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 HelloReturn to index of stories... |
Hello. I'm Allison McNair. Welcome to NH Outlook. |
| Preshow #1 Return to index of stories... |
In this program.we're talking budget. The House and Senate have had their say. Now the threat of a state government shutdown looms and the Governor tells us why. |
| Preshow #2 Return to index of stories... |
And are you wrestling with how to handle your own investments? We'll give you some perspective on the risks of the bond market. |
| Intro Richard Return to index of stories... |
But first. It was decision day at the statehouse. Joining me to tell us about how the day unfolded. Richard Ager. |
| Senate SOTs Return to index of stories... |
Sen. Robert Clegg\R - District 14 WHO ARE THE WINNERS? I THINK WE'RE ALL WINNERS. I THINK THE COULD YOU PLEASE TELL US ARE WINNER. WE ADDED MONEY SO THAT MORE PEOPLE COULD STAY HOME INSTEAD OF HAVING TO GO DIRECTLY TO NURSING HOMES. DID I LIKE CUTTING $50 MILLION OUT OF THE SENATE VERSION? NOT AT ALL. BUT I'VE BEEN UP HERE LONG ENOUGH TO REALIZE THAT THE ONLY WAY TO GET THINGS DONE IS TO COMPROMISE. I'VE REACHED THE END OF MY COMPROMISING. ANY FURTHER IS A HAZARD AND DANGER TO THE NEW HAMPSHIRE CITIZENS. Sen. Iris Estabrook\D - District 21 BUDGET, AS IT STANDS, THIS COMPROMISED BUDGET, DOES NOT TAKE CARE OF MANY OF THE ESSENTIAL NEEDS OF THE PEOPLE OF NEW HAMPSHIRE. AND THIS BUDGET DOES DOWNSHIFT COSTS TO LOCAL TAXPAYERS. THESE ARE THE MAJOR REASONS WHY I CANNOT SUPPORT THIS BUDGET DESPITE THE GALLANT EFFORT THAT CRAFTED IT. |
| House SOTs Return to index of stories... |
Rep. Neal Kurk \R - District 48 I'M CONVINCED, AND THESE ARE MY NUMBERS AND EVERYBODY CAN PLAY GAMES WITH NUMBERS, YOU KNOW THAT. I'M CONVINCED THAT FOR 'OFF AND 'ON 6 AND 'ON 7, WE'LL HAVE TO HAVE SOME MODEST REVENUE INCREASES WITHIN OUR EXISTING TAX STRUCTURE TO MAKE THE BUDGET BALANCED. IN OTHER WORDS, THE CONFERENCE REPORT AND THE SPLITTING OF THE DIFFERENCE BETWEEN THE HOUSE AND SENATE POSITIONS IS SOMETHING THAT IS WITHIN THE TRADITIONAL WAY WE BUDGET IN NEW HAMPSHIRE. Rep. Alf Jacobson\R - District 32 THE GOVERNOR OPERATES ON TWO PRINCIPLES. ONE IS THAT HE LIKES TO USE THE THREAT IN ORDER TO GET HIS WAY. APPARENTLY, IT MAY NOT WORK THIS TIME. Rep. Fran Wendelboe\R - District 29 IT IS HIS CONSTITUTIONAL RIGHT TO BE ABLE TO VETO THE BUDGET, AND IT IS OUR RIGHT TO VOTE TO OVERRIDE HIM. THE PROBLEM IS THAT WE DID NOT MEET EARLY ENOUGH IN JUNE FOR THAT PROCESS TO FOLLOW THROUGH AND FOR US TO HAVE AN OVERRIDE VOTE BEFORE THE END OF THE FISCAL YEAR. |
| Governor SOT Return to index of stories... |
Craig Benson\NH Governor THE SPENDING IN THIS PARTICULAR BUDGET IS MORE THAN ANY OTHER SURROUNDING STATES. IN FACT, IT IS MORE THAN THE SURROUNDING STATES COMBINED. MORE THAN MAINE, MASSACHUSETTS, AND VERMONT INCREASES ON A CUMULATIVE BASIS IS MORE THAN THOSE THREE COMBINED. ALSO, IT DOESN'T JIVE WITH WHAT IS GOING ON IN THE REST OF THE COUNTRY. THEY'RE SPENDING LESS THAN OR THE SAME AS LAST YEAR. WE'RE INCREASING OUR SPENDING AND IT MEANS THE DEFICIT WE INHERITED THIS TIME IS ONLY GOING TO BE PASSED ON. PEOPLE SEPTEMBER US HERE TO SOLVE THE PROBLEM ONCE AND FOR ALL. THAT'S WHAT WE GOT TO DO. |
