January 27, 2014
As we approach the Super Bowl, it is only appropriate to pit one “team” against another. So, in the spirit of the season and the headline grabbing questions: Is it a New York or New Jersey Super Bowl? Is it Seattle v. Denver or Denver v. Seattle? Does it really matter if one team is called the “home” team when the teams are no closer than 1,700 miles from home? This week, I pit the self-proclaimed Rock and Roll Capital of the World (aka Cleveland, “Forest City”, “Plum City”, “Metropolis of the Western Reserve” and the “North Coast”) against Motown (aka Detroit, “Motor City”, “Hockeytown”, “Rock City”). I then take a look at a vexing question potentially facing Puerto Ricans and comment on the Debt Ceiling and Housing. I conclude with my Super Bowl Sunday prediction.
Cleveland v. Detroit
Let’s dispense with two points right off the bat. First, Detroit wins the name game hands down. Not even close. Next, I am not suggesting that Cleveland is in imminent danger of becoming the next Detroit. I am suggesting that access to and review of current data and issuer information is important.
Last week, a certain daily publication ran a column regarding Cleveland’s planned sale of subordinate lien income tax revenue bonds and noted the city’s population decline for four consecutive decades ending in 2010 (even the cities themselves issue financial statements more current than 2010). The column also noted the ratings assigned by Moody’s and S&P as A1 and AA, respectively. I am not here to dispute the data (although I question why this reputable resource would offer up stale demographic data) or ratings but am here to point out the importance of accessing and understanding current and meaningful game day data – going beyond the rating and data from 2010. The table below highlights some data points one might deem relevant as you contemplate the economic well-being of any State, County or City.
| Data Set/Locations |
Cleveland, OH |
|
Detroit, MI |
|
| Population – City / Town (2012) |
390,928 |
-0.45% |
701,475 |
-0.67% |
| Population – City / Town (2011) |
392,694 |
|
706,201 |
|
| DIVER Geo Score Current (Dec 2013) |
0.3 |
|
0 |
|
| DIVER Geo Score Current (Dec 2012) |
0.4 |
|
0 |
|
| Crime Risk – City / Town (2013) |
333 |
|
372 |
|
| Food Stamp Part. Change (Households) – City / Town (2011-2012) |
12.39% |
|
6.89% |
|
| Poverty (%) – City / Town (2012) |
36.1 |
1.80% |
42.3 |
1.40% |
| Poverty (%) – City / Town (2011) |
34.3 |
|
40.9 |
|
| Households – City / Town (2012) |
162,717 |
-4.84% |
253,073 |
-0.22% |
| Households – City / Town (2011) |
171,000 |
|
253,629 |
|
| Med. Household Income – City / Town (2012) |
$24,257 |
-4.39% |
$23,600 |
-6.32% |
| Med. Household Income – City / Town (2011) |
$25,371 |
|
$25,193 |
|
| Unemployment (%) – City / Town (Nov,2013) |
9.5% |
1.00% |
15.1% |
-2.40% |
| Unemployment (%) – City / Town (Nov,2012) |
8.5% |
|
17.5% |
|
| Labor Force – City / Town (Nov,2013) |
161,171 |
-0.20% |
337,013 |
-1.16% |
| Labor Force – City / Town (Nov,2012) |
161,491 |
|
340,979 |
|
DIVER Data Services, On-Board, RealtyTrac, BLS, USCB, Lumesis.
If you were preparing your team for the Super Bowl (or just a bond purchase), wouldn’t you want the latest data and information about the other team and your team (injuries, who the studs and duds are, do they like to run or pass, blitz or stay in coverage?). For the Cleveland/Detroit game, I would want to know that Unemployment is trending up, Labor Force is trending down, Median Household Income is trending down, Poverty is on the rise and Food Stamp Participation is up over 12%. What else might you consider? Perhaps the Debt Profile and Characteristics of the issuer. By no means am I suggesting this is the end but, importantly, this needs to be part of the analysis – the game plan if you will. A selfless plug: Data groupings and data analysis can easily become part of your analysis via simple data feeds and/or custom data research and delivery from DIVER Data Services.
Puerto Rico – What’s Next
Congress passed and the President signed the spending bill alleviating the fear of another government shutdown over spending (not the debt ceiling, more on that in a moment) – seems the old hand on the hot stove provided a valuable lesson for both parties. Tucked in the spending bill was a provision approving the government spending our tax dollars for a plebiscite on Puerto Rico’s political status! How about we add a State that is not drowning in debt with a limp-a-long economy? In 2012, 61% of voters said “yes” to statehood – and why not? While Puerto Rico, as a Commonwealth, enjoys the ability to issue triple tax-free debt (and have they leveraged that one), on a per capita basis they receive the 2nd lowest amount of Federal Funds per capita (Utah is lower). How might that change? Yes, the road to Statehood can be long but how about we add a growing economy. Oh wait, then the Commonwealth wouldn’t need us.
