Riley: Did Stock Market Rally Under Trump Help Rhode Island?
Tuesday, November 29, 2016
It’s been a tough November for our hedge fund. I did not predict or expect a Trump Presidency and although I made a 2 a.m. purchase of the U.S. markets down 6% or so, we were still caught mildly offside. Ironically the opposite is true for State Treasurer Seth Magaziner.
No doubt that Seth, convinced of family friend Hillary Clinton's victory, must have been horrified when the markets went “limit down” overnight. By 2:00 a.m. the State had lost all gains in 2016 and was down money once again for the calendar year. Then, inexplicably, the next morning the market rallied in dramatic fashion continuing for weeks into month end. A bullish pro-growth message, with inflationary fiscal policies, was perceived as far better than continuing President Obama’s “boot on the throat” business policies. It turns out that Mr. Trump did “build that” and to the benefit of Mr. Magaziner who may, for the first time in his professional life, have a gain this year end 2016. Mr. Magaziner has never had a positive Calendar year or Fiscal year gain managing money.
Rhode Island (among the worst ten pension funded states) is certainly not out of the woods but there is no doubt that the Trump election helped the State’s pension fund. Thus, it was disturbing to see and hear city and state leaders alike so remorseful and defiant. Whether it was hugging $200,000 staffers or declaring a defiance of federal law, they each displayed a complete disconnect from Rhode Island taxpayers and pension beneficiaries who benefited from a roughly $600 million gain. Had Hillary won and the market was down 5-10 % over the ensuing weeks they likely would have been overjoyed, because this administration is about advancing political careers, both their own and their staffers.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTHey Governor what about Providence?
Providence 2017 is now less financially capable of survival five years after Taveras' ballyhooed pension reform that was filled with lies and miscalculations - so disturbingly, the facts are clear. After four years of Ms. Raimondo's Municipal Pension Crisis Commission and Taveras' reforms, Providence's funding ratio is officially 26.9% down from 34% and more realistically below 20%. That’s called failure.
Yet Mr. Elorza is totally distracted and has made no progress toward solving the pension issues his two paid-for plans cited as key to the survival of Providence. These plans are now approaching one year old and as far as I know there are virtually no discussions with unions, much less a grand bargain. Mr. Elorza has loudly declared who he cares about, but what about our Governor? In a spectacular display of timid leadership, she has done nothing to address the Providence pension crisis even though she declared the problem 6 years ago, to be the reason she ran for Treasurer. Can future voters expect her to always lack toughness and decisiveness?
Based on current City financials and current law, State taxpayers will soon be bailing out Providence and supporting the retirements of thousands of Providence city employees in addition to supporting their own communities pension and health care costs. You have been warned.
Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.
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