downtowncanyonville.com

By REX NUTTING

Quoted: “There’s not a doubt in my mind that you will see a spate of municipal bond defaults. … You could see 50 … to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars’ worth of defaults.”

“When individual investors look to people that are supposed to know better, they’re patted on the head and told, ‘It’s not something you need to worry about.’ It’ll be something to worry about within the next 12 months.”

—Meredith Whitney, banking analyst, “60 Minutes” (12/19/2010)

The Reality: Rarely has a Wall Street analyst been so wrong so publicly.

In the year since Ms. Whitney predicted that the recession would force numerous cities and counties to renege on their debts, there have been fewer than a dozen municipal bankruptcies, and only two sizable ones—Harrisburg, Pa., and Jefferson County, Ala. Defaults have totaled less than $10 billion in a market worth $3.7 trillion.

Investors who ignored Ms. Whitney were rewarded handsomely, in part because the market crashed soon after her prediction. By springtime, however, the muni-bond market was rallying, with prices climbing and yields falling.

The bottom line? Muni-bond investors have earned about 10%, the best performance of any asset in the fixed-income markets this year.

Write to Rex Nutting at rnutting@marketwatch.com

By JONATHAN LOPEZ

Amsterdam

Edgar Degas (1834-1917) was an artist of paradoxes. Renowned for his depictions of modern life—the ballet, the racecourse, the café-concert—he felt nowhere more at home than in the print room of the Bibliothèque Nationale, where he spent hours on end making sketches after old etchings and engravings. “No art was ever less spontaneous than mine,” he once wrote in a letter to a friend. “What I do is the result of reflection and study of the great masters.”

The current exhibition at the Rijksmuseum offers a focused look at what Degas learned from a specific great master: Rembrandt van Rijn (1606-1669). On view in a single, graciously proportioned gallery are 22 paintings, drawings and prints—11 works each by Degas and Rembrandt—including Rembrandt’s shadowy, bust-length “Self-Portrait as a Young Man” (c. 1628-29) from the Alte Pinakothek in Munich and Degas’s self-portrait of about 1857-58 from the J. Paul Getty Museum in Los Angeles. Using frequent side-by-side comparisons to emphasize visual similarities between these works, the exhibition reveals that Degas’s early efforts at forging a personal style were interwoven with an intense and sincere interest in Rembrandt. Although the show’s binary pairing of the two artists tends, by its nature, to stint the complexity of Degas’s relationship to tradition, the case that emerges is nonetheless compelling.

Alte Pinakatothek

‘Self-Portrait as a Young Man’ (c. 1628-29) by Rembrandt

The Sterling and Francine Clark Art Institute

‘Self-Portrait’ (c. 1857-58) by Edgar Degas

The son of a wealthy banker, Degas dutifully enrolled in law school in 1853, at the age of 19, but lasted only one year before yielding to a passion for art. He briefly attended France’s premier art school, the École des Beaux-Arts, in Paris, where he found the teaching methods stultifying. He then opted for a rigorous three-year program of self-guided study in Italy, planning to consult the works of the Renaissance masters while visiting with Italian cousins.

Strangely, it was in Italy that Degas came under Rembrandt’s spell. Among the young artists who congregated at the French Academy in Rome—including the portraitist Léon Bonnat, the symbolist painter Gustave Moreau and the printmaker Joseph Tourny—Rembrandt was a revered symbol of artistic individualism, due in part to his outsider status in the canons of art history as taught at the École des Beaux-Arts.

Instructors at the École accorded a measure of respect to Rembrandt, especially for the deep humanity of his work, but they did not encourage students to imitate him. Rembrandt’s use of broken, sketchy outlines to suggest atmospheric effects and his tendency to define forms through chiaroscuro—dramatic contrasts of light and shade—placed him starkly at odds with the classical mode of drawing favored by the École. French academic tradition held that Italian Renaissance artists like Raphael, whose ideal lines seemed to cleave space effortlessly into form and void, furnished the best examples for study.

The printmaker Tourny, who collected etchings by Rembrandt and brought a small printing press with him to Italy, inspired Degas to try making prints in the Rembrandtian manner, as three etchings on the exhibition’s first wall make clear. Degas’s faithful copy of the 1637 Rembrandt etching “Young Man in a Velvet Cap” is juxtaposed with the original, and nearby hangs an etched portrait that Degas made of Tourny in much the same spirit. Tourny, whose face is cast into shadow, adopts a pose similar to the figure in the Rembrandt etching—seated, with arms folded, leaning on a table—and even sports a velvet chapeau.

At this early date, Degas’s draftsmanship lacked some of the freedom and authority it would later attain, and it therefore suffers somewhat in a direct comparison with Rembrandt. Whereas the dense thickets of crosshatched lines in Rembrandt’s etchings fully exploit the expressive possibilities of chiaroscuro, Degas defines the folds and creases of Tourny’s coat with an almost mechanical system of crosshatching, reminiscent of 19th-century line engravings. The mismatch between this fussy technique and the larger drama of the image evidently bothered Degas; another work on view captures his attempts to remedy the problem.

In this c. 1865 reworking of the Tourny portrait, Degas used the original etching plate but left areas of excess ink on it during the printing process to create fields of shadow independent of the etched lines. The effect is eminently Rembrandtian, as the figure emerges from almost total darkness. Degas also used expressive inking on a self-portrait etching from this period, one of the most striking works in the show. Here, the young artist appears as a shadowy figure in a frock coat and broad-brimmed hat—a modern Frenchman thrust into the gloom of 17th-century Amsterdam by means of art-historical homage.

