A Rate Hike Is Already Baked In

The Federal Reserve’s highly anticipated 25-basis-point rate hike will be announced in the coming weeks. In fact, it’s already been baked into the fixed-income markets.

A Rate Hike Is Already Baked In

Under the helm of Janet Yellen, the Federal Reserve Chair, the Fed’s calculating approach has been to manage expectations well in advance. As a result, given her recent comments and those made by other board members, the next moves will likely mirror the Fed’s actions in 2015.

Once announced, I do expect the short-term fixed income markets to settle down. I also foresee an immediate jump in lending rates with a very small increase in deposit rates.

A Rate Hike Is Already Baked In

At three+one, we are not a bank or investment advisor. Our expertise is determining the time horizon of an entity’s operating and non-operating cash and its value in the marketplace.

Keep in mind that every single dollar that sits idle is a lost opportunity to increase your income. Given the upcoming actions by the Fed, your cash will have greater value in 2017 than it has had over the last 10 years.

Now is the time to have three+one conduct a liquidity analysis so you can maximize the value of each dollar in the coming year.

 

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We Hope to See You at Our Upcoming Presentation:

Northeast GFOA Holiday Seminar – December 13th in Troy, NY
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Earning High Grades

In less than two years, the University of Redlands, in Redlands, CA, has developed a strong liquidity strategy leading to a 500+% increase in annual income on its operating cash.

This all happened in light of the faint memories of the liquidity challenges they experienced (as did many of its peers) by the Common Fund after the 2008 financial crisis.

With a spirit of determination, the U of R took the following steps that has led to its success:

1) A complete review of its banking services with an emphasis to improve forecasting of its operating cash. The university has strong banking relationships built on a proactive approach in communication with its banks.

2) Performing ongoing liquidity reviews and having an action plan established in partnership with three+one and the university’s primary bank.

3) A complete review and updating its liquidity and investment policy statements.

4) A liquidity plan with a designated time horizon on all levels of cash and a marketplace review that established reasonable expectations of potential yield, while meeting all legal, safety, and liquidity requirements.

5) Once approved, the U of R finance team swiftly implemented a liquidity plan, creating a new source of revenue within 30 days of initiating the plan.

 

Earning High Grades

 

Can you expect the same type of result on your operating cash?

The answer is “absolutely!” With the help of three+one, you can create a liquidity strategy with confidence that can be used both internally and externally to reach new levels of income on your cash.

The team of advisors at three+one is independent of all banks and financial institutions. Our niche is in developing liquidity analyses for public entities and higher education institutions that can be used internally or externally with their financial providers. Our proprietary processes are designed to lead to new income opportunities while enabling these entities to have stronger relationships with their bank(s).

Northeast GFOA Holiday Seminar – December 13th in Troy, NY
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Will Dodd-Frank Be On The List?

Articles are already popping up that, with a Trump presidency, the Dodd-Frank Wall Street Reform Act of 2010 will be on the chopping block during his first 100 days on the job.

Will Dodd-Frank Be On The List?

Dodd-Frank is already over 24,000 pages long and the Fed is feverishly writing still more pages before the new administration takes over in January.

Given other priorities—e.g., healthcare, jobs, immigration, defense, trade, veterans affairs, etc.—I don’t expect the new Trump administration to use its new political capital to repeal Dodd-Frank, especially since it would take 60 U.S. senators to vote in favor.

Keep in mind that Dodd-Frank symbolizes the relief of Main Street against the biggest banks and Wall Street. While that may have been the intent, the regulations have strangled regional and community banks while adding significant costs to all banks and that, in turn, picks the pockets of those whom the regulations were supposed to protect—the folks on Main Street.

So what should we expect?

I don’t see Dodd-Frank remaining as an open document after 2017. It would make sense that some of the current regulations be revamped so they would still support Main Street while easing up on burdensome documents currently required that apply to small business loans and personal mortgages.

There will still be a lot of regulations to digest around Dodd-Frank. We at three+one are here to help public entities, higher education institutions, and banks navigate through these challenges.

The good news is that better days are ahead for banks of all sizes and that should also be great for those of us on Main Street.

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We Hope to See You at Our Upcoming Presentation:

Northeast GFOA Holiday Seminar – December 13th in Troy, NY
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Banking Relationship Banking Trends News The Results Are In

At one of our recent presentations to a group of finance officers we took the opportunity to do some live polling. Although this was not a scientific poll, we thought you might be interested in what fellow finance officers thought about the following five topics.

 

 Banking Relationship Banking Trends News The Results Are In

 

Notice that 75% thought the value of their cash was under 0.50%. We put the value at greater than 0.50%. The opportunity is there when the information needed to make the decisions is at your fingertips.

 

 Banking Relationship Banking Trends News The Results Are In

 

From this poll we saw that most respondents didn’t have confidence that rates would be raised before year end. We do believe the Federal Reserve will make a rate adjustment in December. However, the markets will have anticipated that before the Federal Reserve makes its official move. You could receive the benefit before the day that becomes official if you position yourself now to do so.

 

 Banking Relationship Banking Trends News The Results Are In

 

Banks are not an ordinary vendor. They should be looked at as strategic partners! Be sure to have periodic conversations with your relationship manager. They can provide valuable insight and assistance, especially as technology changes the way your constituency handles its transactions.

 

 Banking Relationship Banking Trends News The Results Are In

 

When it comes to paying banking fees, it really is a simple math calculation. If rates on investments are higher than an ECR, you should invest and take the boost to your interest revenue. Remember that banking services are never free. Your bank always knows if your relationship makes sense within their profitability model.

 

 Banking Relationship Banking Trends News The Results Are In

 

Wasn’t that the great promise of technology—to save you money? Yet the cost savings with banking technology has been offset by the significant cost of new regulations. Though overall banking costs are not likely to go down, you can reduce your costs by using the right banking products. Doing so can make you more efficient internally, be viewed more favorably by those who transact with you, and save you money.

Where Do I Start?

Last week I blogged about a big shift of bank deposits to U.S. Treasuries.

Treasuries are safe, collateralized, liquid, and can provide a higher yield when matched correctly to your entity’s liquidity needs.

For those who have never purchased a Treasury or don’t even know where to start, there are several great resources to get you on the right path.

The Government Finance Officers Association (GFOA)—at both the state and national levels—provides very useful guides on this topic.

Where Do I Start?

A more in-depth and hands-on approach that you may consider is the Fixed Income Academy (www.fixedincomeacademy.com). They offer a more structured program designed for public finance officers in how best to manage the public’s cash. They have national renowned speakers and a certification program that will position one well in managing public funds in today’s topsy-turvy marketplace.

If you want personal professional support, a Register Investment Advisor (RIA) can be invaluable provided he or she specializes in the management of public funds.

As you consider these options, please feel free to call three+one. We are independent of all banks and RIAs so we can provide you with a clear and unbiased perspective as you seek better management of your day-to-day cash flow.

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We Hope to See You at Our Upcoming Presentation:

Northeast GFOA Holiday Seminar – December 13th in Troy, NY
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