Saudi Finance Minister: “I Wouldn’t Care If The Oil Price Is Zero” - The Saudi government has developed plans for root and branch economic change. But how can they cope if (when) it falls short?
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“Though new home sales rose by more than forecasts in December, the increase was off a very low reading in November and was primarily due to a jump in sales in one region. To put the increase in the West into perspective, unadjusted nonannualized new home sales in the West rose to 7,000 from 4,000—once annualized and seasonally adjusted, these sales are reported to have risen to 110,000 in December from 64,000 in November. While it is encouraging that sales continue to move into better alignment with home supply, we characterize new home sales as still bouncing around at low levels (December’s reading compares to a peak of 1.4 million in July 2005) and we do not expect the housing sector to be either a significant driver nor a drag on economic growth in 2011.”
SEPTEMBER 8, 2010:
Goldman Sachs Group Inc. is about to start selling municipal bonds directly to mom and pop.The New York company plans to enter a partnership this week with Chicago securities firm Incapital LLC to sell bonds issued by U.S. states, cities and towns to individual investors, according to a person familiar with the situation.
The arrangement will make billions of dollars of municipal bonds underwritten by Goldman available for sale by at least 85,000 brokers in Incapital's distribution network of broker-dealer firms.
The move allows Goldman to branch out into a lucrative area of the fixed-income markets, a haven for retail investors scared off by volatility in the stock market and riskier corporate credit markets. While some municipalities are facing budget crises, it is rare for municipal bonds to default. Such securities yield more than certificates of deposit or other ultra-safe investments and are tax-free in most cases, making them a staple in retiree savings accounts. read moreGoldman strikes deal to sell new-issue munis
October 1, 2010My question is:
Goldman Sachs Taps Retail With Munis
By Patrick McGee
The company recently announced that it is teaming up with the Chicago securities distributor Incapital LLC in an exclusive agreement to sell new-issue munis. Incapital maintains a retail distribution network of more than 600 broker-dealers and 400 fee-based advisors.
"We're really acting as Goldman's syndicate desk to the retail-dealer community during the traditional retail offer period," John Radtke, the president of Incapital, says. "It gives Goldman access to a customer base that they historically have never reached."
Goldman has been the lead underwriter on $16.3 billion of munis this calendar year, according to Thomson Reuters. It is best known in the municipal bond world for its institutional distribution, particularly for large issues-the 95 deals it has senior managed this year is the smallest number of deals among the top-10 firms.
Historically, virtually none of Goldman's underwriting has been distributed to the conventional retail base, aside from high-net-worth individuals who can purchase new municipal products through its private wealth division.
"We're helping to create something that's almost unprecedented in the municipal business," Radtke says. "And that's giving retail access to investments that they would never actually see."
Jeff Scruggs, co-head of Goldman's public-sector and infrastructure group, described the agreement as an expansion of a multiyear relationship with Incapital.
The firms have worked together for the past three years marketing Goldman's certificates of deposit, plain-vanilla corporate debt and some structured fixed-income products. The addition of municipal products deepens their ties while also offering municipal issuers the chance to market bonds to a wider investment base. "We felt that with the addition of the Incapital relationship, it really rounds out our overall marketing and distribution ability," Scruggs says.
Retail demand for tax-exempt products has been growing, as investors become more concerned with wealth preservation and protecting their portfolios from a potential increase in income tax rates. Federal Reserve data indicates that household holdings of muni debt increased to about 36% of the market in the first quarter of this year from less than 33% in the first quarter of 2008.
During that period, total outstanding muni debt grew 4.6%, to $2.83 trillion, from $2.71 trillion while household holdings surged 8.9% from $937.7 billion, to $1.020 trillion.
Earlier this summer, fixed-income analysts at JPMorgan Chase & Co. called the increase in retail demand a shift in the tectonic plates of the market that hasn't been seen since tax laws were changed in 1986.
The Goldman-Incapital agreement was six months in the making, according to Radtke, who expects it to be fully implemented this month. Incapital will distribute the new-issue bonds initially to a selected group of 175 broker-dealer firms that represent about 85,000 brokers, with assets totaling more than $4 trillion, Radtke says. However, he declined to name which firms were selected.
Incapital, founded in 2001, isn't very well known in muni land. But in the broader fixed-income world it offers underwriting and distribution for corporate debt, U.S. agency bonds, CDs, structured notes and mortgage-backed securities.
"The last item or table-leg was municipals," Radtke says of Incapital's expansion into fixed income. He notes that more than half of its broker-dealer clients are involved with municipal products.
"The muni world might not know Incapital, but munis aren't new to us, based on the personnel we have employed," Radtke says. He adds that the growing trading team alone has more than 50 years of experience.
Incapital hopes the agreement could raise its profile in the muni world, as it may begin looking to make a splash as a co-underwriter at some point in the future, Radtke says. This distribution deal doesn't preclude that, he says.
JPMorgan Chase, another top muni underwriter known for its institutional distribution, also beefed up its retail base recently by tapping into the retail network of Charles Schwab Corp. and extending a 2008 agreement with UBS Wealth Management for an additional two years to 2013. Citigroup accesses retail clients through its own network of nearly 20,000 brokers.
Conversely, the broker-dealer Fidelity Investments benefited from the market dislocation of recent years and ramped up its negotiated underwriting of municipal bonds.
The Goldman-Incapital agreement focuses on traditional tax-exempt products rated investment grade. Build America Bonds, with their long maturities and taxable status, have been more popular among institutional buyers rather than retail buyers. But, if market dynamics shift and individual investors become more interested in BABs, this new venture could "absolutely" be a critical avenue in that space as well, Scruggs notes.
Goldman has led 18 BAB deals this year totaling $7.3 billion, ranking it the third-largest underwriter for the stimulus bonds.
The Fed. Reserve reported gold continued to be "earmarked" for the account of foreign central banks (in effect exporting it from the US); $64M was earmarked up to 3PM on Thursday, bringing the total in the past week to $185M. Foreign and local bill selling reached an "extraordinarily large" total of about $100M on Thursday; bill dealers "advanced their rates sharply in a spell of nervousness;" open market rates rose 1/4% on all maturities but the Fed Reserve maintained its buying rates for bills, and left its rediscount rate at 1 1/2%; this was seen as "a virtual invitation to banks and dealers" to sell bills to it. It's believed the Fed. would welcome a large increase in bill holdings and discounts, in pursuance of its policy of "making money rates extremely easy and increasing the volume of both Fed. Reserve and general bank credit outstanding." - Friday, Sept 25, 1931: