Archive for the ‘Smith’s Grades’ Category

Affordable Housing Bonds Are Good Investments (If You Can Find Them)

April 12, 2018

Smith’s Affordable Housing Finance Conference returned to Fort Lauderdale, Florida, this year. It was another great year for housing bond investors, as the S&P Muni Bond Housing Index illustrated by posting a 250.85% Ever To Date Total Return and 2.95% Annual Total Return.

More than double your money AND no worries about credit problems given the very strong average credit quality.

Compare those investment parameters to the increasingly volatile stock market moves over the past week and its easy to see why housing bonds play a role in the municipal investment process. (https://us.spindices.com/indices/fixed-income/sp-municipal-bond-housing-index)

The U.S. stock market has gone berserk in the face of national public policy positions that undermine global trading strategies. It shouldn’t come as any surprise since Smith’s Regulars know that stocks are inherently more volatile.

Law of Unintended Consequences
With hopes of improving Portland’s brand-new mandatory affordable housing policy, Portland City Council recently agreed to woo developers with its original (optional) affordable housing policy: the Multiple-Unit Limited Tax Exemption (MULTE). The old plan would incentivize (read optional) residential developers to lease 20 percent of their apartments to low-income renters.

The Portland City Commission’s decision comes at the end of the city’s year-long slog to create and retain affordable housing after passing its “Inclusionary Housing” (IH) policy. The new program requires any new apartment building with 20 or more units to lease a chunk of those units below market rate.

Sure, those “below market rate” units are not really that affordable when compared to other cities around the country.

But, instead of spurring a wave of affordable new housing across the city, the IH policy has practically ground the affordable housing construction to a complete halt.

Months before the IH policy went into effect on February 1, 2017, developers wanting to avoid the onerous rule, submitted building permits for no less than 19,000 units across the city. Since then? Only 12 buildings (containing a total of 682 units) have applied for new permits from the city’s Bureau of Development Services. In the past, the city fielded permits for between 3,000 to 6,000 new units a year—making 2017’s numbers look even more pathetic.

Norworst
If you think Portland’s affordable housing crisis bad, take a look at Seattle, where during a one-year period in 2015–16, Seattle rents increased by 9.7 percent — four times the national average. In 2017, the cost of an average two-bedroom topped $2,000. The results have been predictable: nearly half of Seattle renters are currently “housing-cost burdened,” meaning they spend more than 30% of their income on rent.

A recent Zillow study cited the connection between even modest rent increases and resulting homelessness. King County’s 2017 One Night Count tallied 11,643 homeless people, which is second only to New York and Los Angeles in homelessness.

Seattle’s Housing Affordability and Livability (HALA) program claims it will create 6,000 affordable housing units over the next ten years.

To put it into some context, Seattle’s population has risen by an average of 15,000 every year since 2010, growing by nearly 21,000 in 2015–16 alone.

Touted by Seattle politicians as the result of a tough negotiation between the city and developers, it’s little more than a giveaway, as the overwhelming majority of apartments constructed as a result of the “Grand Bargain” will be sold and rented at market rates.

Indeed. The affordability mandate is currently as low as 2% in some parts of Seattle.

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Smith’s Political Event Risk Grading Alert: U.S. Sanctuary Cities (-1)

February 14, 2017

Smith’s Political Event Risk Grading Alert was issued the first week of February for U.S. Sanctuary Cities (-1).

Smith’s Research & Gradings (SRG) publishes its SRG Political Event Risk Grading whenever Smith’s Sentinel System triggers a predetermined response. SRG was founded in 1992 to provide principles-based, independent, conflict-free (Paid By Investor/Stakeholder) analysis.  One of the principles is to provide credit analytics that are “Universal” so investors can compare risks across all classes of investments.

Smith’s Gradings have three components: 1) long-term payment probability gradings 2) recovery gradings, 3) event risk gradings.

Smith’s reported a Political Event Risk Alert for the United States Treasury Debt at Smith’s Affordable Housing Conference in March of 2011. “Probability of Sovereign Debt Crisis Now Escalating to Over 40%”, according to Terence M. Smith, CEO, SRG.  He noted the “Weak US$ Policy vs. Weak Chinese Yuan”.

Smith’s Political Event Risk Covers (classes):
1) Currency inconvertibility (CI) and exchange transfer (FX);
2) Confiscation, expropriation and nationalization (CEN);
3) Political Violence (PV) or War (including revolution, insurrection, politically motivated civil strife, terrorism);
4) Breach of Contract, Contract Frustration (CF), Contract Repudiation.
5) Wrongful Call of a Guarantee (WCG).

