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November 26, 2012

Economic themes: Greece, Fiscal Cliff, Consumer Spending, Housing Starts, Jobless Claims.

  • Greece: Euro region finance ministers are meeting in Brussels to determine what conditions will be required to release the next round of bailouts to Greece, and how to keep the island nation solvent.  With a two year extension to meet deficit reduction targets, a €10 billion financing gap needs to be filled.
  • Fiscal Cliff: from the date of this document, we have 36 days until the fiscal cliff is upon us, and four weeks until Washington goes on Christmas break.  Democrats are insisting on revenue increases, which some Republicans are warming up to, contingent upon unspecified spending cuts.  A grand bargain including major tax and spending reforms would be optimal; kicking the can down the road is most likely.  The key is balancing growth with deficit reduction measures.
  • Consumer spending: consumers continue to spend, with Thanksgiving weekend spending increasing 13% to $59.1 billion.  Retailers are hoping to continue to entice consumers with ‘cyber Monday’ deals.
  • Housing starts: rose 3.6% in October to an 894k pace, with permits falling 2.7% to 866k.  After large surges over the past couple of months, the growth in housing leveled off in October, though confirms the housing market is continuing to show signs of momentum.
  • Initial jobless claims: decreased 41k to 410k, though continue to be heavily impacted by Hurricane Sandy.
  • Economic highlights for the week ahead;
    • Tuesday, 11/27/2012: Durable Goods Orders, S&P Case-Shiller Index, Consumer Confidence.
    • Wednesday, 11/28/2012: New Home Sales, Beige Book.
    • Thursday, 11/29/2012: GDP, Jobless Claims, Pending Home Sales.
    • Friday, 11/30/2012: Person Income and Outlays.

Municipal market themes: Charter Schools, Detroit, Mammoth Lakes

  • Charter schools: in a study released by Initiatives Support Corporation, a non-profit group in partnership with the Gates Foundation, charter schools have experienced stronger than expected financial performance, despite a challenging funding environment.  In 2011, charter schools had a median change in net assets of 10.9%.  The report included that schools with strong academic programs tend to have favorable financial performance, independent of school size.
  • Detroit, MI: fighting to win the release of $30 million in bond proceeds from a state-controlled escrow account, the financially distressed city said they could remain solvent with additional cuts and furlough days. 
  • Mammoth Lakes, CA: the ski resort town’s chapter 9 case has been dismissed, after the town agreed to a settlement with its largest creditor, developer Mammoth Lakes Land Acquisition LLC.