their deals due to the divergence in yield movements between the underlying securities and the hedging vehicle. In addition, liquidity concerns contributed to the lack of interest for municipal securities, which can be a common occurrence for Muni’s during economic turmoil. However, for the astute investor, these events have created great opportunities to invest in the municipal market at tax adjusted yield levels not seen since 2003.

October 1, 2006 — Why should investors employ active management for their municipal bond portfolio? This is a question posed by many individuals who want tax free income. Despite the perceived safety and stability of municipal bonds, active management can add incremental value.

August 1, 2004 — The 32,000 increase in payrolls in July, following just 78,000 in June (revised from 112,000) was disappointing and the reaction in the bond market was swift. However, given the volatile month-to-month history of the payroll data and the fact that the weakness is not substantiated with other employment data, we would caution against extrapolating too much out of one or two readings. We do not believe the underlying trend in employment growth has suddenly changed, more likely we are seeing an adjustment for a bit of exaggerated strength earlier in the year. The break in momentum as well as the divergence between the Establishment and Household surveys does bring up a couple important questions – namely, what is the trend and which survey is giving us the correct indication of that trend?

June 1, 2004 — For bond market participants, the recent employment numbers have essentially shifted the question of Fed tightening from “when”, to “how aggressively” will the Fed raise rates? Although the March employment report sparked a repricing in the bond market, it was the April and May numbers that offered the needed confirmation that we are seeing a sustained recovery in the job market. This final piece of evidence has effectively put the Fed back into play, with expectations now that the Fed will raise interest rates between 75-100 basis points by year-end, with the first hike coming as early this month. While we have written several times over the last year and half about the impact of rising rates, and strategies for that environment, we thought it was worth revisiting with a specific focus on the corporate sector.

April 1, 2002 — In recent years new wave security analysis techniques, such as pro-forma earnings and price-to-sales ratios, were used to justify frothy security valuations. Terms such as cash flow, leverage and liquidity were passé. Investors shunned fixed income in favor of the next hot IPO. But now times have changed because in today’s world the equity market increasingly takes its cue from the bond market. Indeed, investors are struggling to find their way in a post-Enron world where balance sheets and income statements do not appear to be worth the paper they are written on. Moreover, auditors’ independence and objectivity have been called into question, further weakening investor confidence. A study by the Wall Street Journal indicates that 73% of the total fees paid by companies to their auditing firms in the Dow Jones Industrial Average during 2001 were for non-audit services. What about the rating agencies one may ask? Moody’s and Standard & Poor’s have increasingly come up a day late and a dollar short in protecting investors. In 2001 ten issuers were rated investment grade one year prior to default and Enron retained its investment grade rating up until one month prior to default.