The 2016 Presidential election of Donald Trump was as much about the middle class revolting against the political  class in Washington, D.C., and the concentration of wealth in America, as it was about “Making America Great Again.”   President Trump is not much of a Republican, really, which is why he could move so swiftly to secure the borders and address immigration.

In his wake, the Republicans (the real ones) are moving to quickly move to consolidate legislative power.  And, once one grasps why he was elected, the likelihood that the U.S. Senate and Congress will become even more conservative is inevitable. To quote a well-respected friend on Wall Street, “The political correctness of the Democratic Party is what defeated them because no one told the truth during the polling. Everyone lied about Hillary and the polls were wrong when they said she was going to win.”

Sanctuary Cities
Steve Salvi, Founder of Ohio Job and Justice PAC, has the oldest non-governmental website that tracks Sanctuary Cities. He started in 1997.

Mr. Salvi explained that in 1996, the 104th U.S. Congress passed Pub. L. 104-208, also known as the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA). The IIRIRA requires local governments to cooperate with Department of Homeland Security’s Immigration and Customs Enforcement (ICE) Agency.  Despite the IIRIRA, hundreds of urban, suburban, and rural communities have ignored the law and adopted so-called “sanctuary policies.”

Generally, sanctuary policies instruct local or state government employees not to notify the federal government of the presence of illegal aliens living in or passing through their communities, counties, or states. These policies may also blur the legal distinction between legal resident aliens and illegal aliens, so illegal aliens can have access to the same taxpayer funded programs and benefits available to legal permanent resident aliens.
Sanctuary policies exist in two forms, formal and informal.

Already, in the wake of President Trump’s comments,  many sanctuary cities have taken steps to revoke formal sanctuary policies, such as Fairbanks and Juneau, Alaska.  However, some people express skepticism about these “formal” repeals being substituted with informal sanctuary policies.

U.S. Senator Jeff Sessions has been one of the strongest advocates for immigration law enforcement in the U.S. Congress. He introduced Senate Bill 1640 (S. 1640) in June, 2015, to address Sanctuary Cities.  Senator Sessions’ bill gives states and local governments the authority to enforce immigration laws. It is named the Davis-Oliver Act, after two law enforcement officers who where murdered by illegal aliens.  Congressman Trey Gowdy introduced a companion bill in the U.S. House (H.R. 1148).

SRG will remain vigilant to monitor the political event risks facing investors in the bonds of sanctuary cities.

 

Smith’s Critical Infrastructure Review: Water

June 16, 2015

j0321110Smith’s  Critical Infrastructure Review of Water (an essential resource)

We have found the United States continues to face dramatic event risks.  Tops on the list of Smith’s Event Risks for Water is Global Climate Change.

Smith’s has found more than half of the dams in the United States are beyond their expected useful life. Smith’s Gradings of reservoirs go hand-in-hand with dams.  The water level behind a dam is very important to measure slow moving events, like droughts, or fast moving events like floods. The loss of human lives and property damage factors into Smith’s Sentinel System that powers Smith Information System.

Smith’s Database of Critical Infrastructure Assets includes Safe Drinking Water and Clean Waste Water. Smith’s Drinking Water Research includes water mains, which are driven, in part, by water main breaks. These water main breaks occur 850 times a day (on average), and when coupled with slow leaks, are the reasons why one-sixth (1/6) — 2.1 trillion gallons of  treated drinking water — never reach the faucet.

The age of the water mains is a key performance indication (KPI) for Smith’s Water Main Gradings. Other H2O KPIs include the pipe material, soil, climate/weather, seismic faults/activity, location, and any recent pipe inspections.

America’s older urban areas, such as major cities along the East Coast and Mid-Atlantic, have water systems that are well beyond their expected lives.  Baltimore’s water system suffers more than a 1,000 breaks a year, for example.

The American Water Works Association, a lobbying group for non-profit and corporate water works, estimated the cost of repairing the U.S. underground water system at more than US$1 trillion.

Principal Aquifers of the U.S. Source: U.S. Geological Survey

Principal Aquifers of the U.S.
Source: U.S. Geological Survey

Smith’s Aquifer Gradings

Understanding water, as an essential resource, requires digging deep into the subject matter to learn about the aquifers, which are underground water-bearing layers of rock that serve as subterranean rivers and lakes. Smith’s Aquifer Gradings maps to 62 different aquifers in the United States.