The Debt Ceiling
As recently as a few weeks ago, we were told that a budget was passed (recently signed by the President) and the talk of budgets and shutdowns would be eliminated, at least for a while. Well, some woke this week to find that, along with the intense cold and snow hitting many of us, we still have the debt ceiling to worry about. Jacob Lew, the President’s Treasury Secretary, says the US will exhaust its borrowing powers by late February. While there will be negotiations, it doesn’t appear either party is poised to do anything wholly irrational (although it is Congress so one never knows). Stay tuned on this one.
Housing
On Friday, the WSJ ran a story that home sales are expected to cool in 2014 after a strong 2013 (best year in the last seven – would artificially low interest rates have anything to do with that?). Can some of the strong home sales be attributed to artificially low interest rates (why this will not continue with the prospect of low rates for at least another year is a different debate around monetary policy)? No doubt. While the rate of acceleration of home sales may flatten a bit, the good news is that the Annual Foreclosure Rate and the Delinquency Rate is much better than a year ago.
Ten States saw a higher Annual Foreclosure Rate in 2013 than in 2012 and only 744 counties saw a higher Annual Foreclosure Rate in 2013 than in 2012. While good news indeed, the 744 counties were across 45 States. Thus, the importance of looking at the detailed data as opposed to the headlines. Analytics subscribers can use the Filter Module to easily identify this data.
DIVER Analytics, Filter Module; RealtyTrac.
On the Delinquency Rate front, only one State (Vermont) had a higher Delinquency Rate in November 2013 (the most recent data reported) than a year prior. Maybe, just maybe, the housing market is on firmer ground as the Fed eases off the throttle.
Prediction and On the Road
Despite being an NFC fan, I am predicting that Peyton Manning and the Broncos will pull this out 35-31. I sure hope Richard Sherman doesn’t read this commentary…
The DIVER team is back on the road and we hope to see you – this week we are in Chicago and New Orleans for the NFMA Advanced Seminar (Gregg and Debra). Mike, Tim and Vincent are in NYC. Next week, Tim will be in sunny Green Bay while Debra, Kate and Gregg will be in Austin for the Bond Buyer conference. Happy to visit while we are in town and/or swing by to say hello if you are at either of the conferences.
[1] A score that represents the combined risks of rape, murder, assault, robbery, burglary, larceny, and vehicle theft compared to the national average of 100. A score of 300 indicates 3x the national average total crime risk. Scores are based on demographic and geographic analyses of crime over seven years. Courtesy of On-Board.
Have a great week,
Michael Craft, CFA, Managing Director, Credit
Lumesis, Inc.
CLICK HERE to Subscribe to the Weekly Commentary
The Super Bowl: Cleveland v. Detroit and What’s Next for Puerto Rico
January 27, 2014
As we approach the Super Bowl, it is only appropriate to pit one “team” against another. So, in the spirit of the season and the headline grabbing questions: Is it a New York or New Jersey Super Bowl? Is it Seattle v. Denver or Denver v. Seattle? Does it really matter if one team is called the “home” team when the teams are no closer than 1,700 miles from home? This week, I pit the self-proclaimed Rock and Roll Capital of the World (aka Cleveland, “Forest City”, “Plum City”, “Metropolis of the Western Reserve” and the “North Coast”) against Motown (aka Detroit, “Motor City”, “Hockeytown”, “Rock City”). I then take a look at a vexing question potentially facing Puerto Ricans and comment on the Debt Ceiling and Housing. I conclude with my Super Bowl Sunday prediction.
Cleveland v. Detroit
Let’s dispense with two points right off the bat. First, Detroit wins the name game hands down. Not even close. Next, I am not suggesting that Cleveland is in imminent danger of becoming the next Detroit. I am suggesting that access to and review of current data and issuer information is important.
Last week, a certain daily publication ran a column regarding Cleveland’s planned sale of subordinate lien income tax revenue bonds and noted the city’s population decline for four consecutive decades ending in 2010 (even the cities themselves issue financial statements more current than 2010). The column also noted the ratings assigned by Moody’s and S&P as A1 and AA, respectively. I am not here to dispute the data (although I question why this reputable resource would offer up stale demographic data) or ratings but am here to point out the importance of accessing and understanding current and meaningful game day data – going beyond the rating and data from 2010. The table below highlights some data points one might deem relevant as you contemplate the economic well-being of any State, County or City.
