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Smith's Research & Gradings
Volume: 
XXVIII
Issue: 
13
Author: 
August 3, 2020

Smith's Research & Gradings

Should State and Local Bailout Come With Strings?

One of the great lessons from the Puerto Rico bankruptcy was never to draw to an inside straight — in other words, state and local government politicians need to play the hand that is dealt.

The Governor of Puerto Rico was called to testify before the Senate Committee, whose chairperson asked "Who is in charge?" All the Governor needed to say was "You".

Instead, The Governor insisted the $120 bln. in federal funds be provided to him without any strings. Any conditions to the aid would violate Puerto Rico's sovereignty. He had $70 bln. in par value of defaulted bonds to prove it. He rang-up $30 bln. from Hurricane Maria. He had 15 bln. in unfunded pensions. Puerto Rico received $2 bln. in grant money and $3 bln. in federal loans for specific pre-approved projects.

Clearly, the temptation to "not waste an emergency" can result in politicians running up spending just when cutting costs and expenses are required.
Analysts and investors need to be aware of the political event risks when considering a municipal bond.

Take notice

Stay on top of the latest global news that can impact your investment strategy.

Negative Event Risk (-1)

Here Comes the Sun

Smith's is issuing an Event Risk for Solar Flares (+1) The Solar Cycle 25 reached its lowest level in 2020 and it has started climbing higher in 2021. Forecasts predict the Solar 25 Cycle will peak in 2025.

Continued Federal Infrastructure Investments Will Save Jobs and Grow the Economy Over the Next Decade: Economic Study

ASCE released its economic report on “Bridging the Gap.” The report describes the impact that the federal investment has had on the US Infrastructure needs.

Disastrous Puerto Rico Elections

Puerto Rico's elections were a mess. On Sunday, August 9, Puerto Rico was forced to partially suspend voting for primaries marred by a lack of ballots, as officials called on the president of the Commonwealth's elections commissioner Juan Ernesto Davila to resign. The primaries for voting centers that had not received ballots by early Sunday afternoon were expected to be rescheduled, while voting would continue elsewhere, the commission said.

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