The Great Plains Ogallala Aquifer is one of the world’s great aquifers, but in places it is being rapidly depleted by growing municipal and agricultural use. Even this huge aquifer, which underlies portions of eight states, is being depleted. It contains primarily fossil water from the time of the last glaciation. The annual recharge, in the more arid parts of the aquifer, is estimated to total only about 10% of annual withdrawals.

Moreover, Smith’s review has shown an increased presence of chemicals used in pesticides/fertilizers, proven to be harmful to human beings.

Understanding the three major Aquifers that form the Florida Aquifer is essential to investing over the next 10 to 30 years. It is one of the world’s most productive aquifers. It is under all of Florida as well as large parts of coastal Georgia and areas of coastal Alabama and South Carolina.  The Florida Aquifer provides fresh water to major cities, such as Savannah and Brunswick in Georgia, as well as Jacksonville, Tallahassee and St. Petersburg, Florida.

Smith’s Florida Bond Gradings reflect our growing concerns about the saltwater intrusion, particularly in South Florida, where the unconfined Biscayne Aquifer merges with the Atlantic Ocean. Smith’s Aquifer Gradings are linked to the bond credits of Miami and Dade County.

The Edwards Aquifer in Central Texas provides clean water to more than 2 million people.  It is located in the Permian Basin, which is famous for natural gas and the movie “Friday Night Lights”.  What’s more, the Central Texas Aquifer remains fully charged due to the tremendous recharging from local lakes, streams and rivers.

The Mahomet Aquifer is located in central Illinois. It supplies water to some 800,000 people and contains approximately four trillion gallons of water.

The Kirkwood-Cohansey Aquifer is located under the Pine Barrens (New Jersey) of southern New Jersey. It not only contains 17 trillion gallons of water, it provides some of the purest water in the world.

The Buried Valley Aquifer System is in the central basin of the Passaic River watershed as defined by the U.S. Army Corps of Engineers and U.S. Environmental Protection Agency. This aquifer impacts drinking water sources and, thus Smith’s Gradings for twenty-six municipalities in four northern New Jersey counties: Morris, Union, Essex, and Somerset.

In California, Smith’s Aquifer Gradings include the Bishop Sub-basin, which supplies San Ramon, California in Contra Costa County. The Bishop Sub-basin, together with the Mocho Sub-basin, are candidates for recharging from “reclaimed reverse osmosis waters.” to support communities in the Livermore Valley.

The Santa Clara Valley Aquifer provides drinking water for the south San Francisco Bay area.  It has been under enormous pressure, which resulted in the water pressure dropping below 200 feet — which in turn, resulted in the ground dropping (subsiding) 15 feet in some areas.

The largest groundwater basin in California is the Turlock Basin, which is a sub-basin of the San Joaquin Valley groundwater basin, and it occupies approximately 13,700 total square miles. The Turlock Basin aquifer is located within California’s Central Valley and is to the east of the city of Turlock. Unlike most of California, the groundwater in the Turlock Basin occurs in older alluvial deposits and it is the sole source of water for the City of Turlock. Smith’s Aquifer Gradings reflect that portions of the San Joaquin Basin have “overdrafted” water, allowing infiltration of agricultural water pollutants and creating overall poor water quality.

Smiths Aqueduct Gradings
Smith’s Database of Critical Infrastructure Assets includes tunnels, which can be used to transport vehicles (cars, trucks, bus) or water, which are called aqueducts. The largest existing aqueduct in the world is the Thirlmere Aqueduct in North West England. It was built between 1890 and 1925 and runs 96 miles through the English countryside.

New York Aqueduct System

New York Aqueduct System

The second largest aqueduct in the world is New York Water, which has a storage capacity of 550 billion gallons and provides 1.2 billion gallons of fresh water per day to 8 million New Yorkers. In an engineering feat that rivals the great pyramids of Egypt, more than 95% of New York aqueduct’s water is moved by gravity. The New York water system has three aqueducts and three tunnels. The aqueducts serve as reservoirs and the tunnels serve as the distribution system.

The New Croton Aqueduct is the oldest in New York and it was completed in 1890 to transport water from New Croton reservoir in Westchester and Putnam counties. Today it supplies about 10% of New York City’s water needs.

The Catskill Aqueduct is the newest asset in the New York system. It was completed in 1960 to bring water from two reservoirs in the Eastern Catskill Mountains.  It supplies about 40% of New York City’s water needs.