| Intro Discussion Return to index of stories... |
Earlier, I had a chance to speak with members of the house and senate at the state house to see what's next. |
| Reaction Discussion Return to index of stories... |
JOINING ME IS REPRESENTATIVE ROGERS JOHNSON. QUITE A DAY HERE AT THE STATEHOUSE. THE SENATE VOTED FIRST. WHERE DO YOU THINK WE GO TO FROM HERE SENATOR ALESANDRO. I THINK WE HAD A POSITIVE VOTE IN THE SENATE. THAT'S AN IMPERATIVE THAT THE BUDGET IS SOMETHING THAT WE ACCEPT, SOMETHING THAT WE BELIEVE IN. WE THOUGHT THE CONFERENCE PROCESS WAS A GOOD ONE, CAME UP WITH A BUDGET THAT'S RESPONSIBLE AND RESPONSIVE TO THE PEOPLE OF THE STATE OF NEW HAMPSHIRE. WE ARE GOING TO CARRY THAT FORWARD. NATURALLY I THINK THE HOUSE AGREED WITH US. THEY PASSED THE BUDGET. NOW IT IS ON TO THE GOVERNOR. REPRESENTATIVE JOHNSON. I WOULD SAY THE SAME THING. WE SAW A POSITIVE VOTE COMING OUT OF THE HOUSE. THAT'S A VERY STRONG MESSAGE TO THE STATE THAT WE ALL DO AGREE THAT THIS IS A BUDGET THAT WE CAN LIVE WITH. SO NOW IT IS ON TO THE GOVERNOR. THAT'S NOT QUITE A TWO-THIRDS MAJORITY THAT THE VOTE IN THE HOUSE. DID YOU THINK WE WOULD GET THERE? SHOULD THE GOVERNOR DO WHAT HE SAID HE WOULD? WHEN YOU HAVE AN OVERRIDE SITUATION, IT WILL BE EASY TO PICK UP TEN TO 15 ADDITIONAL VOTES. WHEN THE TIME COMES, IF THE GOVERNOR VETO THE BUDGET, WE DON'T REALLY KNOW THAT. IT IS HARD TO SPECULATE AT THIS POINT. WE HAVE STRONG AND COMPETING STATEMENT THAT HAVE BEEN GOING ON. IT'S CLEAR THE SENATE MADE A STRONG STATEMENT THIS MORNING. THERE'S NO QUESTION, THE SENATE IS VERY FIRM IN ITS POSITION. WE WENT THROUGH A DELIBERATIVE PROCESS. IT IS A PROCESS THAT TOOK MONTHS AND WE LOOKED AT EVERY SITUATION WE LOOKED AT THE NEEDS OF THE PEOPLE OF THE STATE OF NEW HAMPSHIRE AND TRIED TO RESPOND TO THOSE NEEDS IN A RESPONSIBLE MANNER WOOMPT WE LOOKED AT POST-SECONDARY EDUCATION, HEALTH AND HUMAN SERVICES, LOOKED AT THE COUNTIES, ADULT AND ELDERLY SERVICES. THOSE ARE IMPORTANT ISSUES THAT THE PEOPLE OF THE STATE OF NEW HAMPSHIRE ARE DEEPLY CONCERNED ABOUT. AND WE ADDRESSED THOSE ISSUES. FORTUNATELY WE HAD SOME MONEY COME IN FROM THE FEDERAL GOVERNMENT. THAT WAS A GREAT PLUS FOR US. THERE IS NO QUESTION ABOUT THAT. WE WERE ABLE TO USE THAT MONEY WISELY, SAVE GENERAL FUND MONIES AND CARRY IT INTO THE SECOND YEAR OF BIENNIUM AND MAKE THIS THING WORK WITHIN THE PARAMETERS THAT WERE SET FORTH BY THE GOVERNOR. THERE ARE NO NEW TAXES. THAT'S THE NAME OF THE GAME IN THIS BUSINESS. YOU DO WHAT YOU ARE ASKED TO DO AND YOU PRODUCE A PRODUCT, THAT PRODUCT SHOULD BE VIABLE. ISN'T THIS AN UNPRODUCTIVE CONFRONTATION,? I WON'T CHARACTERIZE IT IS UNPRODUCTIVE BECAUSE THAT'S THE NATURE OF THE BEAST WHERE HAVE YOU GIVE AND TAKE ON BOTH SIZE. THERE WAS SOMETHING BETWEEN THE GOVERNOR AND THE HOUSE AND THE. YOU HAD COMMITTEE KFRMS. THERE IS NO EQUIVALENT BETWEEN THE LEGISLATIVE BRANCH AND THE EXECUTIVE BRANCH. BUT AT THE END OF THE DAY, WE HAD AN END PRODUCT THAT BOTH THE SENATE AND THE HOUSE COULD AGREE WITH. BUT NOW LIKE I SAID, IT IS ON TO THE GOVERNOR FOR HIS SIGNATURE. GOVERNOR IS ENGAGED IN THE PROCESS. BEEN AROUND HERE FOR A FEW YEARS AND THE GOVERNORS AND THEIR ENGAGEMENT IN THE CONFERENCE PROCESS IS A VERY SIGNIFICANT COMPONENT. THAT WAS DOWNPLAYED THIS TIME. THE HOUSE AND