June 9, 2014
Last week, the Louisiana legislature unanimously passed legislation (imagine that at the Federal level) requiring muni issuers in the State comply with 15c2-12 of the Securities Exchange Act. The legislation also required LA issuers to do a few other things and have their auditors make sure issuers are fulfilling their record keeping duties and review EMMA to determine if the issuer is complying with their disclosure agreements. The bill awaits Governor Jindal’s approval.
A few things to say here — first, bravo. Since the SEC can’t regulate the muni issuers, perhaps other States will follow the lead and enhance the level of disclosure and transparency. I applaud the Louisiana legislature with disclosure obligations – if you don’t have the resources to disclose to your investors (when you committed to do so) then, perhaps, you shouldn’t have issued debt in the first place. I also applaud the auditors’ ‘lobby’ for recognizing their part of the obligation is a de minimus cost. Since the auditor is supposed to be preparing the CAFR, they can take that one little extra step and drop in a statement as to their finding on the subject of compliance with disclosure obligations. While I am sure others will poke holes, I think this is a great step forward for the muni space.
One last point before I leave the topic. The June 6 edition of the Bond Buyer provided the following (which we have heard anecdotally), “Some issuers continue to file disclosures with … municipal information repositories, such as Bloomberg, but they do not file with EMMA.” Perhaps there should be a requirement that any filing with such “municipal information repositories” must be filed by such repository with EMMA or, perhaps, that such a filing does not constitute meeting the required disclosure filing. Would love to hear from you on this point.
Before delving into the heart of this week’s commentary, in case you missed it, the DIVER Geo Score for May 2014 (yes, it comes out monthly) was released last Tuesday. Click here for more information.
Trade Deficit, Europe and State GDP
Last week, I wrote a bit about GDP and worried about the fact that the US GDP contracted in the first quarter of 2014. Several media outlets placed some level of blame on, you guessed it, the weather. On a data point related to GDP, on June 4, the Commerce Department reported that the US trade deficit widened for the fourth time in five months (that’s not good). Trade with our global partners matters and impacts our GDP when our trading partners import less of our goods and services and we import more of their goods and services. Perhaps that explains the wide projections for US GDP growth of between 2% and 4%, although I wonder if the export reality is truly factored in.
Continuing with this line of thought, the June 4 WSJ that noted “the export drop suggests sluggishness in overseas economies like Europe is sapping demand abroad for American-made products and services.” (Interestingly, the EU has not blamed their economic difficulties on the weather). The article continued “
A Word on Louisiana, a Look at Trade Deficits, Europe and State Exports and Housing Delinquencies
June 9, 2014
Last week, the Louisiana legislature unanimously passed legislation (imagine that at the Federal level) requiring muni issuers in the State comply with 15c2-12 of the Securities Exchange Act. The legislation also required LA issuers to do a few other things and have their auditors make sure issuers are fulfilling their record keeping duties and review EMMA to determine if the issuer is complying with their disclosure agreements. The bill awaits Governor Jindal’s approval.
A few things to say here — first, bravo. Since the SEC can’t regulate the muni issuers, perhaps other States will follow the lead and enhance the level of disclosure and transparency. I applaud the Louisiana legislature with disclosure obligations – if you don’t have the resources to disclose to your investors (when you committed to do so) then, perhaps, you shouldn’t have issued debt in the first place. I also applaud the auditors’ ‘lobby’ for recognizing their part of the obligation is a de minimus cost. Since the auditor is supposed to be preparing the CAFR, they can take that one little extra step and drop in a statement as to their finding on the subject of compliance with disclosure obligations. While I am sure others will poke holes, I think this is a great step forward for the muni space.
One last point before I leave the topic. The June 6 edition of the Bond Buyer provided the following (which we have heard anecdotally), “Some issuers continue to file disclosures with … municipal information repositories, such as Bloomberg, but they do not file with EMMA.” Perhaps there should be a requirement that any filing with such “municipal information repositories” must be filed by such repository with EMMA or, perhaps, that such a filing does not constitute meeting the required disclosure filing. Would love to hear from you on this point.
Before delving into the heart of this week’s commentary, in case you missed it, the DIVER Geo Score for May 2014 (yes, it comes out monthly) was released last Tuesday. Click here for more information.
Trade Deficit, Europe and State GDP
Last week, I wrote a bit about GDP and worried about the fact that the US GDP contracted in the first quarter of 2014. Several media outlets placed some level of blame on, you guessed it, the weather. On a data point related to GDP, on June 4, the Commerce Department reported that the US trade deficit widened for the fourth time in five months (that’s not good). Trade with our global partners matters and impacts our GDP when our trading partners import less of our goods and services and we import more of their goods and services. Perhaps that explains the wide projections for US GDP growth of between 2% and 4%, although I wonder if the export reality is truly factored in.
Continuing with this line of thought, the June 4 WSJ that noted “the export drop suggests sluggishness in overseas economies like Europe is sapping demand abroad for American-made products and services.” (Interestingly, the EU has not blamed their economic difficulties on the weather). The article continued “
Now to Europe. “Ailing Europe Tries Below-Zero Interest Rate” – page A7 from Friday’s WSJ (don’t think for a moment rate decisions across the pond won’t influence rates here). Below zero – talk about incenting banks to lend! In cutting rates, the EU said they would make more money available in cheap loans to banks to spur their lending. The action highlights the concern that “sluggish consumer prices and falling credit could create a self-feeding spiral, depressing wages and job creation.” The EU is trying to goose inflation (avoid deflation) and the economy of many member countries. Growth in Europe is important (some may say critical) and the “sluggishness in overseas economies like Europe” (noted in the preceding paragraph) is important to consider as we contemplate State level exports and the impact of a trade deficit and rising or declining exports on the fiscal well-being of the States (think employment, tax receipts, consumer spending).
Turning closer to home. First data point to consider is the percentage of a State’s GDP comprised of Exports. The range is less than 1% for Hawaii to a high of almost 32% for Louisiana with an average of about 10.5%. Next, I wanted to get a sense of where Exports, at the State level, are declining and to also consider the percent of GDP derived from Exports for those States. The table below shows the ten States with the largest declines in Exports as well as three States (Alabama, Michigan and Mississippi) that saw a decline in Exports and who’s Exports as a Percent of GDP is greater than the national average (in other words, States you might want to take a closer look at).
Earlier in this commentary, I noted the recent release of the DIVER Geo Score. Below I provide you the current Geo Score for the above-referenced States and the trend score which looks at the relative economic well-being of the State over the course of the year (as opposed to the current score which is the point in time). For DIVER subscribers or those that have requested access to Geo Scores at Lumesis.com, I encourage you to watch States of interest where you see low trend scores and/or low current Geo Scores.
Housing Delinquencies
One last data set I want to highlight is Housing Delinquencies – a data set that can be an indicator of foreclosures or where housing prices may trend up or down. For the period April 2013-2014, eight States saw an increase in delinquencies. For DIVER Analytics subscribers, worth watching the Foreclosure and Housing Price data for these States.
Lots going on this week. Gregg will be in Philadelphia on Wednesday speaking at the Ballard Spaher law firm. On Thursday, Gregg and UBS Associate General Counsel will present a webinar, Regulatory Requirements and Technology, hosted by The Bond Buyer. Click here to register. Mark will be in NYC part of the week while Pete and Mike will be in the NY area and attending the MBCNY events this week.
Have a great week.
Gregg L. Bienstock Esq.
CEO & Co-Founder,Lumesis, Inc.
Data Released Last Week: