Posts filed under “Analysts”
In light of the California bankruptcies and the usual belated downgrades comes this nice overview on Municipalities from UBS analysts Thomas McLoughlin and Kristin Stephens, titled Municipal Bonds: City credit quality reconsidered.
They did a screen of credit quality via the Merritt Research database of 284 cities, and note come to the oft overlooked conclusion that all cities are not in the same financial position. Some are healthy, some are middling, and a some are in various degrees of distress. “Most city governments are performing reasonably well in spite of the financial challenges posed by lower property valuations, rising employee benefit costs, and lower state aid.”
To identify the municipalities with the greatest potential for trouble, look for “the weakest liquidity position as of the most recent available audited fiscal year.” This is because a “weak liquidity position is a reasonably reliable indicator of financial stress among city governments and increases the probability of a rating downgrade.”
Of the 284 cities in their sample, approximately 10% exhibit characteristics which may indicate “lower level of financial flexibility” and future downgrades from rating agencies.
Note that downgrades have been outpacing uporades for some time now:
Municipal Bonds: City credit quality reconsidered
Thomas McLoughlin, Kristin Stephens
UBS Wealth Management Research 13 December 2011
Two reports from different wirehouses caught my eye yesterday due to their amazing Yin and Yang nature. First up, the always excellent Equity & Quant Strategist at BAML, Savita Subramanian (the Yin), issued a report titled Wall St. Proclaims the Death of Equities. The report discusses the firm’s proprietary sell-side indicator, which has reached near…Read More
Equity prices & bond yields since 1900 I don’t often give props to big Sell Side firms, but today I must make an exception. Merrill Lynch’s Equity Strategy group put out The Longest Pictures: Picture Guide to Financial Markets Since 1800 this week. Its a 102 page doozy looking at every asset class and country going back…Read More
6 Buys, 3 Neutrals Average Price Target = $39 BofA/Merrill – Neutral – $38 PT Goldman Sachs – Buy – $42 PT Oppenheimer – Outperform – $41 PT JPMorgan – Overweight – $45 PT Piper Jaffray – Overweight – $41 PT Wells Fargo – Outperform – $37-$40 Range Credit Suisse – Neutral – $34 PT…Read More
Rosenberg, exactly 5 years ago today in May 2007: > click for full report > Invictus here. In my Barron’s Big Money post, I mentioned attending a small dinner in October 2007 at which David Rosenberg was the speaker. In comments, Hamann asked if I could provide any additional insight into what he had shared…Read More
Click to enlarge: The Wall Street Journal – Stock Funds Shunned Despite Broad Inflows Long-term mutual funds had estimated net inflows of $6.48 billion in the latest week as investors added money to hybrid, bond and foreign equities, while domestic equity funds saw the sharpest outflow so far this year, according to the Investment Company…Read More
Société Générale’s Andrew Lapthorne lays out the danger of relying on P/E ratios. “The essential message is that although one is of course simply the inverse of the other, using P/E ratio instead of earnings yields can give dramatically different results when making historical valuation comparisons. This disparity between average P/E and average E/P is…Read More
S&P, the notoriously incompetent rating agency that was a prime enabler of the credit crisis, has declared that Greece is in “selective default.” This is, of course, an act of belated cowardice on the part of S&P. When a borrower informs their lenders that they will a) Not be repaying the full loan amount; and…Read More