The Delaware Aqueduct is the largest by volume.  It was completed in 1945 to bring water from tributaries of the Delaware River in the Western Catskills and it provides about 50% of the New York City’s water supply.

In terms of length, the top title would go to the California Aqueduct. It is 444 miles long and runs from the Sacramento Delta to Lake Perris.

No. 2 in length is the Colorado River Aqueduct, which supplies the Los Angeles area with water from the Colorado River nearly 250 miles to the east.

Smith’s Canal Gradings
America’s first financial boom and the birth of Wall Street came with the construction of the Erie Canal.  Prior to the canal, Philadelphia was the heart of banking, brokering and commerce. It was the Philadelphia Exchange which promulgated rules for traders, such as no spitting on the floor of the exchange and no feet on desks.

Smith’s Canal Gradings includes 18,241 canals. These are man made canals. Each state has given a name to the canal, which may be only a narrow irrigation or drainage ditch or a large ship, municipal water and/or irrigation canal. States with extensive agricultural acreage may have several hundred to thousands of canals. Smith’s Gradings consider the canals as economic arteries and cultural veins.

The longest canal is the Intercoastal Waterway, which is 3,000 miles long and extends from the Gulf of Mexico up the entire Eastern Seaboard.

The most important canals in America today, perform the same duties they did when created.

For example, the Augusta Canal still provides transportation and is the primary source of fresh water for Augusta, Georgia.

The Chain of Rocks Canal, “Lock No. 27”, allows traffic on the Mississippi to bypass the dangerous Chain of Rocks that can make the river unnavigable during low water. During droughts, Smith’ Gradings monitors the area as a major bottle neck for logistics and barges.  Situated just south of where the Missouri River flows into the  Mississippi, Lock No. 27  handles more  cargo than any other structure on the Mighty Mississippi.

Still, not every canal has been a success. The Mississippi River – Gulf Outlet Canal (abbreviated as MRGO or MR-GO) is a 76 mi. channel constructed by the United States Army Corps of Engineers in the 1950s that provided a shorter route between the Gulf of Mexico and New Orleans’ inner harbor Industrial Canal via the Intracoastal Waterway.

In 2005, although disputed by the Corps of Engineers, the MRGO channeled Hurricane Katrina’s storm surge into the heart of Greater New Orleans, contributing significantly to the subsequent multiple engineering failures experienced by the region’s hurricane protection network. In the aftermath the channel was closed. A permanent storm surge barrier was constructed in the MRGO in 2009, and the channel has been closed to maritime shipping.

Smith’s Ferry Gradings
Ferry systems provide transportation at a much lower capital cost than, say, bridges or tunnels, for communities located along waterways.

The Washington State Ferries operates the largest Ferry System in the United States. With ten routes on Puget Sound and the Strait of Juan de Fuca, the Washington Ferries transit between terminals in Washington and Vancouver Island. In 2012, Washington State Ferries carried 22 million passengers and 10 million vehicles.

The Staten Island Ferry is the nation’s single busiest ferry route by passenger volume. New York City also has a network of smaller ferries, aka “water taxis”, that shuttle commuters along the Hudson River from locations in New Jersey and Northern Manhattan down to the midtown and financial district in lower Manhattan.  Over the past decade ferry companies started to offer service linking midtown and lower Manhattan with locations, such as LaGuardia airport in the boroughs of Queens, as well as Brooklyn, by crossing the city’s East River.

Cape Cod is connected to the islands of Martha’s Vineyard and Nantucket by The Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority. The ferry leaves Woods Hole to stop at Vineyard Haven (Martha’s Vineyard) as well as Hyannis and Nantucket.

New Orleans operates the Algiers Ferry, which has been in continuous operation since 1827. It is one of the oldest operating ferries in North America.

San Francisco operates the Blue and Gold fleet of Ferries that travel the San Francisco Bay area. The majority of ferry passengers are daily commuters (which is a pleasant way to get to work) and tourists.

SRG’s database of Ferries includes the Bridgeport-Port Jefferson Ferry.  The Bridgeport & Port Jefferson Steamboat Company was founded in 1883 by Phineas Taylor Barnum. It operates year round with two ferry boats that travel on a synchronized schedule (each leaving at the ports at the same time so as to maximize the dockspace/facilities)  Over 1 million people use the Bridgeport-Port Jefferson ferry and 500,000 vehicles are transported.

Smith’s Ferry Gradings consider weather, the age of the ferries, the inspection process, as well as the management  when making its assessments.  The ferries are often overlooked and many could potentially benefit from municipal bond financings.