While the case for Rembrandt’s influence on Degas’s etchings is clear and unassailable, matters become more complex when one turns to the exhibition’s four painted self-portraits by Degas—all of which date from just before or during the artist’s Italian sojourn—as these works actually draw inspiration from a wide variety of sources, not just Rembrandt. In the Degas self-portrait of c. 1857-58, lent by the Clark Art Institute, for example, one sees plain traces of Rembrandt in the deep shadows, in the intentionally unfinished details of the coat and shirt collar, and in the overall sense of role-playing—staid Degas wearing a jaunty red kerchief seems more than a bit theatrical. That said, this work’s shadows are limpid in a way that Rembrandt’s seldom were, and Degas’s melting eyes and dreamy countenance have as much in common with Raphael’s self-portrait in the Uffizi as with any picture by Rembrandt.

But part of Degas’s genius, as curator Jenny Reynaerts takes pains to show, was an ability to appreciate and synthesize styles that might seem, at first glance, completely incompatible. “Van Dyck is a first-rate artist,” Degas once wrote to Moreau. “Giorgione also, Botticelli also, Mantegna also, Rembrandt also, Carpaccio also.” Hardly a surprise, then, that the American collector Louisine Havemeyer, wife of sugar tycoon H.O. Havemeyer, once remarked that “It takes special brain cells to appreciate Degas.” The main accomplishment of this intelligent exhibition is to help those special brain cells perceive how Degas eventually subsumed his fascination with Rembrandt into a larger artistic project that melded a wide array of influences into a new style that owed as much to the past as to the present.

Mr. Lopez is editor-at-large of Art & Antiques

By ANDREA COOMBES

Investors approaching retirement and worried about the negative effect of a volatile market on their savings might want to give annuities a closer look—even though ultralow interest rates currently make that purchase a tough decision.

Buying an immediate income annuity—an insurance product in which you exchange a lump sum for guaranteed monthly payments for life—lets you skirt two big retirement risks: that a market crash will decimate your savings, and that you’ll outlive your money. You can pay extra for inflation protection to make sure rising costs don’t take an ever bigger bite out of income.

Chris Gash

And more savers may get access to annuities as employers embrace the product. Rules proposed by the Treasury and Labor departments last week aim to encourage more employers to offer an annuity option in 401(k)s and other retirement plans.

Insurers base monthly payments, in part, on current interest rates. And if you buy now, you lock in a lower payout than if rates were higher.

So is an annuity going to pay you enough? It depends on how much you’ve saved. An annuity isn’t a solution for saving too little, though it does protect you against running out of money.

Here’s a hypothetical scenario: A single 65-year-old woman with $200,000 in her 401(k) currently can buy an immediate income annuity, with annual inflation adjustments, that pays about $740 a month for life, with that amount adjusting for inflation. For a single, 65-year-old man, the monthly payout is about $800 (higher because men don’t live as long, on average).

Some financial advisers say a good strategy is to gauge your fixed monthly costs—housing, utilities, etc.—and then annuitize enough savings to generate income to cover those expenses. (Don’t forget to factor in another income source: Social Security.)

But the current low-rate environment makes annuities less appealing. “I’d be a little hesitant right now,” says Joe Tomlinson, founder of Tomlinson Financial Planning and a fellow of the Society of Actuaries. When he reran the numbers on a hypothetical retiree scenario that he first calculated eight months ago, he found the monthly annuity payout is now about 5% lower.

Still, for retirees seeking guaranteed income, annuities make sense, says Kelli Hueler, chief executive of Hueler, which operates
IncomeSolutions.com
, a Web-based income-annuities comparison tool. “If you do not need income today to cover your basic needs, then you don’t need to buy an annuity today,” she says. “But if you have basic income needs that aren’t being covered sufficiently…an annuity can be one piece of that. In this interest-rate environment, it’s very difficult to find safe, reliable income alternatives.”

Another consideration: With annuities, you lose the ability to leave money to heirs, unless you pay extra for riders. Still, your kids may consider that an acceptable trade-off if they don’t have to support you financially when you’re in your 80s and 90s.

“Buying an immediate annuity does create a cash-flow discipline,” says Noel Abkemeier, a Williamsburg, Va.-based principal with Milliman, an actuarial and consulting firm, and a fellow of the Society of Actuaries.

“You have $100,000 in front of you, you buy an immediate annuity and it gives you $580 a month. It helps imply a budget,” Mr. Abkemeier says. But if you have $100,000 to spend, “you might blow the money.”

No matter annuity benefits or risks, many people are loath to hand over control of a lump sum they’ve spent years accumulating. An option for them might be a variable annuity with guaranteed income benefits.

With this type of annuity, investors maintain control over their money, which they invest in a subaccount of stocks and bonds—but they’re also promised a guaranteed income.

Still, bells and whistles make it hard to assess costs. Vanguard Group and others offer lower-cost variable annuities with guaranteed income benefits, Mr. Tomlinson says, but the fees for some companies’ products top 4% of the amount invested. If you invest $200,000 at a cost of 4% per year, that’s $160,000 in fees over 20 years, assuming the account balance stays even.

Another risk: whether the insurance company survives 20 or 30 years to keep paying you.

Find out how much your state’s insurance guaranty association guarantees per person in the event of a company failure—it may range from $100,000 to $250,000, says Erin Botsford, chief executive of financial planning firm Botsford Group. Then, buy annuities from different companies up to that value.

Go to the National Organization of Life & Health Insurance Guaranty Associations (www.holhga.org) for more information. Also, buy only from companies with top ratings from A.M. Best, Moody’s and Standard & Poor’s.

Annuities are complicated so consider hiring a financial adviser who works on a fee-only basis and has access to cheaper institutional pricing. Also ask if your retirement-plan provider has information on annuities.

Write to Andrea Coombes at andrea.coombes@dowjones.com

Andrea Coombes is a personal-finance editor for MarketWatch. Read more at marketwatch.com.