Volcker Cautions Federal Reserve May ‘Fall Short’ – Bloomberg 05-29-13

Salient to Investors:

Paul Volcker said:

  • The Fed will fall short by being asked to meet price stability and full employment – a mandate both operationally confusing and ultimately illusory.
  • Asking too much is accommodating misguided fiscal policies, dealing with structural imbalances, to square continuously the hypothetical circles of stability, growth and full employment – efforts that cause the Fed to lose sight of its basic responsibility for price stability and a stable currency.
  • Credibility must not be frittered away by yielding to the notion that a little inflation right now is a good thing to release animal spirits and pep up investment.
  • Inflation cannot be manipulated to reach economic objectives, and when fairly and deliberately started is hard to control and reverse.

 

Read the full article at http://www.bloomberg.com/news/2013-05-29/volcker-cautions-federal-reserve-may-fall-short-.html

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Volcker Says Jobless Rate to Remain Above 6% for Two Years – Bloomberg 05-15-13

Salient to Investors:

Paul Volcker said US growth is too slow to cut the jobless rate quickly so the unemployment rate may remain above 6 percent for at least another two years. Volcker said the unemployment rate is declining because the labor force is not rising.

Read the full article at http://www.bloomberg.com/news/2013-05-15/volcker-says-u-s-jobless-rate-to-remain-above-6-for-two-years.html

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Illinois Rally Defies Warning of Pension Insolvency: Muni Credit – 10-30-12

Salient to Investors:

Lower-rated issuers are benefiting as sinking yields spur investors to stomach more risk.

Debt sold by Illinois issuers is rallying the most in 20 months despite a warning that the state’s pensions may run out of money and drain funding from education, infrastructure and local aid. Moody’s said debt-holders are taking the risk because of their confidence in getting repaid. Fidelity Investments said Illinois is one of seven states with the strongest legal provisions for paying debt service on its general obligations – only South Carolina, Minnesota, Utah, Missouri, Texas and Virginia have equal to or better safeguards. No state has missed payments since Arkansas in 1933.

Paul Volcker, Richard Ravitch et al said Illinois’ pensions are destined for insolvency and may absorb a quarter of the state’s budget in 2015. Their report said the culture of budget gimmickry and short-sightedness pushes costs off to the future, but eventually will be impossible and retirees may lose their pensions as the funds dwindle.

Richard Ciccarone at McDonnell Investment Management LLC said Illinois’ pension deficit and backlog of $8 billion in unpaid bills mean its fiscal prospects may deteriorate further.

Matt Fabian at Municipal Market Advisors said some investors can’t get enough Illinois bonds because they’re cheap, and the risk of non-payment is miniscule. 

Read the full article at http://www.bloomberg.com/news/2012-10-29/illinois-rally-defies-warning-of-pension-insolvency-muni-credit.html