California Takes Kick the Can to a New Level

California Takes Kick the Can to a New Level

  • Posted on: 9 December 2015
  • By: admin

California Takes Kick the Can to a New Level

California school districts are financing projects by pushing debt payments as far as 40 years into the future, defying a warning from the Los Angeles County treasurer while incurring interest that dwarfs principal by 10- to-1 or more. Last year, 55 school districts were among local authorities selling bonds that mature in more than 25 years, the most since 2007, according to data compiled by Bloomberg. The practice is akin to state and local governments raising pension benefits without funding them, said John Hallacy, head of municipal research at Bank of America Merrill Lynch. Increased retirement costs helped push Stockton and San Bernardino into bankruptcy court this year.

http://www.bloomberg.com/news/2012-08-14/california-schools-barring-taxes-push-bills-to-2051-muni-credit.html

Why You Should Care

The lack of people’s willingness to live within their means, stop borrowing, or understand that debt needs to be repaid is no longer shocking, but rather scary. For a school district to borrow $105 million dollars and defer payments for 20 years takes it to a whole new level. The school board should be fired for their lack of forward thinking by agreeing to pay $1 billion, yes $1 billion, in interest over the life of a $105 million dollar debt. It is unlikely the debt can ever be paid, so maybe they’re just thinking of the loan as free money that will eventually be defaulted on during some bankruptcy process over the next 20 years. This is just another example of the increasing risks of municipal financing and the disaster that is California’s balance sheet. 

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Romney Picks Paul Ryan for Running Mate – Get Ready for a Budget Debate

Romney Picks Paul Ryan for Running Mate – Get Ready for a Budget Debate

  • Posted on: 9 December 2015
  • By: admin

Romney Picks Paul Ryan for Running Mate – Get Ready for a Budget Debate

Over the weekend Mitt Romney selected Paul Ryan to be his running mate in the upcoming Presidential election. Paul Ryan is considered a budget hawk, and the choice sets the budget and deficit in the U.S. as a major campaign focus. You can read a recap from Bloomberg at http://www.bloomberg.com/news/2012-08-13/ryan-pick-sharpens-romney-duel-with-obama-over-budget.html

Why You Should Care

Paul Ryan has been at the forefront of the Republican assault on the budget of the federal government having proposed and passed many budgets that never had a chance to pass in the Senate. The choice by Romney does frame the debate in a pretty stark manner, and you should expect the fiscal cliff and debt ceiling to be front and center going forward.

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Japanese Parliament Passes Consumption Tax Increase

Japanese Parliament Passes Consumption Tax Increase

  • Posted on: 9 December 2015
  • By: admin

Japanese Parliament Passes Consumption Tax Increase

Japan’s parliament passed a bill Friday to double the country’s consumption tax over the next three years as opposition parties increased their pressure on Prime Minister Yoshihiko Noda to call fresh elections to prove he still has the public’s support.

http://www.washingtonpost.com/business/japans-parliament-passes-tax-increase-while-opposition-ups-pressure-for-elections/2012/08/10/894c0144-e2c9-11e1-89f7-76e23a982d06_story.html

Why You Should Care

Japan has one of the largest debt to GDP ratios in the world and that debt has to eventually be paid. One such way is through increasing tax revenue, which is what Japan is seeking to do. An increase to their consumption tax immediately impacts consumers, but with consumption being a major driver of the economy is should add to government coffers. This type of tax increase is something we could see in the U.S. perhaps on specific goods such as luxury items or hospitality. Unfortunately, the developed world has been on a debt binge for 30 years and tax increases are a likely outcome as a means to help reduce this debt. It remains to be seen where these hikes come from, but ultimately they will come in one form or another. 

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Great Story – U.S. Sprinter Breaks Leg and Still Finishes Race

Great Story – U.S. Sprinter Breaks Leg and Still Finishes Race

  • Posted on: 9 December 2015
  • By: admin

Great Story – U.S. Sprinter Breaks Leg and Still Finishes Race

Manteo Mitchell, a member of the U.S. Olympic 4x400m relay team, broke his leg midway through his run and still finished, helping the U.S. to qualify for the final. You can read the story at http://www.huffingtonpost.com/2012/08/09/manteo-mitchell-broke-leg-injury-us-relay_n_1760905.html

Why You Should Care

We like to uncover great stories, even when they aren’t investment related, and this is truly a great story. The Olympics always manage to post some truly amazing storylines, but a sprinter showing the sheer strength of will and completing his leg of the relay, well, on one leg, shows just how special these Olympic athletes are. We salute all of them.

