WHAT WE OFFER
Smith's Conference series provide unique forums for investors and issuers to discuss matters of mutual interest. They include, Smith's Affordable Housing Finance Conference, High Yield Municipal Bond Conference, State and Local Government Finance Conference, and Community-Based Healthcare Conference.
Smith's has become a bellwether research company, often predicting significant trends and spotlighting controversial subjects sometimes months before they come to light elsewhere. SMITH’s provides independent research and third-party analysis for institutional investors.
SMITH’s Grading scale provides a comprehensive and unified credit comparison that is consistently applied for all securities — from supranational organizations and sovereign risk gradings to sub-sovereign municipal entities and corporate credit analytics. It’s a principled and proven approach to credit analysis expressed on Smith’s universal scale.
Smith's Research & Gradings has the news and information you need to know as you continue your search for value in the municipal markets. Smith's is the premier source of independent credit evaluation within the municipal credit market.
Smith's is published every other week
Tax Reform Passes Senate
The Senate has passed a nearly $1.5 trillion Republican tax bill that's historic in scope and an urgent political priority for President Donald Trump and the GOP.
The vote was 51-49, largely along party lines. Not a single Democrat voted in favor of the legislation, which was crafted behind closed doors by Senate Republican leaders. Tennessee Sen. Bob Corker, who calls the growing debt a national security threat, joined Democrats in opposing the bill.
The bill lays the bulk of its tax cuts on businesses and higher-earning individuals and gives more modest breaks to others. It would bring the first major overhaul of the U.S. tax system in three decades. The measure must be reconciled with a version the House passed last month.
Both the House and Senate versions would eliminate advance refundings for municipal bonds. The U.S. House of Representatives version, unlike the Senate version, included the elimination of tax-exemption for the municipal market's private activity bonds (PABs). The full AMT elimination was partially rolled back in the Senate version (as a concession to Senator Collins of Maine).
Higher Education in the Crosshairs
Historically, the Higher Education sector has seen few defaults, but recently, the sector has seen more stress and more defaults. That's according to a panel of experts speaking at Smith's recent High Yield Municipal Bond Conference. The panel featured Brian Connery,Vice President, Municipal Analytics at Morgan Stanley; William Nolan, Senior Managing Director at FTI Consulting; Marc Savaria, Senior Investment Analyst at Eaton Vance Investment Managers; and Miyoko Sato, Member at Mintz Levin.
Brian Connery sees two important trends that are impacting the higher education sector: massive debt caused by student loans and quickly depreciating technology. As universities fight to attract and retain students, they are spending lots of money on amenities such as luxury dorm rooms, technology and recreational facilities — rather than hiring more professors or reducing costs.
Student loans have grown from about $0.25 trillion in 2003 to $1.3 trillion in 2017. Student loan debt dwarfs every other debt sector in terms of growth and delinquencies have grown ten-fold. Mr. Connery is concerned that students have taken out massive debt that's non-dischargable in bankruptcy. "They don't really know what they're getting themselves into. This debt has helped define a generation of these kids who are crippled for 20 or 30 years," he said.
Tax Reform and the Law of Unintended Consequences
The passage of the Tax Reform and Jobs Act creates a lot more work for investors to cope with the resulting shifts in capital flows. Already alarm bells are ringing regarding budgets in high tax States like Illinois, New York, New Jersey, and California.
Governor Andrew Cuomo of New York State made the first major move during his State of the State Address. He artfully crafted plans to replace New York State's income tax with a payroll tax, which shifts the loss of revenues back onto the Federal government and insulates Albany from the tax act.
Governor Cuomo told CNN's New Day that President Donald Trump's new tax reforms are “a dagger in the heart of New York and California” because they cap the state and local tax (SALT) deduction.
U.S. Energy Dominance and Municipal Credit Quality
"We have ended the war on American energy, and we have ended the war on beautiful clean coal," U.S. President Donald Trump said in his first State of the Union address. "We are now very proudly an exporter of energy to the world."
