Evercore | Wealth Management

December 1, 2011
New York City: A Great Place if They Ever Finish It

New York City is throwing its considerable financial weight behind several major construction projects. These projects, along with maintaining its basic infrastructure, have significantly increased the municipality’s outstanding debt burden, which just passed $100 billion after rising 83% in ten years. At this rate, debt service costs will comprise 10% of the city’s annual expense budget by 2015.

December 1, 2011
Roger Altman in The Financial Times: We need not fret over omnipotent markets

The succession of political dramas in Europe, most recently the end of Socialist dominance in Spain, again shows the financial markets acting like a global supra-government. They oust entrenched regimes where normal political processes could not do so. They force austerity, banking bail-outs and other major policy changes. Their influence dwarfs multilateral institutions such as the International Monetary Fund. Indeed, leaving aside unusable nuclear weapons, they have become the most powerful force on earth.

November 11, 2011
Jefferson County, Alabama Files Record Chapter 9 Bankruptcy

Jefferson County, Alabama declared bankruptcy this week after the state legislature failed to implement a September agreement with creditors that could have reduced the county's $4.1 billion in debt. As this is the largest default on record, it is likely to revive concerns among individual investors that defaults may rise in the municipal market with a corresponding effect on prices and yield. However, in our view, the causes of this bankruptcy are specific to Jefferson County and are not symptomatic of a wider trend of defaults for municipal governments.

November 8, 2011
John Apruzzese on the Investment Outlook

The best analogy I've come across for investing in the current market environment is whitewater rafting. Investors survived Class V rapids — the equivalent of riding a waterfall — in 2008, albeit with the help of a large rescue team. The waters continued to churn until the summer of 2010 when investors started to relax. But we hit Class IV rapids this past August and there has been no let up since.

September 21, 2011
America and Europe Are On the Verge of Disastrous Recession

Interest rates on US, German and UK government bonds have fallen to alltime lows. Yields on 10-year US Treasury securities, for example, are below 2 per cent. That is the lowest recorded since the Federal Reserve began publishing market data in 1953. In addition, yields on the inflation-protected 10-year Treasuries are zero. These are almost incomprehensible levels whose implications are profoundly negative. Namely that Tuesday's International Monetary Fund report is quite correct to warn that America and Europe are on the verge of renewed recession. It is only the anticipation of negligible demand for capital and negligible inflation — both hallmarks of recession — that could drive rates this low.

August 8, 2011
Evercore Wealth Management Partners: What Matters

Deficits matter. The failure of U.S. and European policymakers to adequately resolve debt issues matters to us all. The markets will continue to react to every twist and turn in their respective decision making until some real progress is made. The S&P downgrade, whether warranted or not, was not unexpected and is now behind us.

August 4, 2011
Why America deserves to stay triple A

Congress has now voted to extend the US debt ceiling and undertake major deficit reduction. However ugly those negotiations, America has never missed a debt service payment and there was little risk it would do so. That is one reason why yields on Treasury securities fell over recent weeks. Nevertheless, there is speculation the leading credit rating agencies may lower America’s rating below triple A.

July 29, 2011
John Apruzzese on U.S. Debt Negotiations

About the only thing that everyone in Washington D.C. agrees on is that the current projections of the long-term federal fiscal deficits and the corresponding debt growth are unsustainable. The seeds of this situation were planted and nurtured over the last 50 years. Our democracy has encouraged politicians to make unfunded, unconstrained future commitments to their constituents and thousands of tax breaks and subsidies to special interest groups. Similar to a Ponzi scheme, the national debt is now approaching the tipping point when something has to give.

July 12, 2011
Passing the Buck: State and Municipal Budget Shortfalls

The five most populous states—California, Florida, Illinois, New York and Texas—are facing significant budget shortfalls. Their primary revenue sources have yet to fully recover to pre-recession levels, and stubbornly high unemployment rates are placing additional strains on expenditures. At the same time, they are grappling with the expiration of federal aid from the American Recovery and Reinvestment Act.

July 1, 2011
Update on U.S. Money Market Funds Exposure to European Banks

Evercore Wealth Management regularly reviews all of our recommended money market funds; a practice that we have supplemented in recent weeks to protect our clients from potentially troubled European banks. At present, we are confident that our money market fund managers are taking a proactive and practical approach as they continue to reduce their exposures and apply rigorous stress tests across their bank-related exposures.

April 14, 2011
Tax Reform Proposals and Municipal Debt

There is increasing interest in Washington D.C. in overhauling the U.S. tax code as a way to cope with the mounting federal deficit. This overhaul could include a halt to or diminishment of the traditional tax- exemption for new municipal bonds. While we do not expect that existing tax-exempt bonds will lose this preferential status, reformist attitude permeating Washington, along with the search to solve the federal budget deficit, requires that we take this proposal seriously.