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20-34 Year Olds Shun Buying for Renting to Remain Flexible – Pull a “De Niro” in Heat

20-34 Year Olds Shun Buying for Renting to Remain Flexible – Pull a “De Niro” in Heat

  • Posted on: 9 December 2015
  • By: admin

20-34 Year Olds Shun Buying for Renting to Remain Flexible – Pull a “De Niro” in Heat

With the Great Recession still very fresh in their minds, 20-34 year olds want to remain flexible financially so that means they are renting everything from homes to clothes. You can read the Bloomberg article at http://www.bloomberg.com/news/2012-08-08/recession-generation-opts-to-rent-not-buy-houses-to-cars.html

Why You Should Care

The rental trend isn’t going anywhere, and as this article shows, it isn’t limited to homes/apartments. The lesson that younger people learned from the Great Recession appears to be the famous line Robert De Niro uttered in the movie Heat, “Don’t let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you spot the heat around the corner.”

Although flexibility is great to have, younger people have to focus on growing wealth, and unfortunately, most of the time that comes with stability. Stability in your job, stability in your geography, stability in your ability to save. 

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California “Bets” on Facebook Tax Revenues to Save Teachers, and Loses Big Time

California “Bets” on Facebook Tax Revenues to Save Teachers, and Loses Big Time

  • Posted on: 9 December 2015
  • By: admin

California “Bets” on Facebook Tax Revenues to Save Teachers, and Loses Big Time

California Governor Jerry Brown and state lawmakers in June approved a $91 billion budget that included $1.9 billion in expected tax revenue from Facebook employees striking it rich -- a rare projection that helped stave off cuts to schools and programs for the sick, poor, and disabled. This turned out to be a big mistake as Facebook’s stock has tumbled since its IPO. You can read the full story from the Mercury News at http://www.mercurynews.com/business/ci_21218422/facebook-stock-plunge-takes-hundreds-millions-away-from

Why You Should Care

This story is simply preposterous. Since when is it acceptable, as defined by common sense, to establish a budget that includes potential revenues based on a “bet” on the success of an IPO? Since when are politicians stock market traders and analysts? Since when is a stock a “sure thing” that you can bank 28,000 teacher’s salaries on?  California was already running a $16 billion-plus deficit, so what’s another couple-hundred-million? The more stories we hear about the utter lack of intelligence and foresight when it comes to elected officials the less confidence we have in the system. When is the government going to act like we the people have to and live within its means and stop projecting phantom windfalls that may or may not materialize? Unbelievable.

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S&P Downgrade of U.S. Debt, One Year Later

S&P Downgrade of U.S. Debt, One Year Later

  • Posted on: 9 December 2015
  • By: admin

S&P Downgrade of U.S. Debt, One Year Later

On August 5, 2011, Standard & Poors downgraded U.S. debt from AAA to AA+ in a move that had the potential to disrupt the U.S. and global economies. One year later, it turns out that there really wasn’t anything to worry about. You can read the AP story at http://news.yahoo.com/later-p-downgrade-us-looks-dud-130149232--finance.html

Why You Should Care

Although stock markets are up and yields on U.S. debt have actually declined since that fateful day last year, people shouldn’t dismiss what S&P did. It was a significant action, one that held great symbolism and meaning, the U.S. just happens to be “benefitting” from the fact that the rest of the global economy is in worse shape than we are. Investors still have the greatest confidence in the U.S. to repay its debts, but we remain deadlocked politically and unable to deal with our own debt and deficit issues. 

The looming fiscal cliff, lack of political will to cut spending, and a weak economy are likely to bring S&P’s attention back to the U.S. as we move toward the Presidential election. Amazingly, we could be dealing with a repeat of last year, staring down the barrel of another U.S. debt downgrade.

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Expert's Corner - What You Need to Know to Find a Job

Expert's Corner - What You Need to Know to Find a Job

  • Posted on: 9 December 2015
  • By: admin

Expert's Corner - What You Need to Know to Find a Job--Q&A with Valdo Melton, Managing Partner with recruiting and placement firm Vaco Resources.
 

We had the opportunity to sit down with Valdo Melton, Managing Partner of Vaco Arizona, a leading consulting and placement firm for financial and technology professionals. We discussed his view of the current employment market in Arizona and the common traits/credentials that are being demanded by companies today.

 

Pathlight: What are your views of the current employment market as it relates to the overall health of the economy?

 

Melton: The hiring of finance and technology talent, whether on a consulting basis or for permanent placement, is a good sign for the general employment market because it indicates companies expect to grow and implement strategic initiatives that have been set aside the last few years.

 

Pathlight: Where do you see most of the hiring demand?

 

Melton: The upswing in hiring has come both from large corporate clients and from new startups and small businesses.

 

We’re seeing significant growth in high tech, software, healthcare, and some pickup in manufacturing. Arizona also has a notable number of new high tech startups being fueled by private equity and angel investment.

 

There is also a major emphasis on compliance with regulatory requirements, and companies are bringing in experienced workers to help get their systems aligned.