THE SENATE I THINK DID VERY GOOD IN TERMS OF THEIR DELIBERATIONS. WE DID DELIBERATE. WE HAD SOME COMPETITIVE ISSUES I WOULD SAY. SIGNIFICANTLY COMPETITIVE ISSUES BUT WE WERE ABLE TO COMPROMISE. AND THAT'S THE NATURE OF THIS BUSINESS. THIS BUSINESS IS COMPROMISE. IF WE ARE GOING TO SUCCEED IN DOING ANYTHING, THAT SPIRIT OF COMPROMISE HAS TO EXIST. THE EXECUTIVE HAS TO MANIFEST A LITTLE BIT OF THAT. CERTAINLY WE ARE LOOKING AT WHAT HAS BEEN DESCRIBED AS THE POSSIBILITY OF A GOVERNMENT SHUTDOWN IF THERE IS THIS VETO. AND I DON'T KNOW IF EITHER CHAMBER CAN GET TO AN OVERRIDE IN TIME TO PREVENT THAT. WHAT DO YOU THINK COULD UNFOLD SHOULD YOU NOT SUMMON ENOUGH OF VOTES TO OVERRIDE THE VETO? I DON'T THINK WE'LL GET TO THAT POINT. I THINK WE'LL HAVE ENOUGH TO OVERRIDE AND I THINK IT EXISTS IN THE SENATE. I DON'T DON'T THINK WE ARE GOING TO GET TO THE POINT WHERE THE ACTUAL GOVERNMENT SHUTS DOWN. CLEARLY THERE IS PROBABLY NOT AS MANY CONCERNS IN THE SENATE OVER THE SHUTDOWN OF GOVERNMENT BUT THERE MUST BE CONCERNS IN THE HOUSE. WOULD I SAY THAT THIS MORNING. THIS MORNING WOULD I SAY THAT A LOT OF PEOPLE WOULD HAVE THOUGHT THAT. THIS AFTERNOON, I DON'T THINK ANYBODY IS THINKING THAT. THE SIZE OF THE VOTE IS VERY IMPORTANT AND THE SIZE OF THE VOTE IN THE HOUSE IS INDICATIVE OF THE FACT THAT PEOPLE WANT A BUDGET. NO ONE IS HAPPY, NO ONE IS EVER HAPPY IN THIS BUSINESS, BUT THEY'RE SATISFIED WITH THE JOB THAT WAS WELL DONE. THE VOTE IS A MANIFESTATION OF THAT. CERTAINLY THE VOTE IN THE SENATE IS A MASS FESS STATION OF THAT. AND WHEN YOU HAVE THOSE THINGS TO LOOK AT, IF YOU ARE THE CHIEF EXECUTIVE OFFICER, YOU HAVE TO REALLY THINK ABOUT WHAT YOU'RE GOING TO DO. GOVERNOR ALWAYS HAS AN OPTION TO LET THIS BECOME LAW WITHOUT HIS SIGNATURE. AND AS THE CHIEF EXECUTIVE OFFICER, HE HAS THE RESPONSIBILITY FOR WATCHING OVER THE SPENDING IN THE NEXT TWO YEARS. SO IT DOESN'T LOSE ANY OF HIS POWER OR ANY OF HIS AUTHORITY BY LETTING THIS BECOME LAW. BY THE SAME TOKEN, IF HE DOES TAKE THIS OPPORTUNITY OF VETO, YOU GOT A WHOLE NEW GAME AND A LOT OF DIFFERENT THINGS TO HEAR. THE GOVERNOR LAID OUT HIS CASE YESTERDAY, CLAIMED THERE WAS GOING TO BE A $200 MILLION DEFICIT ON THE ROAD TO THE INCOME TAX. THERE WAS QUESTIONING OF THAT IN THE HOUSE TODAY, WASN'T THERE? YES, IN VIEWING THE $200 MILLION POTENTIAL DEFICIT, THAT'S THE MOST PESSIMISTIC OF ALL POSSIBLE OUTCOME. I TRY TO BE MORE OPTIMISTIC; MEANING I DON'T THINK WE'RE ANYWHERE CLOSE TO THAT. AND NOW THAT THE PROCESS IS GOING TO GO FORWARD, WE HAVE AN OPPORTUNITY FOR THE HOUSE AND THE SENATE TO WORK WITH THE GOVERNOR TO MAKE SURE THAT DOESN'T HAPPEN AND I'M SURE WE ALL GOING TO COME ALONG AND DO THAT. THIS HAS BEEN AN UNUSUAL YEAR IN SOME WAY BECAUSE THE THREAT HAS BEEN WITHIN THE REPUBLICAN PARTY. I'M NOT SURE THAT'S SO UNUSUAL. IF YOU GO BACK TO OTHER TIMES AND THERE IS LARGE REPUBLICAN MAJORITIES, THIS WAS ALWAYS THE CASE, SO THIS IS NOT SO UNUSUAL. NOW I PROBABLY HAVE MORE OF A SENSE OF THAT BECAUSE I'M THE PERSON RESPONSIBLE FOR COUNTING THE VOTES. BELIEVE ME, IT WAS NOT AS SIMPLE AS IT SEEMED AT TIMES AND NOT AS EASE WET LARGE MARMGTSZ SO MY WORK HAS BEEN PRETTY HEAVY. SUPER MAJORITIES CAN BE TOUGHER TO DEAL WITH THAN MINORITIES. AS A DEMOCRAT, HAS IT BEEN A LITTLE PLEASANT