The March 2010 edition of the Brinker Fixed Income Advisor is online at www.BrinkerAdvisor.com. This month we outline the expected path of monetary policy.
Our 2009 Model Portfolio performance:
Aggressive Portfolio + 33%
Moderate Portfolio + 20%
Conservative Portfolio + 14%
Tax-Exempt Portfolio + 13% **this a tax-exempt return**
Filed under: General, Investment Letter
Posted on March 1st, 2010 by Bob Brinker
Today we updated our online database of upcoming municipal bond auctions. The latest calendar includes more than $20 billion in upcoming municipal bond auctions spread over 47 states. These include a $1.4 billion offering from the State of Illinois, a $1.4 billion offering from the Los Angeles Unified School District, and a $700 million offering from the State of Hawaii.
Filed under: General, Municipal Bonds
Posted on February 16th, 2010 by Bob Brinker
Federal Reserve Chairman Ben Bernanke provided the following statement to the U.S. House of Representatives Committee on Financial Services this morning.
In our view, the notable points from the statement are:
Filed under: Federal Reserve, General, U.S. Treasury
Posted on February 10th, 2010 by Bob Brinker
For conservative investors, now is about the most difficult time ever to earn a safe return on your cash. Short-term Treasuries offer almost no return. Savings accounts, Money Markets, even CDs are offering extremely low rates. Many investors will receive monthly statements showing a 0% return for their money market account in January and a 7-day Yield of 1 or 2 basis points going forward.
Today I came across an interesting promotion from American Express Bank that I thought was worth sharing. According to this online promotion, customers may setup a high-yield savings account that provides an advertised 1.5% APY as of February 2nd. Interest is compounded daily and credited monthly to your account. These are FDIC-insured deposits. There are no fees or balance requirements. You can do it all online or call 800-446-6307 for telephone assistance. You may make up to six withdrawals per calendar month to your linked bank account.
Now, I realize 1.5% APY is nothing to write home about, but relative to the near 0% return of short-term Treasuries and money markets, at least you’ll earn something on your cash balance.
Filed under: CDs, General, Money Markets, U.S. Savings Bonds, U.S. Treasury
Posted on February 2nd, 2010 by Bob Brinker
The February 2010 edition of the Brinker Fixed Income Advisor is online at www.BrinkerAdvisor.com. This month we review our credit market indicators.
Our 2009 Model Portfolio performance:
Aggressive Portfolio + 33%
Moderate Portfolio + 20%
Conservative Portfolio + 14%
Tax-Exempt Portfolio + 13% **this a tax-exempt return**
Filed under: General
Posted on February 1st, 2010 by Bob Brinker
Today we updated our muni bond database with more than 500 upcoming auctions totaling more than $27 billion in new deals spread over 44 states.
The largest upcoming issues include:
Unlimited access to our municipal bond database is included in our $99.00 annual subscription.
Filed under: General, Municipal Bonds
Posted on January 15th, 2010 by Bob Brinker
Today’s CPI Report from the Bureau of Labor Statistics is welcome news to FOMC members. They appear to have won their battle against deflation for now. The headline CPI increased 2.72% year-over-year and the core CPI increased 1.82% year-over-year. The following chart illustrates the CPI rates over the past two decades.
What is especially notable in my view is the relative stability of the core CPI rate (red) over the past fifteen years. It has essentially remained with a range of 1% to 3% since 1995. You can also see the affect of the oil price shock causing the absurd swings in the headline CPI the past few years.
Below is the ‘Year in Review’ from the CPI release:
Year in Review For the 12 month period ending December 2009, the CPI-U rose 2.7 percent, compared to 0.1 percent for 2008. The larger increase was primarily due to the energy index, which rose 18.2 percent during 2009 after falling 21.3 percent in 2008. The energy upturn was caused by the gasoline index, which rose 53.5 percent in 2009 after declining 43.1 percent in 2008. The household energy index, in contrast, declined 4.9 percent during 2009 with the index for natural gas falling 18.1 percent and the electricity index declining 0.5 percent. The food index, which rose 5.9 percent in 2008, fell 0.5 percent for the 12 months ending December 2009, the first December-to- December decline since 1961. The index for food away from home rose 1.9 percent while the food at home index fell 2.4 percent. Within food at home, all six major grocery food groups posted declines in 2009 after rising in 2008. The dairy and related products group declined the most, falling 7.6 percent, its largest annual decline since 1938. The index for all items less food and energy rose 1.8 percent during 2009, the same increase as in 2008. This identical increase was the result of offsetting factors. Pushing the index higher were vehicle prices, which rose in 2009 after declining in 2008. The indexes for new vehicles rose 4.9 percent in 2009 and the index for used cars and trucks increased 9.2 percent. Additionally, the apparel index turned up in 2009, rising 1.9 percent after declining in each of the previous two years. The medical care index rose more rapidly in 2009, increasing 3.4 percent after a 2.6 percent increase the previous year, and the tobacco index increased 30.1 percent in 2009 after rising 6.3 percent in 2008. Largely offsetting these accelerations was the shelter index, which posted its smallest annual increase since its inception in 1953. It increased only 0.3 percent after increasing 1.9 percent in 2008, with the indexes for both rent and owners' equivalent rent increasing 0.7 percent. Also, the indexes for recreation and for household furnishings and operations both declined in 2009 after rising in 2008.