Iowa: Smith’s Avian Influenza Event Risk Alert (-1)

May 26, 2015

Deadly avian influenza viruses have affected more than 33 million turkeys, chickens and ducks in more than a dozen states since the start of 2015.

Iowa, which produces 20% of the nation’s eggs (layers), has been hit hard. More than 40% of its egg-laying hens are dead or dying. The high density of layer birds at the egg farms explains why the flu, which can kill 90 percent or more of a flock within 48 hours, has decimated more birds in Iowa than in any other state.
The most recent Census of Agriculture reported 233,770 poultry farms in the United States in  2012.  In 2014, the U.S. poultry industry produced 8.54 billion broilers, 99.8 billion eggs, and 238  million turkeys. The combined value of production from broilers, eggs, turkeys, and the value of  sales from chickens in 2014 was $48.3 billion, up 9 percent from $44.4 billion in 2013.

South Dakota reported its first possible infection on a chicken farm with 1.3 million birds last Thursday.(See Map)

Smith’s Regulars can contact Pam Kilbourn for quotes on how to immunize investment portfolios using Smith’s Avian Influenza Event Risk Gradings. (pamkilbourn@smithsresearch.net)Avian Influenza

Egg Prices Expected to Increase
China, Japan, and Mexico have banned poultry imports from the United States.  Already, U.S. consumers may have noticed a rise in the price of eggs.

When a egg farm is identified as having the avian flu,  the extermination of the birds requires hiring a company to  gas the entire barn with carbon dioxide.

Even when the Avian flu has been identified at a farm, the hens are still laying eggs in barns that had yet to be emptied.  Those eggs are being sold as a liquid product after undergoing a federally required extra pasteurization.  The liquid eggs are used in many food products, including cakes, ice cream, and cookies.

Once the barns are cleared, a mandatory 28-day period must pass before it is tested. Once the test comes back negative, then the barns can be put back into production.

The U.S. Department of Agriculture believes consumers may see an increase in the price of foods using liquid eggs, too.

Pathogens
HPAI, or “high path” AI, spreads rapidly and is often fatal to chickens and turkeys. The HPAI H5N8 virus originated in Asia and spread rapidly along wild bird migratory pathways during 2014, including the Pacific flyway.  In the Pacific flyway, the H5N8 virus has mixed with North American avian influenza viruses, creating new mixed-origin viruses. These mixed-origin viruses contain the Asian-origin H5 part of the virus, which is highly pathogenic to poultry.

The N parts of these viruses came from native North American avian influenza viruses found in wild birds.  USDA has identified Eurasian H5N8 HPAI and mixed-origin viruses, H5N2 and a novel H5N1, in the  Pacific  Flyway.  The HPAI H5N2 virus strain has been confirmed in several states along three of the four North American  Flyways:  Pacific, Central and Mississippi.

Smith’s Event Risk Grading Alert For 2013 Atlantic Hurricane Season

May 24, 2013

NOAA Predicts Extremely Active 2013 Atlantic Hurricane Season
Smith’s Research & Gradings – May 23, 2013: In its 2013 Atlantic hurricane season outlook issued today, NOAA’s Climate Prediction Center is forecasting an active or extremely active season this year.

For the six-month hurricane season, which begins June 1, NOAA’s Atlantic Hurricane Season Outlook says there is a 70 percent likelihood of 13 to 20 named storms (winds of 39 mph or higher), of which 7 to 11 could become hurricanes (winds of 74 mph or higher), including 3 to 6 major hurricanes (Category 3, 4 or 5; winds of 111 mph or higher).

These ranges are well above the seasonal average of 12 named storms, 6 hurricanes and 3 major hurricanes. This era of high storm activity began in 1995 and the cycles historically last 25-40 years. Meaning, this era could last until 2020 – 2035.

The message from Kathryn Sullivan, Ph.D. and NOAA’s acting administrator and from Joseph Nimmich, associate administrator for response and recovery at FEMA was “Preparedness.” Dr. Sullivan said, “The emphasis of the news is not about percentages and ranges. The important news is about preparedness. Make your plans. Now is the time to pay attention to preparedness.”

Three climate factors that strongly control Atlantic hurricane activity are expected to come together to produce an active or extremely active 2013 hurricane season. These are:

• A continuation of the atmospheric climate pattern, which includes a strong west African monsoon, that is responsible for the ongoing era of high activity for Atlantic hurricanes that began in 1995;

• Warmer-than-average water temperatures (8/10°F above average) in the tropical Atlantic Ocean and Caribbean Sea; and

• El Niño is not expected to develop and suppress hurricane formation.