TO SIT BACK AND WATCH THE REPUBLICANS GO AFTER EACH OTHER. I THINK IT IS VERY INTERESTING WHEN THE SENATE MAJORITY LEADER HAS TO TAKE ON THE GOVERNOR AND THEY'RE OF THE SAME PARTY AND THE GOVERNOR AND THE SENATE MAJORITY LEADER AND THE SENATE PRESIDENT HAVE EXTREME DIFFERENCE OF OPINION. IT IS VERY INTERESTING IN OUR WORLD AND OF COURSE THE SPEAKER OF THE HOUSE, WHO IS A WONDERFUL GUY, I HAD HIM AS A STUDENT IN THE NINTH GRADE. SO I'VE WATCHED HIM MATURE OVER THE PROCESS. IT IS A VERY INTERESTING PROCESS. SO NEITHER OF YOU EXPECT ANY KIND OF A VETO TO BE SUSTAINED, DO YOU? AT THIS POINT I DON'T EXPECT ONE. BUT, YOU KNOW, UNLESS SOMETHING UNUSUAL HAPPENS IN THE NEXT FOUR OR FIVE DAYS THAT WOULD TILT IT THE OTHER WAY, I DON'T EXPECT IT TO HAPPEN. THE GOVERNOR HAS THE LAST WORD. HE CAN WORK ON THE HOUSE OVER THE COURSE OF TIME. VOUBSLY HE HAS SEEN SOMETHING THAT I DON'T THINK HE WAS PREPARED TO SEE AND THAT'S THE SIGNIFICANT VOTES IN BOTH THE HOUSE AND THE SENATE. I SAW THE THE RED PATCHES ON HOUSE MEMBERS VOTE NO AND PEOPLE WEREN'T VOTING NO. THEY WERE A A LITTLE MORE RESPONSIBLE THAN THAT. JUST SAYING NO, JUST NOT THE WAY TO GO. YOU HAVE TO THINK BEFORE YOU ACT. WELL, I WANT TO THANK YOU BOTH VERY MUCH. EVEN THOUGH THERE WAS A RED SOX RALLY OUT HERE AND THE VOTE KEPT GOING THROUGH THE RALLY IN THE HOUSE, DIDN'T LOOK LIKE YOU LOST TOO MANY PEOPLE VOTING TO THAT. SO CONGRATULATIONS ON THAT. THANK YOU, RICHARD. WE KEEP THEM IN PLACE. THAT'S WHAT IT'S ALL B.THE GAME IS NOT OVER UNTIL IT'S OVER. |
| Tag Budget Return to index of stories... |
The Red Sox rally at the statehouse as I mentioned featured team owner John Henry, shortstop Rico Petrocelli from the 1967 "impossible dream" team, and pitcher Bob Tewksbury. None of the other legislators got to see it either. Thanks Richard, I'm sure we'll be hearing more as the week progresses. |
| Intro Sedoric Return to index of stories... |
Dealing with financial matters isn't solely the job of the legislature and the governor. There are people who make their living managing other people's investments. Tom Sedoric of A G Edwards and Sons is one of those folks. I had a chance to sit down with him at his firm in Portsmouth to get his perspective on what's happening in the financial markets. Tomorrow, the Federal Reserve is expected to lower interest rates- I asked him what kind of impact that might have on stocks and bonds. |
| Sedoric Return to index of stories... |
IT'S HARD TO TELL. BUT IN MOST CASES WHEN THE FED HAS BEEN TALKING ABOUT THE DIRECTION OF INTEREST RATES, AND THEY HAVE BEEN VERY PUBLIC ABOUT SOME OF THE PRONOUNCEMENTS PREVIOUSLY, A LOT OF THE ACTION IS PRICED INTO THE MARKET. SO THE DRAMATIC RALLY IN THE STOCK MARKET IS AN ANTICIPATION OF A CUT IN INTEREST RATES. THE FAIRLY STRONG BOND MARKET IS ALSO BEEN IN ANTICIPATION. SO WHEN THE ACTUAL EVENT HAPPENS YOU SELL ON THE NEWS. FOR A LAY PERSON THAT HAS NOTHING TO DO WITH BONDS AND THE BOND MARKET, CAN YOU GIVE US A PRIMER ON WHAT IT IS AND HOW IT WORKS? SURE. BONDS ARE LIKE A MORTGAGE. THEY'RE A GUARANTEED RATE OF RETURN FOR A FIXED AMOUNT. IF YOU HOLD A MORTGAGE ON YOUR HOUSE, BONT IS OWNED BY THE BANK GETTING A GUARANTEED RATE OF RETURN. 