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APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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News and Analysis for the Investor - October 20, 2011

Eurozone debt crisis continues to impact markets

| BY Donald Liebenson

European debt crisis causes markets to fall in Asia and Europe The Eurozone debt crisis continues to hammer the markets as the Sunday, October 23 summit approaches. According to Bloomberg, France and Germany are split on the crisis solution. Germany wants to write down as much as 50 percent of the Greek bonds. France allegedly wants to turn the European Financial Stability Fund-the EFSF- into a bank. In another report, the Wall Street Journal writes that the Eurozone doesn't want to directly guarantee a country's bond issues but to provide "first loss insurance". The fund would provide collateral to back up bonds of troubled countries and keep borrowing costs low. The challenge is that $440 billion of the EFSF is already earmarked for existing debt. Reuters reports that Greece needs $8 billion by next month to avoid default. After weeks of reports that agreements were already reached, it appears that a solution is still in the distance. This will continue to cause volatility in the markets until some sort of agreement is reached. Greeks continue protests Greece has shut down for a second day to protest increased austerity measures. Reuters reports that the vote is set for today. It is anticipated that public workers in Greece will take a 20 percent cut to their pay and be subject to income tax on the rest. In the past they public workers below a specific income level were not subject to income tax. Fund managers worldwide anticipate Greek default A survey conducted by Bank of America/Merrill Lynch with fund managers worldwide and reported in the Financial Times indicates that 75 percent of fund managers anticipate a Greek default, probably in early 2012. On a positive note, however, only 25 percent anticipate a global recession, down from 40 percent a month ago. Sixty percent of fund managers identify the Eurozone crisis as the biggest threat to financial stability. US Fund Managers Cut Lending to European Banks Bloomberg reports that US money market funds have reduced their lending to EU banks by 14 percent in the last few months. In September, overall exposure to European banks was 37 percent, down from over 50 percent in July. Lending to French banks is down to 6.7 percent. Short term money market lending between banks occurred significantly during the 2008 crisis. Federal Reserve Beige Book Adds to Economic Gloom In the report regularly issued by the Federal Reserve known as the "beige book", the various Federal Reserve districts report on the economic environment in their own districts. The report was issued on Wednesday and led to a sharp drop in the Dow, according to the Wall Street Journal. The Dow fell 72 points closing at 11,504. Overall, the Beige Book confirmed that the economy has stalled, growing at .9 percent since its last report. It indicated that the economic outlook is dim. Consumer spending during the holidays will reportedly have a significant impact on the economy. New law requires colleges to give accurate accounts of costs A new law which will go into effect on October 29 requires colleges to give an accurate assessment of the costs and related fees of taking classes at that institution, according to USA Today. In response, most of the colleges have incorporated an online calculator onto their websites to provide a "net price calculation". Many colleges believe it will allow students to identify the potential aid available and thus provide more opportunity for schools students may have felt were too expensive. Coffee costs expected to increase According to the Wall Street Journal, significant rains in Central America have destroyed much of the coffee crop in recent months. Central America supplies 10 percent of the world's coffee. Futures have risen 5.7 percent in recent weeks.

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.