From the June 2006 issue of Investment Advisor • Subscribe!

Catching up with...

Quincy Krosby on oil, retirement, and taxes

Quincy Krosby is the chief investment strategist at The Hartford. In that position, she speaks regularly to the brokerage community, to investment advisors, and to institutional investors about macroeconomic and geopolitical trends and how they impact the capital markets.

Krosby also helps advisors interpret economic trends and market direction for their clients. Prior to coming to Wall Street, Krosby earned her stripes inside the Beltway: She was a United States government diplomat, serving both in Washington and in several U.S. embassies abroad. Krosby spoke with Staff Editor Ryan G. Murphy in early May.

Heading into the summer months, what is the overall state of the economy?

I think we might just start to see signs of slowing down. I think that we'll see the housing market display increasing signs of a slowdown. We'll start to see indications that GDP is coming down from its robust levels, and I think we'll start to hear from companies that their earnings are starting to come in a little bit [down]. You're [also] starting to see strains--although it might be temporary--in the large-cap names.

How will oil play into this?

Oil is interesting; it plays a cameo appearance when things start to heat up. I think we'll see [oil] going up to new levels, then a pullback, and then going up to new levels, and this will be predicated on a number of factors. One will be strength of the global economy, so demand will pick up. Two, we will be responding to geopolitical jitters. Also, we're paying very close attention to some of the main suppliers and some of the less than bullish trends in some of the oil-producing nations.

The Medicare and Social Security trust funds have been making headlines as of late. The concern is that the programs may run out of money. What's a way to remedy that?

The government needs to stop spending in areas that it can legitimately stop spending. Unfortunately, this is an election year and politicians want to keep their particular spending causes and I don't think the President can pull back some of the spending.

Would a tax hike help?

No, and the reason is that, unfortunately, when we have tax hikes, I don't see Washington being particularly prudent in the way it uses tax revenue. If I felt that Washington took tax revenue wisely and judiciously, perhaps I would say yes to a tax hike, but I've never seen a case where tax hikes do the job and then they [don't] have to come back for even more money.

The broad spectrum of Americans do not believe that an increase in taxes solves the problem because the money is not used wisely and efficiently.

What's the answer for effectively funding pension plans?

This is one thing we're paying very close attention to. We've just seen [U.S. Treasury] Secretary Snow give a speech [in which he said] he did not think the pension reform bill they are looking at now is stringent enough. [At press time, the pension reform bill was still stuck in conference.] So what we need is more stringent pension reform coming out in terms of what we're demanding of companies. That is going to put pressure on the long end of the yield curve and that in turn should push yields down as companies and pension funds and insurance companies try to match their assets with their liabilities.

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