5% FOR A CERTAIN PERIOD. ONE OF THE BIGGEST ISSUER OF BONDS IS THE FEDERAL GOVERNMENT, AUDIT DEBT TO FUND OPERATIONS. MUNICIPAL EPT ADVERTISE LIKE SCHOOL DISTRICTS AND TOWNS AND GOVERNMENTS ISSUE BONDS AS WELL TO BUILD UNIVERSITY BUILDINGS OR SCHOOL. CORPORATIONS ISSUE DEBT AND CORPORATIONS ISSUE DEBT BECAUSE THEY HAVE STOCK WHICH IS EQUITY AND THEY HAVE DEBT WHICH IS THE MONEY THEY BORROW. ANDS BONDS CHANGE QUITE DRAMATICALLY. AND THE PUBLIC HAS ALL OF A SUDDEN BEEN CHASING AFTER BONDS BECAUSE THEY'RE STABLE, SAFE AND SECURE. WHAT THEY DON'T QUITE REALIZE IS THAT BOND PRICES CAN CHANGE IF INTEREST RATES CHANGE. IT CAN BE FAIRLY DRAMATIC. SO THIS WOULD SEEM WHEN THE MARKET TOOK ITS TUMBLE DOWNWARD, AS A SAFE PLACE TO FUTURE MONEY, IN THE BOND MARKET? THERE WERE A NUMBER OF ISSUES DRIVING THE BOND MARKET. ONE WAS A FLIGHT TO QUALITY. PEOPLE GOT BURNED IN THE STOCK MARKET. PEOPLE WANTED SAFETY, NO MORE PAIN. THEY PERCEIVED BONDS TO BUY THAT. IN MANY CASES THEY DO. THE OTHER ISSUE IS THAT OUR DEMOGRAPHIC SHIFTS THAT ARE OCCURRING, THE BABY BOOM GENERATION OF WHICH I'M ONE ARE AGING. WE WANT MORE STABILITY IN OUR ASSET BASE, MORE INCOME FROM OUR ASSETS. RIGHT NOW STOCKS PAY IN THE UNITED STATES AN AVERAGE DIVIDEND YIELD OF JUST BARELY 1% WHEREAS YOU MIGHT GET BONDS TO PAY FOUR OR FIVE PER SEPTEMBER. IF YOU ARE LOOKING FOR INCOME, WHAT DO YOU THINK? STOCKS VERSUS BONDS. THAT'S WHAT'S HAPPENING. THERE ARE A NUMBER OF DEMOGRAPHIC ISSUES THAT ARE OCCURRING. YOU MENTION INFLATION AND DEFLATION. DO WE KNOW WHERE WE'RE HEADING AND HOW DOES THAT IMPACT THE BOND MARKET? EVEN CHAIRMAN GREENSPAN HAS MADE COMMENT THAT WE ARE GETTING MIXED SIGNALS FROM THE ECONOMY. THERE ARE A NUMBER OF THINGS THAT INDICATE THAT WE MAY BE HAVING HIGHER INFLATION. ONE WOULD BE HIGHER OIL PRICES WHICH ARE INFLATIONARY. ON THE OTHER HAND, A NUMBER OF INDICATIONS THAT WE HAVE A DEFLATIONARY TYPE ENVIRONMENT DEVELOPING, HIGH PRODUCTIVITY MEANS WE CAN BUILD WIDGETS FOR LESS MONEY. PRICING DOESN'T SEEM TO BE MOVING UP MUCH IN THE GENERAL ECONOMY UNLESS YOU ARE AN ITCH MANUFACTURER AND THE DEFLATIONARY PRESSURE, THEY'RE MOST CONCERNED ABOUT US FOLLOWING THE PATH OF JAPAN BECAUSE JAPAN HAS BEEN IN A DEFLATIONARY VERMONT FOR THE BETTER PART OF A DECADE AND OUR POLICY MAKERS ARE BEING DILIGENT AND VIGILANT ABOUT TRYING TO AVOID THOSE TYPES OF PROBLEMS. DOES THAT MAKE THE BOND MARKET VERY RISKY THEN? THE BOND MARKET HAS RISK. FROM THE STANDPOINT, AS I SAID, THAT RATES CAN MOVE AROUND. ANY ASSET HAS RISK AND THAT'S THE FACT OF THE MATTER, AND A PRUDENT INVESTOR DOESN'T HAVE ALL THEIR MONEY IN ONE BASKET OR ALL THEIR EGGS IN ONE BASKET. WE'RE A LITTLE CONCERNED ABOUT HOW THE PUBLIC CHASES AFTER BONDS. WE'RE BUYING BONDS WITH THE SAME EFFECT THAT THEY'RE GOING TO PROVIDE QUALITY IN THEIR BEFORE AND THAT MAY NOT BE THE CASE. WHEN INTEREST RATES MOVE UP DRAMATICALLY, BOND PRICES GO DOWN DRAMATICALLY. THAT HAS NOT HAPPENED SINCE WE'RE IN THE LOWER INTEREST RATE ENVIRONMENT SINCE I WAS TWO YEARS OLD, 1956. AND RIGHT NOW, WITH RATES BEING SO LOW THEY CAN'T MOVE A WHOLE LOT LOWER, IT'S MORE LIKELY THAT INTEREST RATES WILL RISE OVER TIME HAVING AN ADVERSE EFFECT ON BONDS AND THE INVESTOR THAT HAS CHANGE CHASED AFTER BONDS MAY HAVE THE SAME EFFECT THAT HAPPENED WHEN HE CHASED, HE OR SHE CHASED AFTER TECHNICAL