March 29, 2011
Outlook for United States Electric Utility Bonds Following Events in Japan

Failure of the back-up safety systems at the nuclear power plant in Fukushima, Japan, will likely result in heightened scrutiny of the systemic risks for the 104 nuclear plants operating in 31 states in the United States that collectively provide 20% of the country’s current power.

March 15, 2011
John Apruzzese on Japan events

News from Japan this week has rightly focused on the tragic loss of life and the still developing nuclear crisis. We are reminded that we, both as individuals and as investors, face — and will always face — large and unknown risks.

February 9, 2011
Update on Egypt from the HL Fund

As part of the Evercore Wealth Management efficient architecture platform and to gain exposure to rapidly growing markets, we invest in the HL Frontier Fund. Please click here to read a recent message from the fund's managers on developments in Egypt and their view on the investment implications for the region.

January 26, 2011
Market Commentary - Year-End Review and Outlook

On balance, the global economy is likely to grow at a faster pace than the consensus expects, at least for the first half of 2011, but the US, Europe, and China must make progress in addressing the world's structural imbalances. Once they do, the ingredients for a more sustainable expansion should be in place, especially with the rise of a new middle class in the emerging markets.

January 26, 2011
Core Equities - Year-End Review and Outlook

Equity markets around the world rallied strongly in September 2010, a usually treacherous month. Almost universally under water as September started, most markets around the world ended the third quarter with strong gains and are in positive territory for the year. For the quarter, the S&P 500 is up 11.3%, Germany 17.2%, and the UK 18.9%. The emerging markets were strong as well with Brazil up 21.3%, India up 14.3% and China up 12.7%. The EWM Core Equity Strategy portfolio was up 10.2% in the fourth quarter.

January 26, 2011
Fixed Income - Year-End Review and Outlook

The outlook for fixed income markets in 2011 is particularly uncertain. Price volatility is likely to continue, and like the consensus, we expect interest rates to move higher with stronger economic growth and a larger Federal budget deficit following recently enacted tax legislation. But we think rates for US Treasuries may stabilize temporarily early in the first quarter after the significant rise in the fourth quarter of 2010. Ongoing distress in the housing market, stubbornly high unemployment, and continuing problems in the Euro zone support this view. For municipal bond investors in this environment, we favor well-researched, essential-purpose revenue and dedicated tax issues, and have over-weighted higher yielding, short-maturity and callable issues. Among taxable issues, we look for investment opportunities that reduce interest-rate risk, such as non-agency mortgage-backed securities, selected foreign bonds, and floating-rate leveraged loans.

January 26, 2011
Diversified Market Hedges - Year-End Review and Outlook

The Evercore Diversified Market Hedges portfolio ("Hedges") invests to counter risks, thus far nearly all government policy related, unaccounted for in stock and bond allocations and seeks to do it in a fashion not deleterious to portfolio returns should the hedges not be needed. On both measures, cost and risk abatement, the portfolio has been a success since inception, and in both 2009 and 2010. In spite of satiating financial market returns over the last two years, the inclusion of the Hedges portfolio in broader asset allocations increased return and reduced volatility relative to a stock and bond portfolio alone.

January 7, 2011
California & New York: Crossroads of Fiscal Stability

On opposite ends of the country, California and New York are trapped in the same fiscal corner as they attempt to balance their budgets. Both high-tax states must close unexpected mid-year deficits during the current fiscal year. Both face future operating deficits that overshadow available operating revenues and reserves. These deficits are structural: Spending in both states chronically lags spending over an entire business cycle.

December 28, 2010
Update: Tax Relief Act of 2010

We recently sent out our year-end tax planning bulletin to you as the Tax Relief Act of 2010 was in final negotiations. On December 17, The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 ("the 2010 Tax Act") was signed into law by President Barack Obama and is effective until the end of 2012. The 2010 Tax Act has very favorable income tax and wealth transfer tax provisions. Most do not require action before year end, but we wanted to highlight some important planning opportunities that we will discuss with you and your other advisors when making decisions for 2010 and over the next two years. In the interest of making our analysis as understandable as possible we have taken out much of the technical terms and detailed provisions.

December 20, 2010
Municipal Market Concerns and Media Attention

Yields on tax exempts have risen significantly for all but short maturity bonds over the past 6 weeks, while yields between different sectors and credit ratings have increased. First it was the announcement of the second round of quantitative easing (QE2) in early November, combined with heavy new issue volume and redemptions from bond funds. Now the primary culprits are the new economic stimulus (and resulting deficit), the retention of lower tax rates on income, and the realization that the Build America Bond (BABs) program will definitely lapse December 31, combined again with heavy new issue supply and more redemptions from municipal bond funds. The heavy new issue supply, some of which has probably been borrowed from 2011 Q1, will abate, while U S Treasury yields may stabilize after a significant move higher. The wild card is municipal bond fund redemptions, for which credit concerns now appear to be a bigger factor.

