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Economic Update

March 10, 2014

Economic themes: Employment, Ukraine, China, International Trade

  • Employment: According to the February Employment Report, nonfarm payrolls increased by 175k, above forecasts of a 150k increase, with the implication that the number could have been stronger had it not been for the weather.  The unemployment rate ticked up to 6.7%.  Strength was seen in business services, wholesale trade, and food services, with weakness seen in information technology and retail.
  • Ukraine: Ukraine has been testing the combat readiness of its military, as Russia allegedly has 19k troops in the Crimean Peninsula.  Russia is seeking to defend native Russians in the region from “radicals” after a coup overthrew the Moscow-backed government led by Viktor Yanukovych last month.  The geopolitical instability is likely to contribute to volatility in markets.
  • China: Exports from the world’s second largest economy plunged 18.1% in February, significantly missing a forecasted increase of 6.8%.
  • International Trade: The January trade balance was in line with expectations, at -$39.1 billion.  The petroleum deficit increased to $19.3 billion, and industrial supplies increased on both sides.
  • Economic highlights for the week ahead:
    • Thursday, 3/13/2014: Jobless Claims, Retail Sales.
    • Friday, 3/14/2014: PPI, Consumer Sentiment.

Municipal market themes: Puerto Rico, North Las Vegas, California Pensions

  • Puerto Rico: The much anticipated $3 billion Puerto Rico general obligation deal is scheduled to price on Tuesday, March 11, 2014, with speculation of the long bond being around 9%.  Of note have been the risk factor disclosures, in contrast to previous Puerto Rico bonds, which include liquidity being very concerning, and the possible failure to pay debt service.  The deal is generating quite a bit of interest from non-traditional buyers such as hedge funds, and has some investors thirsting for yield.
  • North Las Vegas: Standard & Poor’s lowered the North Las Vegas limited tax general obligation bonds to ‘BB-’ from ‘BBB+’, citing a lawsuit from employee unions over money not paid to employees during the financial state of emergency.  The City is scheduled to have a $17.8 million budget gap, and limited flexibility due to unsustainable employment contracts.
  • California Pensions: In a historic move, former Vernon City Manager, Bruce Malkenhorst, a convicted felon for misappropriation of public funds, will have his $552k annual pension reduced to $116k effective April 1st.  The decision was first rendered in May 2012, but has not been implemented, due to a lawsuit from Malkenhorst stating he is entitled to the full benefit.  The implementation is following a court ruling from the City of Oakland versus the Oakland Police and Fire Pension System, which stated retirement systems ought to correct overpayments.


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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