 |
Meriden Retirement Board
Tuesday – June 13, 2006
Overview
It has been a painful month for the markets, as the interest rate outlook shifts dramatically from “almost done” to “waiting for data.” New Fed Chairman Ben Bernanke appeared to signal an end to the rate-hike cycle when he succeeded Alan Greenspan earlier this year. But Bernanke has led a very public campaign since mid-May, rethinking policy, now that the Fed has discovered that there may be more inflationary pressures than their data had earlier revealed. After watching a handful of Fed governors make cautionary public statements recently, one top economist called Bernanke’s FOMC the Federal Open Mouth Committee. The markets have “corrected” (fallen) by 5% to 10% - even more, overseas – as forecasters anticipate another quarter-point hike in rates
June 29th, locking-in the inverted yield curve and leaving an uncertain summer ahead.
Growth manager Louis Navellier suggests the Fed may be craftier than many observers believe, and deliberately jawboning the markets in anticipation of a change in policy. After sixteen consecutive increases, he says, the FOMC will pause – making this week the best buying opportunity of the year. Whether he proves to be correct, or if the consensus prevails, we are likely to have increase volatility following the Fed’s pronouncement at the end of the month.
Meriden Retirement Funds
The composite Meriden Retirement funds suffered widespread losses in May, but remained up about 15% for the fiscal year as of May 31st. Locking in gold profits proved a timely decision, as Orrell Capital still held a 70% gain. NWQ, Neuberger, Navellier, Kayne Anderson, Roxbury and Mastrapasqua all lost ground for the month. The City Employees closed May with $125.7 million, while the Police/Fire pension plan totaled $94.1 million. From the end of April to the end of May, the composite funds dropped from $226.1 to $219.8 million. Despite the defensive move in the gold accounts, the fund total further declined to $213.3 million as of the June 12th close. (Had Orrell not sold, the total would be $207.8 million.)
Investment Updates
CNL has settled a lawsuit regarding the withdrawal of its 2004 IPO, agreeing to pay shareholders $35 million in a series of payments over the next three years. The suit concerned the Hospitality REIT, and does not affect the Retirement REIT, which is scheduled to be acquired at a premium this summer. Settlement talks continue in the Refco case, where we have a claim pending. The investment team at Mastrapasqua is under review by A.G. Edwards. A senior manager has left the firm for medical reasons.
| |