 

For example, any firm, even very small ones that accept credit card payments, must be PCI-compliant, and companies are looking for professionals with this kind of experience to get them set up properly. There is also a definite demand for security, and in healthcare, for electronic medical records compliance.

 

Pathlight: Should jobseekers consider advanced degrees or certifications?

 

Melton: It’s definitely worth it in the job market today. 

 

For people in the financial and technology arenas who may be looking for work, in school, or considering a job change, there is a strong demand for credentialed professionals. The most sought-after credential is a CPA. Also in high demand are CISA (certified information systems auditor), CISSP (certified information systems security professional) and CFA (chartered financial analyst). MBAs are still valuable as well.

 

Financial or technology specialists also may want to consider consulting work in their fields versus full-time employment. Consulting is a very in-demand profession and consultants enjoy a special lifestyle. For those who are suited both by talent and by temperament, consulting is an excellent option for many IT and accounting and finance professionals.
 

Pathlight: What’s the bottom line on the job front?

 

Melton: The bottom line is that we are seeing an upswing in technology and finance hiring, and that indicates an overall improved business climate. Good news for all of Arizona and the nation.

 

About Vaco Arizona

Vaco Arizona is a leading consulting and executive search firm specializing in finance, accounting and technology professionals for both contract and direct hire placements. Further information on Vaco Arizona can be found at www.vaco.com/phoenix, or by calling (602) 633-1300.

  
The views and opinions expressed are not those of Pathlight Investors and are intended to be for educational purposes only. Pathlight Investors cannot vouch for the accuracy of the information presented. Please contact the author of the article to determine how this information pertains to your specific situation.

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The Olympic Investor - The Traits Shared by the Greatest Athletes and Investors

The Olympic Investor - The Traits Shared by the Greatest Athletes and Investors

  • Posted on: 9 December 2015
  • By: admin

The Olympic Investor - The Traits Shared by the Greatest Athletes and Investors

Every four years, the Summer Olympic Games provide a glimpse into the unifying power of sport. The 2012 Games from London are no different and provide a welcome reprieve from the conflict and discord around the globe. We should all marvel at and respect the commitment, sacrifice, and dedication that go into becoming an Olympian. Think about it—Olympic athletes train their entire lives to participate in an event that lasts only minutes or seconds. The 100-meter dash, pommel horse, high jump, springboard—four plus years of work come down to one moment, one chance at eternal Olympic Glory. 

While we may be caught up in the feel-good aspect of the Olympics, where else can archery, badminton, and table tennis share the stage with basketball, soccer, and track and field? It is precisely this broadening of opportunity which often provides those quintessential Olympic moments—those that are not just about medals but highlight the intersection of preparation and opportunity. While reflecting on the traits needed to reach this pinnacle of sport, we began to wonder if there was an overlap between Olympian traits and those of a successful investor.

After some thought, we decided on the following common traits:

1.      Successful investors are disciplined—Successful investors, like Olympians, must be disciplined. They must forgo short-term pleasure for long-term benefits. They must also maintain conviction, often in the face of uncertainty, and be willing to deal with doubters and criticism. Both Olympians and investors must maintain resolve and constantly seek the best opportunities to reach long-term goals.

2.      Successful investors understand their strengths and weaknesses—Most athletes have a specialty. There are sprinters and distance runners, springboard and platform divers, single-event gymnasts, backstroke swimmers, and freestylers. The same is true for investors. Having a specialty allows people to understand their strengths and weaknesses and focus on their core competencies. For investors, specializing is not so much about investing in a particular asset class (i.e., stocks, bonds, real estate) as it is about staying true to a specific discipline. Investing that is fundamental, momentum-driven, technical, computer-modeled, trading-driven, or buy and hold—each is a specialty that can be rewarding, but rarely can people invest successfully and consistently across multiple specialties.

3.      Successful investors are patient—Successful investors are very patient. Much like Olympians, they must recognize that patience is a virtue, one that calms emotions and leads to making decisions with the end goal in mind. Apple Computer is a great example of exercising patience.Many people may not realize that Apple’s stock price from January 2006 to February 2009 remained nearly flat at about $80 a share. Investors who didn’t have the patience to let the full story play out might have sold after a mediocre three-year return and missed out on a seven-fold increase.

4.      Successful investors are voracious learners—Warren Buffet’s business partner, Charlie Munger, says, “In my whole life, I have known no wise people who didn't read all the time—none, zero.” The same is true for Olympians. They study technique, video, timing, past champions—all to have an edge. Fortunately, learning is cumulative and can be applied successfully by those who are constantly seeking to improve.

At the end of the day, most of us will not become Olympic athletes, but if we train hard and stay focused, we can become great investors. Stay disciplined, be patient, constantly strive for knowledge, and know your strengths and weaknesses and you can have an “Olympic” investing career.

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