Effective January 2010 BLS will be making several changes to the item structure and expenditure weight index – which are updated every two years. The change in ‘Shelter’ is notable:
Shelter. The expenditure weight for second homes will be moved from Lodging away from home to a new, unpriced stratum under the Owners' equivalent rent expenditure class. As such, the expenditure class index for Owners' equivalent rent will now include both primary and secondary homes, and the title of that expenditure class index will change from Owners' equivalent rent of primary residences to Owners' equivalent rent of residences. Both the expenditure class (Owners' equivalent rent of residences), and the Owners' equivalent rent of primary residence stratum within it, will be published.
Filed under: Federal Reserve, General, Inflation
Posted on January 15th, 2010 by Bob Brinker
Federal Reserve Bank of Atlanta President and CEO Dennis P. Lockhart is a non-voting member of the FOMC in 2010. Yesterday he gave a speech to the Downtown Atlanta Rotary that I felt contained some valuable insight into the current thinking of some FOMC members. Below are some quotes from his speech with my thoughts afterward.
2010 outlook
I expect the recent growth of the economy to be sustained, but the pace of the expansion to be slow over the foreseeable horizon. This forecast of slow recovery takes account of nagging problems, particularly unemployment and commercial real estate. Near-term growth will probably not be strong enough to substantially bring down the large number of unemployed.To back this up, growth at the economy’s long-term trend rate—something like 3 percent annually or a little lower—would generate about 160,000 jobs per month under standard assumptions about population growth, labor force participation, and productivity trends. Employment growth at this level would reduce unemployment only marginally over the coming year. As Friday’s payroll employment report indicates, getting to 160,000 jobs per month could be a challenge even with GDP growing.
As regards the inflation outlook, I am reasonably confident that the rate of inflation will remain in check for the immediate future. Current inflation readings are acceptable and inflation expectations seem to be stable. I talk to many business people who tell me they have little or no pricing power. On balance, I expect inflation pressures to be restrained as a slow recovery proceeds.
In sum, I expect a better overall year in 2010. The bottoming of the inventory liquidation cycle, some recovery in business investment, and better economic prospects in the rest of the world set a foundation for continued growth going forward. But it will not be a gangbuster recovery.
BOB: This view is roughly in line with my own view. Gradual economic recovery as we transition from government stimulus to private demand. The employment situation should also improve as the pace of job losses lessons and job growth resumes. It takes over 100,000 new jobs monthly just to absorb new workers, so it will take many months of strong job growth in order to see the unemployment rate drop significantly. Fortunately, inflation remains a non-issue as excess capacity and weak demand are keeping pricing pressure to a minimum.
Thoughts on exit
If my outlook for 2010 is accurate, this will be the year that necessarily involves exit from a lot of the emergency policies put in place to fight the financial crisis and recession. How that process might unfold is and will be a matter of active discussion among the members of the FOMC.Last January, I talked about the dramatic expansion of the Fed’s balance sheet in response to the financial crisis in September 2008. Although the total balance sheet has not yet started to shrink, some unwinding already has begun. At our last meeting in December, the FOMC said that most of the Fed’s special liquidity facilities will expire at the end of this month and the purchase of mortgage-backed securities and other agency debt will taper off and come to an end early this year.
A bit like Goldilocks’ porridge, the exit or unwinding process needs to be—in my view—not too fast, not too slow, but just right. I continue to support an interest rate policy described in recent FOMC statements as low for an "extended period." What does "extended period" mean? I don’t want to put a date on it. To me, it means the policy rate will be kept low until recovery has shown momentum that is based on private business and consumer demand, job growth is established or at least imminent, and the downside risks appear to be safely navigable. This unwinding is in the context of well-behaved inflation, of course.
BOB: The exit from the emergency lending facilities has been happening for several months. They were designed to unwind themselves as demand for funds diminished. Closing the programs is a formality – they are no longer needed. The program to purchase mortgages may need to be reinstated at some point. Early indications are the market can support MBS, though higher rates are likely. Still, it was not so long ago that a 6% 30-year fixed-rate mortgage was considered a great rate!
