Mousseau: Economy Not Out Of Woods Yet

Cinthia Murphy
March 26, 2013

The macroeconomy is looking better, but the past two years, for now, still look like prologue, Cumberland’s muni man Mousseau says.


The economy is definitely on the mend, but that doesn’t mean it’s out of the woods yet, according to John Mousseau of Cumberland Advisors. Mousseau, who manages more than $1 billion in municipal bond portfolios for the registered investment advisor, sees the slow grind out of the Great Recession continuing, with the emphasis both on slow and grind.

Among the interesting takeaways from IndexUniverse’s Cinthia Murphy’s recent visit with Mousseau, were that gridlock in Washington, D.C., is likely to motivate Federal Reserve Chairman Ben Bernanke to keep downward pressure on official rates, and that regarding bond market exposure, barbells may be a better call than ladders. The U.S. equities market has been rallying, and the likes of Meredith Whitney have turned bullish after being very bearish, particularly on munis. Has the landscape in municipal debt changed at all since her last prediction?

Mousseau: Well, Whitney is backtracking a little bit and saying that she was probably a little overboard before. We know that municipal credit has gotten better. And we know that they’re starting to take measures to solve some of the pension-obligation issues that are out there, but they’re not out of the woods by a long shot. You have to remember that these are long-term problems, and you’re not insolvent until you miss a payment on a pension issue. So, we think they’re going to solve these things over time. Are you talking California, or more broadly?

Mousseau: I’m talking broadly. This isn’t helping San Bernadino per se, and certainly on a state basis like a Rhode Island or a Colorado, even California has improved with some of the tax things that they’ve done. You’d like to think the taxes that they pass in Proposition 60 aren’t going to be there forever, but they’re going to shore up things.

You saw a lot of negative stuff written about California Proposition 60, and it was more along the lines of: “Hey, you’re going to see a ton of people move out of California to Nevada,” or things like that.

The reason I’m saying that is if you look at the voting patterns in California, the people that voted the most in favor of Proposition 60 and the higher taxes that it brought were in Marin County and in Silicon Valley—it was the people who have the bucks who were willing to part with the bucks. From just a total municipal bond level, it gives you some comfort that in a lot of cases, people are willing to take charge of their destiny a little bit here. So, on the credit side, things are improving.


A slew of iShares bond funds suffered outflows on Monday, March 2, but rising markets lifted total U.S.-listed ETF assets to $2.097 trillion.

'SPY,' 'GLD' and a slew of SPDR sector funds paced SSgA's issuer-leading outflows on Monday, March 2. But rising markets offset net outflows, lifting total U.S.-listed ETF assets to $2.097 trillion.


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