If this is true, I'm in trouble  

Now… well, I'm a dithering idiot.  I'll set down a cup of coffee and a minute later, I have absolutely no idea where I put it.

It is empowering to embrace my pea brain, to reach toward the heavens and loudly proclaim "I don't understand."  I will now ask, without shame, the same question several times, even if I already know the answer, just to make sure I know what I think I know.

Mistakes were unavoidable when I was young.  If you're gonna play the game, boy, ya gotta learn to play it right.  But I paid the tuition.  And the mistakes are now too expensive.  Frankly, it's hard enough even when everything goes right.

There is a constant flood of financial information:  news and ideas and clever men who can turn straw into gold.  I don't understand it all, and I do this for a living (UBS just  announced the largest quarterly loss in the history of banking.  Perhaps they don't understand either) .  But it is rarely the rocket science that trips me up.  It is the common sense, the mistakes that, afterward, I have to ask " how can I be so friggin stupid?"

And so, I plan to write a series of investment and financial planning articles, if for no one other than myself (for future reference, when I become even slower).  The topics will range from basic concepts to occasional ranting on some persistent misconception, all written from my own pea-brain perspective.

Stay tuned. 

As a small, unrated, first-time borrowing, the financing accomplished important objectives that were simply not possible with other alternatives:

•    Immediate funding to lock-in escalating construction costs.

•    Thirty-year fixed rate financing, eliminating future interest rate refinancing risk and simplifying the budget process.  Commercial banks and other conventional sources offered only 7-10 year fixed rate financing.

•    Tax-exempt borrowing rate of 5.50% is significantly lower than conventional lending sources.

•    A tax-exempt private placement (negotiated and placed directly with one mutual fund) avoided substantial underwriting, credit enhancement, and legal fees, achieving an all-in bond rate about 100 basis points lower than a traditionally underwritten bond issue.

*Prassas Capital acted solely as a financial advisor to this transaction.

For more information, please contact us. 

Today's Bloomberg:   The Reading, Pennsylvania school district must pay $230,000 to Deutsche Bank because it is on the losing side of a wager on long-term interest rates.

Excerpts from the article:
“It was all done in a real hurry,'' said Keith Stamm, the only member of the board to vote against the deal. “The whole board is so desperate to try to find a way to raise money, they see this floated in front of them as a big-time amount of money and they want to go forward with it.''

William Cinfici, another board member and a registrar for the state's division of vital records, said Concord (the school's financial advisor) didn't provide enough financial information to evaluate the transaction.

`Nobody Questioned It'

“It was arcane, nobody questioned it,'' Cinfici said. “Everything was presented to us at the last minute. I said, `Well, I'll trust in the guys' judgment.'''

While Reading's taxpayers are liable for the loss, bankers and advisers already have pocketed $1 million in fees for arranging the swap.

The Internal Revenue Service has probed whether the mispricing of municipal swaps has allowed advisers and banks to make excessive fees, depriving the federal government of earnings from the investment of tax-exempt bond proceeds. The U.S. Justice Department and SEC have asked for information on swaps as part of an antitrust investigation into alleged bid- rigging in the $2.3 trillion municipal market.

Local governments from Augusta, Georgia, to Oakland, California, are being lured by similar opportunities to speculate with derivatives created by the world's biggest banks. Most of the $400 billion of private agreements sold to municipalities escape taxpayers' notice and are little understood by the public officials and administrators who approve them.

The article can be read in its entirety here