November, 2014 - In This Issue:


The Greatest Generation Does It Again


From the Desk of Alan Salzbank
Alan Salzbank, Fund Manager, Riverpark Gargoyle Hedged Value Fund
Alan Salzbank


On Tuesday, November 11th, a grateful nation gave tribute to the men and women of our armed forces. Originally known as "Armistice Day," November 11th was chosen as the annual date for this remembrance to commemorate the armistice ending World War I that took effect on the eleventh hour of the eleventh day of the eleventh month in 1918. Following World War II and the Korean War, the holiday was renamed Veterans Day to recognize and honor all veterans.


This Veterans Day, my thoughts turned to the heroism and sacrifice of the Greatest Generation, and the generation that followed, who now comprise the majority of seniors in our country. Generations who came of age in the Great Depression, in the shadow of World War II, at the onset of the Cold War and during the social upheaval of the 60s. These generations stood fast in the face of the most wide-ranging conflicts the world has ever known, and went on to lead the country into an era of unrivaled prosperity. While there are few who would not acknowledge that those generations of men and women were there to aid our nation in past times of need and peril, I wonder how many realize that they have done it again.

I am referring to the aftermath of the Financial Crisis. In late 2008 - early 2009, the nation once again found itself imperiled, as highly speculative and leveraged bets by many large financial institutions unraveled in the wake of the real estate bust. Iconic Wall Street firms like Bear Stearns and Lehman Brothers collapsed, along with banks like Washington Mutual and Wachovia, and giant government sponsored enterprises Fannie Mae and Freddie Mac. The Federal Reserve was able to stave off complete disaster only by an historic slashing of near-term interest rates and an unprecedented expansion of the Federal Reserve's balance sheet that came to be known as Quantitative Easing.



In addition to providing the liquidity necessary to prevent the crisis from deepening into a full-blown depression, the Fed's Quantitative Easing had the effect of driving down long-term bond yields, as the Fed purchased substantial amounts of government agency debt. The yield on the U.S. 10 Year Note has been hovering near historic lows for several years.





This had the intended effect of sparking a massive rally in risk assets, as investors are forced to take on greater risk to achieve acceptable returns in a low-yield environment. While that has benefited the financial sector greatly, and given banks the time they needed to rebuild their balance sheets, it has not benefited those who cannot afford to take on more risk and rely upon the safety of bonds for a stable source of income. It is our more than 44 million senior citizens who are once again bearing the brunt of sacrifice in our time of need. Their sacrifice becomes even clearer when one looks at the U.S. Treasury 3-Month Yield, which is a much closer proxy for the interest rates that seniors relying upon stable income from savings accounts and certificates of deposit can expect to receive:





As Charles Schwab recently wrote in a Wall Street Journal op-ed:


"Retirees depend on income from their savings for basic living expenses. Without that income, many seniors have taken on greater risk to increase the potential yield on their savings, or simply spent down their nest eggs. After decades of playing by the rules, putting off spending and socking away money, seniors have taken it on the chin."


So this year, when you thank a veteran, when you thank our seniors, remember that you are thanking them not only for all of the sacrifices they made in the past, but also for the sacrifices they are making today. Always there when they were needed, always ready to answer the call, the Greatest Generation(s) have done it once again.



Alan Salzbank           Josh Parker
201-227-2208             201-227-2205

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