DIVER Data Services, On-Board, RealtyTrac, BLS, USCB, Lumesis.
If you were preparing your team for the Super Bowl (or just a bond purchase), wouldn’t you want the latest data and information about the other team and your team (injuries, who the studs and duds are, do they like to run or pass, blitz or stay in coverage?). For the Cleveland/Detroit game, I would want to know that Unemployment is trending up, Labor Force is trending down, Median Household Income is trending down, Poverty is on the rise and Food Stamp Participation is up over 12%. What else might you consider? Perhaps the Debt Profile and Characteristics of the issuer. By no means am I suggesting this is the end but, importantly, this needs to be part of the analysis – the game plan if you will. A selfless plug: Data groupings and data analysis can easily become part of your analysis via simple data feeds and/or custom data research and delivery from DIVER Data Services.
Puerto Rico – What’s Next
Congress passed and the President signed the spending bill alleviating the fear of another government shutdown over spending (not the debt ceiling, more on that in a moment) – seems the old hand on the hot stove provided a valuable lesson for both parties. Tucked in the spending bill was a provision approving the government spending our tax dollars for a plebiscite on Puerto Rico’s political status! How about we add a State that is not drowning in debt with a limp-a-long economy? In 2012, 61% of voters said “yes” to statehood – and why not? While Puerto Rico, as a Commonwealth, enjoys the ability to issue triple tax-free debt (and have they leveraged that one), on a per capita basis they receive the 2nd lowest amount of Federal Funds per capita (Utah is lower). How might that change? Yes, the road to Statehood can be long but how about we add a growing economy. Oh wait, then the Commonwealth wouldn’t need us.
The Debt Ceiling
As recently as a few weeks ago, we were told that a budget was passed (recently signed by the President) and the talk of budgets and shutdowns would be eliminated, at least for a while. Well, some woke this week to find that, along with the intense cold and snow hitting many of us, we still have the debt ceiling to worry about. Jacob Lew, the President’s Treasury Secretary, says the US will exhaust its borrowing powers by late February. While there will be negotiations, it doesn’t appear either party is poised to do anything wholly irrational (although it is Congress so one never knows). Stay tuned on this one.
Housing
On Friday, the WSJ ran a story that home sales are expected to cool in 2014 after a strong 2013 (best year in the last seven – would artificially low interest rates have anything to do with that?). Can some of the strong home sales be attributed to artificially low interest rates (why this will not continue with the prospect of low rates for at least another year is a different debate around monetary policy)? No doubt. While the rate of acceleration of home sales may flatten a bit, the good news is that the Annual Foreclosure Rate and the Delinquency Rate is much better than a year ago.
Ten States saw a higher Annual Foreclosure Rate in 2013 than in 2012 and only 744 counties saw a higher Annual Foreclosure Rate in 2013 than in 2012. While good news indeed, the 744 counties were across 45 States. Thus, the importance of looking at the detailed data as opposed to the headlines. Analytics subscribers can use the Filter Module to easily identify this data.
DIVER Analytics, Filter Module; RealtyTrac.
On the Delinquency Rate front, only one State (Vermont) had a higher Delinquency Rate in November 2013 (the most recent data reported) than a year prior. Maybe, just maybe, the housing market is on firmer ground as the Fed eases off the throttle.
Prediction and On the Road
Despite being an NFC fan, I am predicting that Peyton Manning and the Broncos will pull this out 35-31. I sure hope Richard Sherman doesn’t read this commentary…
The DIVER team is back on the road and we hope to see you – this week we are in Chicago and New Orleans for the NFMA Advanced Seminar (Gregg and Debra). Mike, Tim and Vincent are in NYC. Next week, Tim will be in sunny Green Bay while Debra, Kate and Gregg will be in Austin for the Bond Buyer conference. Happy to visit while we are in town and/or swing by to say hello if you are at either of the conferences.
[1] A score that represents the combined risks of rape, murder, assault, robbery, burglary, larceny, and vehicle theft compared to the national average of 100. A score of 300 indicates 3x the national average total crime risk. Scores are based on demographic and geographic analyses of crime over seven years. Courtesy of On-Board.
Have a great week,
Michael Craft, CFA, Managing Director, Credit
Lumesis, Inc.
CLICK HERE to Subscribe to the Weekly Commentary