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President's
Message
Finding
Diamonds Close to Home
In the early 20th
Century, the founder and first president of
Philadelphia’s Temple
University became famous for a
speech he delivered all
over our growing country. In
“Acres of Diamonds,”
Russell Conwell advised
young Americans to
follow the examples of local
merchants and business
owners and seek
opportunities for
success in their own backyards.
The current instability
of our economic
environment reminds me
of Conwell’s message.
As the financial markets
readjust, I’m certain
that prudent executives
can find “diamonds”
close to home. It’s
worth noting, however, that
capitalizing on these
opportunities requires
accurate and skillful
analysis, and the ability to
perceive and avoid undue
risk.
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The licensed
securities professionals at De La Rosa & Co. can help adept financial
executives find value and opportunity when they aren’t readily apparent. Call
us before you decide to borrow or invest. We will help you find diamonds in
your backyard with our unique combination of insight, judgment, and ethics.
Sincerely,
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Harnessing the Tiger in
California's Gas Tanks |
The streets of Oxnard were going
from bad to worse and the City Council was ready to take action. The council
directed city staff to address a backlog of more than $100 million in repairs.
De La Rosa & Co. developed an innovative $27.7-million COP program for
Oxnard, the first long-term gas-tax deal in California with no General Fund
pledge. Banker John Kim said leveraging future gas-tax revenue to repair
streets now makes good economic sense for most cities and agencies. “Every day
they wait, streets fall into greater disrepair and the cost of fixing them
rises,” said Kim, who led the DLR team on the Oxnard project.
California collects 18¢ per gallon for gasoline, diesel and other fuels at the
pump. Each month, cities and counties receive 35% of the statewide gas tax,
which must be used for street construction and maintenance. During a typical
year, Oxnard receives about $3.4 million from the gas tax, barely enough to
patch streets suffering from deferred maintenance.
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Repair crews fix Oxnard's failing streets with revenue from state gas tax
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Signs Point to Lull in
Market Turmoil
Treasury yields rose for the second straight week as investors sold government debt to buy higher yielding investments, a signal that the ongoing credit-market turmoil might be easing. Last week, Citigroup and Merrill Lynch led the market in selling $45 billion in corporate bonds, the highest weekly volume on record. The 2-year note led the Treasury bond decline, rising 29 basis points last week and 39 bps the previous week, its biggest 2-week loss since 2001. Rising commodity prices have stoked inflationary fears. Since August, the annual inflation rate has doubled to 4%. Market participants now anticipate a 78% chance that the Fed will cut its rate by 25 bps when it meets later this week. Two weeks ago, the market was split between a 25- or 50-bps cut. The 2-year note ended the week at 2.42%, the 10-year at 3.87% (40 bps higher in two weeks), and the 30-year at 4.59% (29 bps higher in two weeks).
Munis continue to outperform Treasuries in a fairly quiet market. Primary new issuance continues to be manageable and well received, and absolute yields remain attractive on a relative basis. Liquidity has improved significantly, although secondary Municipal trading shows the market still lacks full efficiency. Investors continue to discredit most insurers and focus on underlying credits. AMBAC announced a $1.66-billion loss for the first quarter of 2008, sending its shares down 40% and raising more speculation about the creditworthiness of its insurance. We expect the market to continue consolidating as crossover buyers and retail continue to create sufficient demand for Municipal paper, but a surge in supply from deal restructurings could temporarily send ratios higher.
High-grade, short-term, tax-exempt yields rose in response to the market’s inflationary fears and an outflow of cash in money funds. The variable rate market appears to be consolidating, but we expect further inconsistencies in reset rates as investors react to AMBAC’s reported losses.
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