December 13, 2010
Evercore Wealth Management Year-End Tax Bulletin

After much debate and uncertainty, the President proposed to Congress a compromised solution on income and estate tax rates. While much of the details are still being speculated and the proposal is not agreed upon by Congress, we thought we would take the time to highlight some provisions of the compromise that will impact you as well as provide you with our suggestions as you plan for year-end.

November 19, 2010
Municipal Market Update: Supply Problems

The municipal bond market has suffered a severe bout of indigestion so far this month. This week's new issue supply (nearly $14 billion) is the largest thus far in 2010. In addition, $10 billion in California short term notes were also priced. This record new issue supply and the expectation of large supply through year-end has occurred on the heels of an unexpected increase in U S Treasury yields following the Federal Reserve announcement on November 3 of a second round of quantitative easing (QE2). Adding to the problem has been a sharp drop off of inflows into tax exempt bond funds, a major source of demand in the municipal market throughout 2010. Another factor contributing to this rise in yields is the expectation that the new Republican controlled House will pursue lower taxes and lower spending (which does not bode well for cash strapped states) and will not renew the successful, albeit controversial, Build America Bond program (BABs).

October 5, 2010
The Minefields in City Enterprise Systems

What do Harrisburg, Pennsylvania; Littlefield, Texas; Buena Vista, Virginia; and Menasha, Wisconsin all have in common? Each city committed resources from general funds to support enterprises that it thought would be financially self-sufficient. In the long-run, self-sufficiency never happened; the cities, their bond holders, and their citizens are paying the price. How should investors analyze the bonds of cities with such contingent liabilities — and those that have other potential problems affecting their general obligation debt?

September 30, 2010
Core Equity Review

Equity markets around the world rallied strongly in September, a usually treacherous month. Almost universally under water as September started, most markets around the world ended the third quarter with strong gains and are in positive territory for the year. For the quarter, the S&P 500 is up 11.3%, Germany 17.2%, and the UK 18.9%. The emerging markets were strong as well with Brazil up 21.3%, India up 14.3% and China up 12.7%. The EWM core portfolio was up 10.2% in the quarter.

September 22, 2010
Navigating Low Yields and Credit Worries in the Municipal Market

After a summer rally drove yields steadily down to historic lows, the municipal bond market looks ready to frustrate forecasters once again with the twin predicaments of historically low yields and uncertain credit quality. What should fixed-income investors do now?

August 11, 2010
Investment Opportunities in General Airport Revenue Bonds

Although the airline industry has a volatile history, the airport business has remained relatively calm. We see opportunities for investors in selected General Airport Revenue Bonds (GARBs). Issuance of GARBs has increased sharply as interest rates hit historic lows and the Alternative Minimum Tax (AMT) was temporarily suspended on private activity bonds. Airport bonds may also offer yields above those of essential-purpose utility bonds and in fact can be very stable credits.

July 21, 2010
Equities — Outlook and Q2 Summary

Despite the brutal market reversal in the second quarter, our views have not changed dramatically. With an earnings yield of almost 8% for the broad market, and generally very solid balance sheets and strong cash flows, we believe that current valuations represent good value for long-term investors. The S&P 500 now trades at 12.5X forward earnings, below historical averages, and yields more than the 5-year US Treasury note.

July 21, 2010
Tax-Exempt Outlook and 2Q Summary

We expect good relative performance from the tax-exempt market through the early summer. Favoring tax-exempt municipal bonds are the persistent low yields on money market instruments, the diminished supply due to the success of taxable Build America Bonds (BABs), the high level of reinvestment demand, the approach of higher income tax rates in 2011, and yields that are relatively attractive compared with US Treasuries. Yet with municipal yields near all-time lows, we remain relatively neutral in our portfolios' maturity structure. We strive to add yield and value through our independent credit research effort with a focus on essential-purpose revenue and dedicated tax issues.

June 15, 2010
Coping with Unfunded Pension Liabilities

Unfunded pension liabilities are an increasingly onerous obligation for the states, amounting to more than twice the sum of all state debt outstanding. Many states have underfunded their annual contributions amid equity market declines while after having enhanced pensions for their workers — a recipe for unsupportable financial obligations.

May 7, 2010
May Market Commentary

The US recovery is advancing at a more rapid pace than expected, led by corporate profits. The economy is adding net new jobs, which has been the biggest concern. We think this favorable trend will continue, with subsequent expansion powered by growth in demand from emerging-market consumers.

April 26, 2010
New Jersey Budget Proposals: A Litmus Test for the Rest of the Country?

Like many other states, New Jersey has a significant budget deficit that has been years in the making. On a percentage of revenues and income, however, its budget deficit is among the most severe in the nation.

