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November 5, 2012

Economic themes: Elections, Employment, Housing, Hurricane Sandy, Manufacturing, Europe

  • Elections: with voting day set for Tuesday, November 6, 2012, Alamo Capital encourages everyone, willing and able, to exercise their right to vote!
  • Unemployment: the national unemployment rate inched up to 7.9% in October, from 7.8%, with nonfarm payroll jobs increasing by 171k, well above a consensus of 125k.  The increase was mostly attributed to an increase in the labor force.  Payroll growth in the private sector is slowly showing signs of improvements, though the figure was held back by a 13k decrease in the government sector.
  • S&P/Case-Shiller Index: showed home prices across the 20-city index increased by 0.5% in August, as the housing market continues to show signs of a recovery.
  • Hurricane Sandy: after sweeping across the East Coast, the hurricane is projected to have caused $50 billion in damages.  While there is the risk of short term pain for certain local governments, the majority of disaster relief is funded through insurance proceeds, state aid, and federal aid, which is not scheduled to strain local governments over the long-term.
  • ISM Manufacturing Index: saw a slight uptick in October, with a reading of 51.7.  A figure over 50 implies an expanding manufacturing market.
  • Europe: as Greece works to push €13.5 billion in austerity cuts in order to receive their next round of aid, further allegations of tax evaders, and the governments unwillingness to pursue them, continue to surface.  Across the region in Spain, unemployment continues to push new highs, currently standing at an astounding 25%.
  • Economic highlights for the week ahead:
    • Thursday, 11/08/2012: International Trade, Jobless Claims
    • Friday, 11/09/2012: Import/Export Prices, Consumer Sentiment.

Municipal market themes: Puerto Rico, Compton, Prop 30/38

  • Puerto Rico: the island commonwealth is voting whether or not to become a state.  If they choose to become a state, future bond issues may no longer receive state tax-exemption for those that reside outside of the island.  The vote would not be scheduled to impact previously issued bonds.
  • Compton: the financially distressed city was sued by CalPERS due to a missed $2.6 million payment.  The missed payment further demonstrates efforts by local governments to renegotiate unsustainable labor contracts.
  • Proposition 30 & 38: as the election nears, polls are not showing sufficient support for either of the tax increase measures, which would avert automatic trigger cuts for school districts.  As has been previously mentioned in this brief, the California Constitution is committed to education funding, and the State has a number of mechanisms to support financially stressed school districts.

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This report is prepared for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service.  Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy. Any comments, statements and/or recommendations made herein are subject to change without notice, and may not necessarily reflect those of Alamo Capital.  Past performance does not guarantee future results.  Alamo Capital has no affiliation with any political party. Investing involves risk. Consult with a Financial Professional for additional information to determine the suitability of this or any other financial product or issue as it relates to your particular situation.

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