I am concerned that certain legislative proposals could compromise the independence that enables staying on course. I’m referring to the "audit the Fed" amendments that were passed in the House and introduced in the Senate. The audits would be performed by the Government Accountability Office (GAO). In 1978, Congress thought it wise to exempt monetary policy from GAO review. Congress did this in keeping with established international practice and studied opinion that independent central banks do a better job of keeping prices stable. The effect of these proposals would be to roll back the clear exclusion of monetary policy. The Fed has no argument with audits in the conventional meaning of the term. We’re already subject to many audits by the GAO and external auditors. In government, the word "audit" can be misleading sometimes. GAO audits can amount to full-blown policy reviews. Fed operations outside of monetary policy are already subject to GAO policy review, so this proposal is about ad hoc, after-action reviews of monetary policy, potentially frequent. In my view, this notion is not about transparency and accountability. Both are bedrock principles to which the Fed should continue to be held. Rather, this is about politicizing a process that should remain apolitical.
BOB: Anyone that follows the Fed/FOMC closely knows how important independence is to what they do. Auditing their balance sheets is totally appropriate, and has happened for a long time. Auditing their FOMC meetings (which really means publicizing, criticizing, and reviewing) is another. This should not happen. The most confusing part of this idea to me is who in their right mind thinks that Congress could do a better job of monetary policy than the FOMC? The FOMC should remain private, and I expect they will.
Filed under: Federal Reserve, General
Posted on January 12th, 2010 by Bob Brinker
Here are the December 15/16 FOMC minutes
My takeways:
Filed under: Federal Reserve, General
Posted on January 6th, 2010 by Bob Brinker
The January 2010 edition of the Brinker Fixed Income Advisor is online at www.BrinkerAdvisor.com. This month we review our economic indicators and provide our view on the year ahead.
Our 2009 Model Portfolio performance figures through year-end:
Aggressive Portfolio + 33%
Moderate Portfolio + 20%
Conservative Portfolio + 14%
Tax-Exempt Portfolio + 13% **this a tax-exempt return**
Happy New Year!
Filed under: General, Investment Letter
Posted on January 3rd, 2010 by Bob Brinker
Today we updated our muni bond database with more than 900 upcoming auctions totaling nearly $34 billion in deals. The largest issues include:
$956MM in The Commonwealth of Massachusetts
$900MM in City of New York
$800MM in Commonwealth of Pennsylvania
$600MM in State of Maryland
Unlimited access to our municipal bond database is included in our $99.00 annual subscription.
Filed under: General, Investment Letter, Municipal Bonds
Posted on December 15th, 2009 by Bob Brinker
The December 2009 edition of the Brinker Fixed Income Advisor is online at www.BrinkerAdvisor.com. This month we make a change to our Model Portfolios to take advantage of an attractive opportunity.
Our 2009 Model Portfolio performance (year-to-date through 11-30-2009):
Aggressive Portfolio + 30.9 %
Moderate Portfolio + 19.6 %
Conservative Portfolio + 14.1 %
Tax-Exempt Portfolio + 12.3 % **this a tax-exempt return**
Filed under: General, Investment Letter
Posted on December 1st, 2009 by Bob Brinker
We recently updated our muni bond database with more than 800 upcoming auctions totaling more than $33 billion. The largest issues include:
$1.85BB, $1.3bb, $1.1bb in California
$1.5BB in New York
$1.08BB in Connecticut
$793MM in Georgia
Unlimited access to our muni database is included in our $99.00 annual subscription.
Filed under: General, Investment Letter, Municipal Bonds
Posted on November 17th, 2009 by Bob Brinker
Today’s payroll figures for October show the unemployment rate rose to 10.2%, from 9.8% in September. The unemployment rate is up from 6.8% one year ago. The 10.2% reading is the highest since a 10.3% in March 1983. In the early 1980s, the unemployment rate peaked at 10.8% in November & December 1982.
The nonfarm payrolls figure showed the economy shed 190,000 jobs in October bringing the 3-month average to –188,000 and the 12-month average to –459,000. With the revisions to the previous month’s figures, it now appears the 12-month average has bottomed along with the 3-month average earlier this year.
Filed under: Employment, General
Posted on November 6th, 2009 by Bob Brinker
Today the Treasury Borrowing Advisory Committee released the minutes from their recent meeting. Below are the highlights :
Lots of additional information and analysis are contained within the minutes for those wanting more clarity on what changes are coming to the composition of upcoming Treasury auctions.
Filed under: General, U.S. Treasury
Posted on November 4th, 2009 by Bob Brinker
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