Transcript Slide 1

“The Economy Today and Its Impact on Your
Local Education Agency’s Investment
Returns”
Rajesh Chainani
Director
PSDLAF Cash Management Group
2101 Oregon Pike
Lancaster, PA 17601
Ph: 717-519-5922
Email: [email protected]
Seminar Presentation Details:
Date: 3/17/2011
Time: 2:45 pm
Location: DLCC 334
Federal Funds Rate as of 3/3/11
“The economy’s recovery is not firmly
established, and we think monetary
policy needs to be supportive.”
Federal Chairman Ben S. Bernanke
March 1st, 2011
6/30/03 - 5/31/04
12/31/08 to
Current
9/30/92 - 1/31/94
Source: Bloomberg LLP
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2 Yr T-Note (Intermediate Rates) 3/3/11
2011 Libya Uprising- Started in
Mid February
The American Recovery and
Reinvestment Act of 2009
passed February, 2009
Source: Bloomberg LLP
3
Crude Oil Price Per Barrel- 3/3/11
2011 Libya Uprising- Started in
Mid February
Source: Bloomberg LLP
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Leading Indicators as of 3/3/11
Effects of
Higher Fuel
•Pressure on
consumer
spending
•Temporary
“Inflation”
pressure
US Economy
is 2/3
Consumer
Driven
Source: Bloomberg LLP
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Employment
Focus on Positives
•Federal Tax cuts extended for 2011
•Reduced Social Security Taxes (2%)
•Unemployment Insurance extended
•Stabilized from “Worst” Job Environment
•Private Sector employment “Improving”
Gov’t
Temp
Jobs
Source: Bloomberg LLP
Retracted
Source: Bloomberg LLP
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Consumer Sentiment
Concerns
Euro Zone Issues – Greece, Spain, Portugal
Credit continues to be “tight”
Banks remain on the side line
- Bank Failures
- FinReg “Financial Regulatory Reform”
Interpretation/ Rules not fully defined.
U.S. Consumer Confidence “Retracted”
- Lowest since 1990’s
- Second Lowest Since 1978
Source: Bloomberg LLP
“The Commerce Department reduced its
estimate of fourth-quarter (2011)
economic growth to a 2.8 percent annual
pace from 3.2 percent as state and local
governments made deeper cuts in
spending.” Source: Bloomberg LLP
Historical Graph 1/1/78 to 2/28/11
Source: Bloomberg LLP
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Financial Sector Overview…
“Credit is the grease that oils the wheels of Capitalism”
Largest Banks- Citibank, Bank of
America, J.P. Morgan Chase, etc
Mortgages
Large Banks- PNC Bank, Key Bank,
Fifth Third Bank, etc
Medium to Small Banks- Less than
$1,000,000,000 in Assets
~Bank Failures- Highest Since 1990
In most cases, the FDIC has
~25 Banks Failed in 2008
arranged for a Large Bank to
~140 Banks Failed in 2009
acquire the failed institution.
~157 Banks Failed in 2010
~23 Banks Failed thus far in 2011
~884 Banks are currently on the FDIC
“Problem List” Source: Federal Deposit Insurance
Corporation (FDIC)
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Fed Fund Futures
Source: Bloomberg
Source: Bloomberg
LLP
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Historical Rates
Certificates of Deposit Rates
Comparison
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
90 Days
180 Days
3/1/2010
365 Days
3/1/2011
Source: Bloomberg LLP
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Investment Basics
• Review investments (and providers) to ensure compliance with Section 440.1
of the PA School Code.
• Update District investment policy as needed.
• Place a greater significance on Safety and Liquidity, with Yield as an
important consideration, not the primary factor.
• Cash Flows (Review and update actual versus projections)
• *Short Term (13 Months or less), *Intermediate (14 to 47 Months) and *Long
Term (exceeding 48 months) Investment Strategy based on individual need.
• Utilize investments with active liquid markets for a portion of the
Intermediate or Long Term portfolios.
• Longer term investments carry greater risk and need to be evaluated
accordingly.
• Reduce checking/ payroll costs.
– Hard Charges (Fees deducted)
– Compensating Balances/ Earnings Credit
• Penny saved is a penny earned.
*Pennsylvania School Boards Association (PSBA) Investment of District definitions
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Breakeven Analysis (Illustration
Purposes Only)
If Fund can be invested
for 2 years.
This does not purport to be a complete statement of all material facts relating to securities mentioned. The information contained, while not guaranteed as
to accuracy or completeness, has been obtained from sources, which we believe to be reliable. Opinions expressed herein are subject to change without
notice. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in
which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.
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