Indeed. America's policy has gone beyond independence to energy dominance. U.S. oil production for January is seen averaging more than ten million barrels per day (b/d) for the first time since November 1970, bolstering Trump's call for "energy dominance." Last week, production reached 9.88 million b/d, its highest weekly rate since 1983, according to the Energy Information Administration (EIA).
U.S. shale production has created vast amounts of natural gas for export and, with U.S. oil production close to exceeding Saudi Arabia, has shaken the very foundations of the new world order.
Affordability Crisis Crushing California Credit Quality
It has been reported that outward migration from the Bay Area in California is the highest in the country. Many are moving out of the San Francisco Bay Area, seeking more affordable cities. But, before considering packing up and moving, call your local U-Haul. Keep in mind, it will cost you to move out of the Bay Area — almost as much as it will to stay. So many people are leaving the Bay Area that there are not enough rental trucks to go around, causing rental truck rates to peak.
According to U-Haul's online rates, it costs $132 to rent a 26-foot U-Haul truck from Phoenix, AZ to San Jose, CA but it costs $1,301 to rent one from San Jose to Phoenix. Only have a studio apartment? A 10-foot U-Haul from San Jose to Phoenix will cost you $618.
Why? Because there are simply no trucks in the Bay Area.
A study published by University of Michigan professor Mark J. Perry, showed that this was simply a supply and demand issue, the SF Gate reports.
CBS News reported that a San Jose U-Haul business is having trouble getting their rental vans back "because so many are on a one-way ticket out of town."
Hurricane Maria Wallops Puerto Rico
Puerto Rico was hit by Hurricane Maria last week. It landed as a category 5 storm along the Southeast coast of the island a little after 6 AM local time on Wednesday.
Sources on the island reported for as long as power and communication lines survived, but by Noon most of the island was eerily silent and without power.
"It is a humanitarian crisis," a Wall Street analyst said," but it may bring an economic boom to the regions once the rebuilding begins."
PROMESA, the federal control board overseeing Puerto Rico's finances, authorized up to $1 billion in local funds to be used for hurricane response, but Gov. Ricardo Rossello said he would ask for more.
"We're going to request waivers and other mechanisms so Puerto Rico can respond to this crisis," he said. "Puerto Rico will practically collect no taxes in the next month."
Federal aid began moving into Puerto Rico on Saturday. Local officials praised the Trump administration's response but called for the emergency loosening of rules associated with the Jones Act, which is long blamed for condemning the U.S. territory to second-class status.
A LITTLE ABOUT US
SMITH’s Research & Gradings is a financial credit grading company that conducts research and creates unique credit reports using its own proprietary grading system.
SMITH’s Research & Gradings provides research and disseminates credit gradings on securities sold both on a new issue basis as well as in the secondary markets.
SMITH’s Research & Gradings mission is to provide real-time intelligence that provides greater accuracy and predictability to decision-makers.
SMITH’s Research & Gradings written manifesto stated its raison d’être was to provide independent, principles-based credit analytics.
Over the past 24 years, SMITH’s Research & Gradings has constantly improved and enhanced its credit analytics to better serve investors.
CONNECT AND CONTACT
Smith's Research & Gradings, has become a bellwether research company, often predicting significant trends and spotlighting controversial subjects sometimes months before they come to light elsewhere. Smith’s provides independent research and third-party analysis for institutional investors. Smith's analysis is an indispensable part of Wall Street and the world's capital markets.
"Smith's ability to analyze and comment on market conditions is highly regarded. "
“Smith's is at the central nerve center of the municipal bond community. Terry Smith is the most visible proponent of municipal research in the industry. Terry has done so much for so many in the business and has had a great impact on the profession.”
“Keep doing what you are doing. You have excellent programs”
“Smith's Conference series provide unique forums for investors and issuers to discuss matters of mutual interest”
The size of this event made networking so appropriate. This was one of my most beneficial events that I've attended since I started in my role 2 years ago.
Smith's Research & Gradings
P.O. Box 1195
Great Falls, VA 22066