STOCKS IN THE '90s. FOR SOMEONE WHO MAY HAVE GONE OVERBOARD IN THAT ARENA AND DOESN'T TAKE THE ADVICE OF SPREAD OUT WHERE YOU MAKE INVESTMENTS, THEY COULD BE IN BIG TROUBLE. THEY COULD BE. THERE IS ANOTHER CONCERN THAT WE HAVE THAT PEOPLE BUYING BOND MUTUAL FUNDS RIGHT NOW DON'T UNDERSTAND THAT SOME OF THE BOND FUNDS WILL BE INCURRING CAPITAL GAINS. THEY'LL BE SELLING SOME OF THEIR BONDS AND IN SELLING THE BONDS, THE INVESTOR THAT BOUGHT THE FUND WILL GET A CAPITAL GAINS DISTRIBUTION AT YEAR END AND MANY MEMBERS OF THE PUBLIC ARE NOT AWARE OF THAT FACT. THERE'S SOME TASK RISK AS WELL. SO IF THEY END UP SELLING SOME OF THE BONDS, THEN I WOULD END UP GETTING CAPITAL GAINS THAT WOULD I HAVE TO PAY O.SO DO I END UP AHEAD OF THE GAME OR BEHIND? YOU END UP BEHIND. THERE IS IN EFFECT IN THE STOCK MARKET IN 1999 OR THE YEAR 2000, I BELIEVE IT WAS, THAT PEOPLE THAT BOUGHT STOCK MUTUAL FUND AT THE BEGINNING OF THE YEAR AND THEY HELD IT TO THE END OF THE YEAR LOST MONEY ON THE FUND BUT ENDED UP HAVING A CAPITAL GAINS DISTRIBUTION TO THE FUND AT THE END OF THE YEAR SO NOT ONLY DID THEY LOSE MONEY, THEY HAD TO PAY TAXES ON A GAIN THAT THEY DIDN'T BENEFIT FROM. FUNDS HAVE TO DISTRIBUTE THEIR CAPITAL GAINS TO THEIR SHAREHOLDERS. NO DIFFERET FOR A BOND FUND. WHAT DO YOU SUGGEST THEN? I MEAN IF WE DON'T KNOW IF WE'RE GOING THROUGH A DEFLATIONARY OR INFLATIONARY PERIOD, PEOPLE RAN, IF SOME OF THEM DID, INTO THE BOND MARKET BECAUSE IT SEEMED SAFER AND MORE RELIABLE. IF YOU ARE DOING IT YOURSELF, MAKE SURE THAT YOUR BOND PORTFOLIO LOOKS AS DIVERSE AS IT SHOULD. PEOPLE THAT BUY BONDS THINK THAT YOU CAN ONLY BUY A TREASURY NOTE OR CORPORATE BOND. IN MANY CASES, PEOPLE ARE CHASING AFTER A YIELD AND BUYING JUNK BONDS. WE ENCOURAGE PEOPLE TO LOOK AT DIVERSITY IN THEIR BOND PORTFOLIO THE WAY THEY DO IN A STOCK PORTFOLIO. DON'T HAVE ALL YOUR MONEY IN ONE SECTOR OR ONE COMPANY AND DON'T HAVE ALL YOUR MONEY IN ONE TYPE OF BOND. WE WOULD GENERALLY SUGGEST PEOPLE KEEP THE MATURITIES QUITE SHORT, LESS THAN 10 YEARS, MAYBE AS SHORT AS THREE AND FIVE YEARS BECAUSE IF RATES DO MOVE UP, SHORT-TERM BONDS ARE NOT IMPACTED. LONG-TERM BONDS ARE IMPACTED THE MOST. THE PRICE DROP THE MOST. AND LONG-TERM WOULD BE WHAT? TEN, 30 YEARS? IN OUR BUSINESS, CONSIDERED LONGER THAN TEN AND SOMETIMES AS LONG AS 25 AND 30. WHY ARE THE LONG-TERM IMPACTED MORE THAN THE SHORT-TERM? BECAUSE THE CASH FLOW FROM THE BOND. THAT'S A VERY GOOD QUESTION. THE CASH FLOW FROM THE BONDS. IF INTEREST RATES MOVE UP QUITE DRAMATICALLY AND I'M GETTING THREE OR 4%, THE CASH FLOW IS LESS IF INTEREST RATES ARE HIGHER. THERE IS NO GUARANTEE WHAT INTEREST RATES WILL DO BUT WE LOOK AT THE SHAPE OF WHAT WE CALL THE YIELD CURVE, SHORT-TERM BOND VERSUS LONG-TERM BOND N LOOKING AT THAT, WE LOOK FOR WHAT WE CALL THE SWEET SPOT OR THE BEST PLACE TO BE PLACING YOUR MONEY. AND RIGHT NOW IT'S RELATIVELY SHORT. WOULD YOU RECOMMEND PEOPLE NOT LOOK AT BONDS AT ALL RIGHT NOW OR IF THEY'VE GOT A LOT IN BONDS THAT THEY THINK ABOUT MAYBE. WHAT WOULD YOU RECOMMEND? I THINK EVERYBODY EXCEPT FOR MAYBE THE 22-YEAR-OLDS SHOULD HAVE SOME FIXED INCOME OR CASH EXPOSURE. IF IN FACT DEFLATION IS GOING TO BE AN ISSUE FOR A WHILE, AND IT MAY WELL BE. NOBODY LIKES TO TALK ABOUT IT, BUT IT MAY WELL