Dr. Gerry Bell, Ph.D., lead hurricane season forecaster at NOAA’s Climate Prediction Center noted, “There are no mitigating factors that would suppress the 2013 hurricane activity. El Niño mitigates hurricane activity, but it will not be a factor this year.

Improvements to NOAA’s forecasting were critical to limiting the loss of life in Moore, Oklahoma, where residents were given a 15-minute warning time before the EF5 tornado struck. Dr. Sullivan noted that in 1990, the average warning time for a tornado was 5 minutes.

Dr. Louis Uccellini, director of NOAA’s National Weather Service announced a series of new super computer upgrades will be coming online in July/August, providing more detailed models and better forecasting. These upgrades are in addition to Doppler radar data which this year will be transmitted in real time from NOAA’s hurricane hunters – the planes that fly across the U.S. and around the world, providing airborne platforms essential to the gathering environmental and geographic data for scientific research.

Dr. Sullivan said with these improvements – forecast models, data gathering, communications about post-tropical cyclone activity, transmission of real time data from airplanes, and procedure improvements could further improve the Hurricane Weather Research and Forecasting (HWRF) model forecasts by 10 to 15 percent. The primary area of improvement will be to NOAA’s storm Intensity forecast. The inclusion of wind fields and the vertical distribution of winds will be predicted with more accuracy.

Other improvements such as storm surge mapping will be ready to operational next season.

While NOAA’s Atlantic hurricane season outlook provides the probability of severe events along the Atlantic and Gulf Coasts, the agency is not able to provide an outlook for specific areas. Dr. Sullivan said, “Weather risk exposure is high – extremely high. We cannot give you a specific location. This is your warning.”

There has not been a major landfall hurricane since 2005, and NOAA cannot predict when the next one will happen. Dr. Bell explained that there is a set of conditions that allow storms to form, and another that allow them to make landfall. An upper level trough has kept many storms out at sea. In 2003-2005, high pressure over the east, tended to keep storms further west. The pattern is linked to the jet stream.

In light of budget cuts and sequestration, NOAA has a plan in to Congress to decrease budget impacts, while still providing Americans the data coverage to keep them informed.

Contact: Pam Kilbourn
(571) 299-4954
pamkilbourn@smithsresearch.net

Should We Use More Than One Unemployment Number?

July 22, 2011

 

The US Economy is showing signs of recessionary pressures. The trend in the unemployment rate is up to 9.2% from 8.8% in March. And, we at Smith’s Research are focusing on the Department of Labor’s Bureau of Statistics and the Unemployment number being used by the markets.  Of course, the Bureau of Statistics actually publishes a whole range of unemployment numbers, ranging from U-1 to U-6.  The unemployment number quoted in the press is U-3, which measures the number of people who are out of work but actively seeking employment as a percentage of the total labor force. The U-3 is part of the Current Population Survey (CPS), which is a monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics.  Smith’s Research continues to examine the growing relevance of U-4, which includes all of the U-3 workers plus those who are “discouraged” and are unemployed because they have stopped looking for work. Prior to the recession, the median number of weeks that a person was unemployed was five weeks, but the latest CPS had a median job search of 10 weeks. Unemployment duration has also increased for those who eventually quit looking for work. The Bureau of Labor said, “Unemployed individuals were jobless for 20 weeks in 2010 before giving-up and leaving the labor force. Whereas in 2007, those who were not successful in their job search had been unemployed for 8.5 weeks.” As James Trapp, who is a level 5 gradings analyst here at Smith’s Research, asked, “Where do people go when they leave the labor force?”   Indeed.  A closer look at the numbers found that 11% of the people who found jobs last month had been out of work for more than 12 months.  In other words, these people had left the labor force (according to the Department of Labor) so they must have “found” (i.e. stumbled upon) jobs because the people had grown discouraged and stopped looking.  So, we are starting to look at the U-4 number, too.

 

Smith’s Gradings Monitor Seismic Risk

March 18, 2011

Smith’s Gradings include a category of “event risk”, which includes seismic risk, for every credit.  These types of event risk can be described as “episodic” in frequency.   However, Smith’s Gradings monitors the presence of these event risks and models the expected loss for each credit.   It is part of the enhanced surveillence program that allows Smith’s Gradings to heighten the situational awareness of our clientele.  To learn more about Smith’s Gradings and the event risks that we monitor, please send us an e-mail at smiths@smithsresearch.net.