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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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Treasury, Muni Markets Remain Quiet
Treasuries ended relatively flat after weeks of volatility. Market concerns remain focused on inflation, but bearish reports about investor confidence, housing and jobs are keeping interest rates down. On June 6, yields on the 2-year note closed at 2.37%. The 10-year note lingered around 4%, then closed at 3.91% after news of the steepest rise in unemployment in more than 20 years, with the economy losing jobs for the fifth straight month. Meanwhile, the 30-year bond closed at 4.62%. Fed Futures indicate a 62% chance the central bank will increase its benchmark rate by yearend.
Tax-exempt rates continue to move along with Treasuries in a fairly quiet market. Primary new issuance continues to be manageable and well received, and absolute yields remain relatively attractive. Although liquidity in the market has improved significantly, secondary municipal trading shows the market still lacks full efficiency. Investors continue to discredit most insurers and focus on underlying credits. Standard & Poor’s downgraded AMBAC and MBIA two notches to AA last week. We expect the market for high-grade Munis to continue consolidating as crossover buyers and retail continue to create sufficient demand for municipal paper, though a possible surge in supply from investors selling paper insured by AMBAC and MBIA could temporarily raise ratios.
Yields on high-grade, short-term, tax-exempt continue to drop as cash flows into money funds. The variable rate market appears to be consolidating as issuers continue to address solutions to their auction rate debt.
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