BE, THEN SHORT AND INTERMEDIATE BONDS WILL BE THE BEST TO OWN. IF, HOWEVER WE HAVE AN INFLATIONARY ENVIRONMENT LIKE WHAT HAPPENED IN THE 1970s, HIGH OIL PRICES AND OPEC AND THOSE TYPES OF PROBLEMS, BONDS GOT DECIMATED. SO IF YOU KEEP THE MATURITIES RELATIVELY SHORT AND DON'T CHASE AFTER JUST YIELD, WHICH MEANS BUYING LOW QUALITY BONDS, I'LL PROBABLY BE FINE. EVEN FOR THE 35-YEAR-OLD OR 40-YEAR-OLD, WE RECOMMEND A SMALL EXPOSURE TO FIXED INCOME. THERE IS MUCH MORE STABILITY IN THE PORTFOLIO AND GIVES THEM COMFORT AND SOME EDUCATION. FOR THE 80-YEAR-OLD OR 75-YEAR-OLD, MUCH HIGHER BOND EXPOSURE. IN THOSE CASES RIGHT NOW WE ARE LOOKING AT MAKING SURE MA TURTSZ ARE QUITE SHORT. GOVERNMENT BOND VERSUS CORPORATE BOND VERSUS JUNK BOND. MY INSTINCT WOULD BE GOVERNMENT IS THE SAFEST. IS THAT TRUE OR NOT? THAT'S TRUE. IT IS TRUE. AND THEREFORE THAT'S WHERE THE LOWEST YIELDS ARE. AND SOME PEOPLE ARE COMFORTABLE BUYING LOWER QUALITY BONDS, UNDERSTANDING THERE ARE RISKS THAT ENRON CAN HAPPEN TO YOUR PORTFOLIO. AND IF YOU OWN THOSE TYPES OF BONDS, YOU NEED TO BE AWARE OF THE RISKS AND KEEP IT A SMALL PIECE OF THE PORTFOLIO. GOVERNMENT BONDS ARE THE SAFEST. THERE ARE A NUMBER OF GOVERNMENT AGENCIES THAT ISSUE DEBT AS WELL AND THOSE ARE RELATIVELY SAFE, FANNIE MAE, FREDDIE MAC, THE FEDERAL HOME LOAN BANK AND MUNICIPAL BONDS WHICH ARE TAX FREE AND CORPORATIONS LIKE GENERAL ELECTRIC AND I.B.M. WHICH ARE HIGH QUALITY. THE HIGHER THE QUALITY, THE LOWER THE YIELD BASICALLY. AND IF YOU'RE WILLING TO TAKE A LITTLE BIT OF RISK, YOU CAN BUY INVESTMENT GRADE OR LOWER INVESTMENT GRADE BONDS AND PICK UP SOME YIELD RIGHT NOW. WHAT IS A JUNK BOND IN. A JUNK BOND IS ANY FIXED INCOME INSTRUMENT ISSUED BY A LOWER QUALITY CORPORATION OR GOVERNMENT ENTITY. FOR EXAMPLE, AT&T WIRELESS IS A COMPANY THAT ISSUES BONDS AND THEY'RE NOT INVESTMENT GRADE. NEXT TELL, NEXTEL, THEY MAY GO OUT OF BUSINESS OR THEY MAY NOT BUT THEY PAY A HIGHER YIELD. LAST YEAR AN INDEX OF U.S. COMPANIES-- U.S. COMPANY BONDS, HIGH QUALITY BONDS, WAS UP 10%. JUNK BONDS, BECAUSE OF THE ENRONS AND THE WORLDCOMS AND ADELPHIA COMMUNICATIONS, JUNK BONDS WERE DOWN 2% ON AVERAGE. SO IF YOU THINK ABOUT IT, NOT ALL BONDS ARE CREATED EQUAL. YOU HAVE TO WATCH OUT FOR THE QUALITY ISSUES BECAUSE QUALITY, EVERYBODY PRESUMES THE UNITED STATES GOVERNMENT IS NOT GOING TO FAIL. BUT CORPORATION DOZEN. AND THEY DON'T PAY BACK THEIR DEBTS. SO WHAT'S THE ONE BIT OF ADVICE THAT YOU WANT PEOPLE TO TAKE AWAY FROM YOU REGARDING THE BOND MARKET? DON'T CHASE AFTER YIELD. BECAUSE IF YOU CHASE AFTER YIELD YOU MAY BE TAKING RISKS THAT YOU DON'T REALLY UNDERSTAND. CHASING AFTER YIELD IN A CURRENT ENVIRONMENT INTEREST RATES AT THEIR LOWEST LEVEL SINCE 1956, COULD HAVE A REAL NEGATIVE EFFECT ON YOUR PORTFOLIO LONG-TERM. TOM, THANK YOU VERY MUCH. THANK YOU. |
| Web Pointer Return to index of stories... |
For more information on our program, streaming video, links to our guests and interviews and to tell us what's on your mind in our discussion forum, visit our website at nhptv.org. |
| Tomorrow Return to index of stories... |
