Perspectives Blog

Stormy conditions in Puerto Rico

Columbia Management, Investment Team | June 25, 2013

…o Rico’s fiscal condition has weakened further and the new administration’s approach to addressing the mounting fiscal challenges raises new concerns. Failure to make meaningful progress in closing the large structural budget deficit due, in part, to persistent economic weakness could result in further rating downgrades and diminished market access. Recent budget forecasts estimate the budget deficit for the fiscal year ending June 30, 2013 will…

The truth about April’s budget surplus

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 16, 2013

Surge in tax receipts allows the U.S. Treasury to report the largest budget surplus in five years. What is good for the Treasury and the budget presents some burden on households; taxpayer refunds are down 3.5% this year versus last. Recent deficit improvement may give a false sense of security and delay critical entitlement reforms. Washington finally had some good news to report, specifically on the budget deficit. The Treasury reported a $1…

Puerto Rico’s turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

…ns, both unusual for state-equivalent obligors and a clear sign of underlying credit weakness. The Commonwealth’s long-delayed fiscal 2012 audited financial statements, released on September 16, reveal a modest improvement in deficit spending, though for fiscal year 2014 a sizable budgetary deficit remains. Faced with limited options, the administration plans to rely on deficit borrowing, bank lines of credit and other one-time measures to close…

The bean counting on second quarter GDP

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 25, 2013

Second quarter GDP data looks soft, including a wider trade deficit and cuts in government spending. Positive factors include steady consumer spending and upcoming changes in the way GDP will be calculated. Growth is poised to improve in the second half, but the Fed’s models and forecasts seem overly optimistic. Final second quarter GDP data reports are trickling in, putting the footprint of economic growth into focus. It looks soft, weighed d…

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Research | January 2, 2014

…bankruptcy filing this summer, contributed to investors’ concerns about other weak municipal issuers. Puerto Rico’s financial problems have been simmering for decades. The Commonwealth has an ailing economy, recurring budget deficits and severely underfunded pension systems. Unlike most other municipalities, PR issues debt to pay annual operating expenses. The chart on the following page provides a snapshot of Puerto Rico’s unrestricted net asse…

Increasing energy independence and the U.S. economy

Columbia Management, Investment Team | May 7, 2013

The U.S. petroleum trade balance has shifted. Development of domestic energy sources benefits domestic goods producers with lower costs. Energy exports modest, but on the increase. Investors should note the recent shift in the U.S. petroleum trade balance. For many decades, the United States has largely imported oil and petroleum products, widening our trade deficit and increasing our dependence on foreign energy. With the shale-gas developmen…

Engineering a better retirement portfolio

Columbia Management, Investment Team | June 4, 2013

…at their nest egg may fall short of being able to comfortably fund their retirement years. The combination of undersaving, low interest rates and a decade of challenging stock markets has created a personal retirement funding deficit that has many struggling to find a way out. Unfortunately, there is no silver bullet. A solution will likely require pulling a number of different levers; working longer, spending less and relying on greater support…