March 1, 2010
California's Financial Crisis: Year Two

Default risk for California's general obligation bonds and appropriation debts is extremely low, and the state's fiscal problems are well known. But the risks of ratings downgrades and further price erosion are high, we believe, both for the state and for underlying entities that rely heavily on it for funding. Investors must therefore remain highly selective and research thoroughly the security for debt-service payments.

February 4, 2010
2010 Outlook

The global economy appears to be in the early stages of a classic recovery from severe recession.

January 8, 2010
Political Credit Risk in New York State

The recession and the troubled financial services industry hit New York State's finances hard, and exacerbating the problem is a dysfunctional political process. We are concerned about New York State credits with political credit risk, and have a preference for New York State credits that are structured to ameliorate this risk.

December 22, 2009
Corporate Bond Commentary and Strategy

Yields on investment-grade credit securities are approaching historic low levels. Balance sheets are defensively positioned overall, with significant cash on hand, limited near-term debt maturities, and good overall liquidity profiles.

December 4, 2009
Financial Markets Commentary

The dramatic market moves of the last twelve months — up as well as down — have shifted many investors' perceptions of risk.

November 17, 2009
Municipal Market Update: Opportunities Exist

Despite the sudden sell-off at the beginning of last month, the municipal market has changed little since mid-October. Yet the drumbeat of concern in the press about the health and viability of the market has grown only louder.

October 16, 2009
Municipal Market Update: Opportunities May Appear

The landscape in the municipal market changed dramatically in early October with tax exempt bond yields spiking upward following a nearly 4 month period of slowly rising prices and declining yields.

October 7, 2009
Municipal Market Update: Where Did the Yields Go?

With rates at 40-year lows, we are very cautious and continue to emphasize defensive, high-coupon securities priced to shorter calls and research-driven, short-duration securities.

September 22, 2009
Why the Recovery May be Stronger than Expected

The United States' recent economic meltdown was virtually unprecedented but it is the global economy that matters.

August 1, 2009
Financial Markets Commentary

The US economy is off of life support but a full recovery isn't likely anytime soon.

August 1, 2009
Corporate Bond Commentary and Strategy

Spreads will continue their march toward normalization—but not in a straight line. We are taking advantage of tightening spreads while guarding against idiosyncratic credit risks and longer-term inflation.

Summer 2009
Municipal Market Mid-Year Update

With the Treasury market under pressure and municipal yields at historic lows, we continue to recommend cautious geographic diversification and high-quality security selection.

July 24, 2009
Investing in California Municipal Bonds

The state has relied upon a progressive income tax system that fluctuates significantly depending on the economy. Currently, there is no mechanism for the state to establish a rainy day fund, leading to revenue booms and busts.

July 1, 2009
Strategic Wealth Transfer Planning in Volatile Times

Low asset valuations and financing costs are providing a compelling opportunity for affluent families to execute wealth transfer strategies.

June 23, 2009
Market Update: Uncertainty Remains High

Stocks look fairly valued but inflation is a real risk.

June 1, 2009
Municipal Market Update

Municipal bonds have significantly outperformed U S Treasury bonds thus far in 2009.

June 1, 2009
Corporate Bond Commentary and Strategy

Economic indicators are clearly pointing to a slower rate of decline in the economy, led by a consumer that is slowly pulling herself up from the ground and better-than-expected corporate earnings.

May 1, 2009
Financial Markets Commentary

Despite some recent hopeful signs, it appears that the global economy is not yet out of the woods and the current recession will likely continue through at least the end of the year.

March 7, 2009
Market Update: Erring on the Side of Caution

History suggests that stock prices are too low but a recovery depends on effective government policies.

Q1 2009
Corporate Bond Commentary and Strategy

After the worst and most volatile year in history for the corporate bond market, the first quarter of 2009 saw slight underperformance on both a total return basis and as relative to Treasuries.

Q1 2009
Municipal Market Update

The municipal bond market experienced its strongest quarterly performance in years and was among the best performing fixed income sectors in the first quarter.

Q1 2009
Municipal Bond Market Commentary

Bond insurance ceased to be a major factor in both the primary and secondary markets. Prior to 2008, nearly 50% of all new issues came to market with insurance. By year-end it was less than 10% as newcomer Berkshire Hathaway was the lone insurer possessing Moody's coveted Aaa rating.

Jan/Feb
The Great Crash

The financial and economic crash of 2008, the worst in over 75 years, is a major geopolitical setback for the United States and Europe. Over the medium term, Washington and European governments will have neither the resources nor the economic credibility to play the role in global affairs that they otherwise would have played.

December 16, 2008
Value in the Municipal Market

With yields offered by U S Treasuries near historic lows due to the worldwide flight to quality, municipal yields, especially for longer term issues, have trended higher since late November. The primary reason is...