On the next New Hampshire Outlook - The future of food. We'll hear from a citizens panel on agriculture in New England. Plus, there's nothing quite like fresh produce from a local farm. We'll take you to New London's Spring Ledge Farm. It's where people come from miles around for their fresh, locally grown fruits and vegetables. We'll show you why Spring Ledge received the state's "farm of distinction" award. |
| Goodnight Return to index of stories... |
That's it for this edition of our program. I'm Ally McNair. Thanks for joining us. |
| founders Return to index of stories... |
Thanks to our founding sponsors who have provided major funding for the production of New Hampshire Outlook: New Hampshire Charitable Foundation Public Service of New Hampshire Stratford Foundation |
| Tonight 10:00 Return to index of stories... |
Tonight on New Hampshire Outlook. There's nothing quite like fresh produce from a local farm. We'll take you to Spring Ledge Farm and show you why it received the state's "farm of distinction" award. Join us tonight at 10:00. |
| key: State Politics / Government Return to index of stories... |
NEW HAMPSHIRE OUTLOOK Air Date/Time: 6/24/03 22:00 HOST: Allison McNair Length: 14:37 minutes In this edition of New Hampshire Outlook, NHPTV's nightly news magazine, in this program, we're talking budget. The House and Senate have had their say. Now the threat of a state government shutdown looms and the Governor tells us why. And are you wrestling with how to handle your own investments? We'll give you some perspective on the risks of the bond market. Richard joined Ally on set to talk about the day's events at the state house. Following the their discussion Richard interviewed Rep. Rogers Johnson and Sen. Lou D'Allesandro outside the state house for reaction to the vote and a look ahead to what can be expected. PRODUCER/REPORTER: Richard Ager NAME OF PARTICIPANTS: Sen. Robert Clegg\R - District 14, Sen. Iris Estabrook\D - District 21, Rep. Neal Kurk \R - District 48, Rep. Alf Jacobson\R - District 32, Rep. Fran Wendelboe\R - District 29, Craig Benson\NH Governor, Sen. Lou D'Allesandro\D - District 20, Rep. Rogers Johnson\R - House Majority Whip |
| key: Economy / Business Return to index of stories... |
NEW HAMPSHIRE OUTLOOK Air Date/Time: 6/24/03 22:00 HOST: Allison McNair Length: 11:00 minutes In this edition of New Hampshire Outlook, NHPTV's nightly news magazine, in this program, we're talking budget. The House and Senate have had their say. Now the threat of a state government shutdown looms and the Governor tells us why. And are you wrestling with how to handle your own investments? We'll give you some perspective on the risks of the bond market. Dealing with financial matters isn't solely the job of the legislature and the governor. There are people who make their living managing other people's investments. Tom Sedoric of A G Edwards and Sons is one of those folks. I had a chance to sit down with him at his firm in Portsmouth to get his perspective on what's happening in the financial markets. Tomorrow, the Federal Reserve is expected to lower interest rates- I asked him what kind of impact that might have on stocks and bonds. PRODUCER/REPORTER: Allison McNair NAME OF PARTICIPANTS: Tom Sedoric\A.G. Edwards & Sons |
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Tonight on New Hampshire Outlook. . Tonight at 10pm on New Hampshire Public Television. |