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Smith's Research & Gradings
Volume: 
XXVIII
Issue: 
21-22
Author: 
December 7, 2020

Smith's Research & Gradings

One Team

One Team

Congratulations to the analysts elected to receive the great and important honor of belonging to Smith's All-Star Analysts Team in 2020. Even if awards and accolades are presented by presidents and kings, none will be more important than the 2020 All-Star Municipal Analyst Award.

In March, the Covid-19 pandemic was recognized as being a worldwide threat to health and human safety. To be clear, the virus originated in Wuhan, China, and its spread was hastened by the travel of 400,000 people from the region to places around the globe during the Chinese New Year celebration.  Initially, America's response was to shutdown the economy "just for 14 days".

Municipal analysts were faced with an unprecedented challenge.  Airports closed.  Schools shifted to virtual classrooms. Trains were empty of passengers. Bridges, toll roads, and tunnels had no traffic. Governors appeared on daily conferences that everyone watched. The municipal bond market ceased to operate.  

Yet, the municipal analysts continued to work in their digital foxholes at home. Smith's hosted a series of Webinars that saw record attendance of well over 500 registrations. E-mails were sent to co-workers and bankers, which soon gave rise to use of video meetings (such as Zoom and GoToMeeting). The U.S. Government approved a CARES ACT that provided a safety net to millions of workers and businesses.  The U.S. Treasury provided a Municipal Liquidity Fund that allowed investors to trade municipal bonds. Rating agencies rode to the rescue with comprehensive analysis and the ability to "rate through the event".  Eventually, a "new normal workday" started to emerge in municipal credit analysis.

The municipal analysts have much to be proud of during the Covid-19 crisis. So many false alarms and municipal missteps occurred, but eventually Covid-19 credit event risks were identified and measured.

The CARES ACT proved to be a lumpy and inefficient subsidy package, especially when compared to many European countries. Distinctions were made without any real meaning – balanced budget mandates appeared to be mirages. No revenue raising measures were enacted.  No expenses were cut. The New York MTA trains were described as "soapy smelling" by one analyst. Tracking the PPP and PPE provided nuances in credit quality that were heretofore unimagined.  

During the summer, States reopened their economies.  But, 12 States were very slow to reopen. The "red states" saw unemployment rates drop to single digits, while "blue states" had double-digit unemployment rates. The expectations for a second federal bailout eventually proved short-sighted.

Now, nine months later, the dreaded second wave of the Covid-19 pandemic is spreading across America. It came despite masks, hand sanitizers, and working from home. The virus spread with the shorter afternoons and the growing gloom that reaches out at 4 o'clock to the dark evenings at our doors.

Still, the All-Star Municipal Analysts continue to brightly shine during the resurgent spread of the plague. With the help of rating agencies, sellside analysts, buyside institutions and bond insurers, a nearly record amount of funds were raised to help States and Local government meet the challenge. To paraphrase Winston Churchill: Never has so much been borrowed for so many people with the help of so few.

Together, Smith's All-Star Municipal Analysts Team works with investment banks and municipal issuers to make a brighter future.  Together, we are one team, working to build a world that is safe and secure, healthy and happy.

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