Imagine the power that cash holds in today’s marketplace. With short-term rates still hovering above 2.0%, the income generated on idle cash can have a major impact on one’s entity and those they serve
As we enter the budget season mid-year or at year end, the challenge of stretching tax dollars often leads to less resources or decisions of where to cut, especially when tax caps can easily be outweighed by insurance premium increases, pension obligations, cost of living increases, or other essential services.
Too many times the frame of mind in forming a budget comes down to cost controls, rather than revenue-producing opportunities. While this may be understandable at one level, it is not a mind-set that will move your entity forward. At best, you will be in constant ‘treading water’ mode.
A great example is the value of one’s cash. So many see the need to have idle cash available for ‘just in case’ circumstances rather than viewing cash as an asset to generate additional income and opportunities.
At three+one® we can help a public entity find new sources of revenue through all levels of cash. In 2019, three+one®’s flagship service cashVest® will provide proprietary liquidity analysis and data that will result in over $100 million of new revenue to communities that will lead to:
- Closing a budget gap
- Preventing additional tax increases
- Providing additional teachers, police, firefighters & EMTs
- Technology upgrades
- New community services
- After-school programs
- Student field trips
- Arts & Cultural community events
- New musical instruments
- Enhanced sports Programs
- Continuing Education & Online Learning
Obviously, the list can go on. Simply put, the power of cash can have a wonderful impact on one’s budget today and in the future. The time is now to have a conversation with the team at three+one® about our cashVest® liquidity analysis service. The result could make all the difference between stagnation and growth in your 2019 and 2020 budgets.
Let’s face it, markets are fickle. Just when you were getting used to earning four to five times the interest earnings you were accustomed to, you start seeing CD, T-Bill, ECR, MMDA, and LGIP rates flatten, or possibly even decline over previous months for the first time in over a year.
The short answer is: short-term rates are rising because they are more closely linked to Fed actions. With the current high-end Fed Funds target rate at 2.50%, it’s no surprise why the 1-month T-Bill rate is currently at 2.47%. Long-term rates are flattening because investors aren’t sure when the Fed’s next move will be, which is also a good indication of why the 1-year T-Bill is currently at 2.48%. Again, investors aren’t sure what the Fed’s next move is.
So, what do you do? Understand that interest rates will always be on the move. For those entities that locked-in higher rates by investing using time-horizon data, you were able to ensure your taxpayers earned anywhere between 2.60%-2.70% for monies stress tested and available for 6+ months.
The good news is that in today’s market, it’s never too late to take advantage of opportunities in the yield curve. Here are three ways you can earn and save more for your taxpayers despite a flattened yield curve:
1.) Identify how much you’re earning on ALL money. Don’t solely focus on the strategic liquidity you have for specific time horizons but also the operating dollars being used to satisfy payroll, A/P, etc. It’s a fallacy that only time deposits can help close the gap for the taxpayers. If you’re like most of the entities with whom I work, you’re also looking at earning on demand deposits, too.
2.) After analyzing each bank account and identifying where your longer-term opportunity lies, save yourself the time and trouble of rolling 30-day CDs every 30-days. If the data suggests you have time-horizon capability, use that strategic liquidity to your taxpayers’ advantage. We do not advocate public finance officials play the markets’ games. Err on the side of being as proactive and safe as possible. Keep in mind, the Chicago Mercantile Exchange’s FedWatch tool has a 47.8% probability of at least one rate cut by 1/29/2020. Now is the time to be proactive.
3.)You cannot underestimate the power of technology. Before you make up your mind that all technology is bad, consider this – with your competing priorities and time constraints, can you affordto save time and achieve better results with technology? Utilize the right bank technologies for you (the right technologies for you). Adopt AND adapt to new technological investment opportunities in the marketplace. If your investment strategy hasn’t changed in a decade, then I would seek an objective party to provide perspective for you.
Last week the Federal Reserve stated that there will be no more short-term rate hikes for the remainder of 2019. Their outlook seems to be influenced by concerns of slower economic growth both in the U.S. and worldwide.
While many may view the Federal Reserve’s recent announcement as a concern, we view it as a major opportunity. CashVest® by threeplusone® is specifically designed to transform stagnant cash holdings into a vibrant revenue- generating source for your entity.
This move triggers a major strategy shift around the value of cash. Over the last two years, those who have invested cash have kept to a 30-90 day rollover strategy.
This is now the time to extend your cash through the use of cashVest® by threeplusone® and its powerful time-horizon liquidity data. Through our proprietary liquidity analysis, we can demonstrate the actual need for cash while balancing the levels of cash needs over a 5-year period. This allows one to maximize the value of all cash, while allowing your financial institutions and advisors to invest your cash over an extended period of time, allowing the ability to preserve 2.25%+ on your cash.
Cash has value. The knowledge and power to accurately identify when you most need cash allows one to capture and preserve interest earning through the remainder of 2019 and into 2020.
You have a fiduciary obligation to manage the cash for those you serve. It’s time to preserve your cash’s value in the marketplace for a longer period of time, especially if you have the time-horizon data to provide the confidence to you and your financial institutions.
Allow your public sector organization or higherEd institution to find out what so many others across the country have learned: CashVest® by threeplusone® will provide new revenue quickly and directly by increasing the yield you receive from your existing cash.
It’s Wednesday. You feel tired, stressed, and you have a sales team waiting outside your door to pitch the latest product they have to offer. As you meet, you see their lips move but you’re not listening because it is a product pitch not a solution to a problem or stress in the office.
In today’s public and higher Ed marketplace, the strains on a finance office continue to grow with less resources to alleviate the stress. Instead of just another product sale, the focus by those who serve you should be solutions-based that reduce pain points while adding value to your organization and the bottom line.
There are three steps to providing a solution to address pain:
1.) Identifying the stress. This means taking the time to listen and understand the pain points.
2.) Formulating and implementing a tailored solution.
3.) Monitoring the success of solution(s) to make certain the pain point has been alleviated.
Too many times pain points are overlooked, and a product is just thrown against the wall to see what sticks, only to create another stressor and not a solution.
At threeplusone®our mission is to understand the needs and vulnerabilities of a public or higherEd entity and provide a solution to resolve any pain points. We listen, identify, and implement solutions that remove the source of stress to provide ease and comfort. We are solely a solution-based provider with no self-serving products to sell. Our interests dovetail with yours. Through our data platforms, threeplusone®can see what others overlook and then craft unique solutions, resulting in new sources of revenue and less amounts of work and stress.
Products have a place in the public and higher Ed marketplace, but only after they have been identified as a solution to the real problem.
The Federal Reserve has recently signaled a level of patience on its path of raising short-term interest rates. This is a major shift since it embarked on raising short-term rates beginning in late 2016.
On January 30, the Federal Reserve decided to maintain the current rate target range of 2.25% to 2.50%.
There are several reasons for this change in temperament: the increased volatility in the equity markets; a possible economic slowdown due to the recent government shutdown; uncertainty in other economic indicators from international trade tariffs; and concern over corporate earnings.
While these market signals of a possible slowdown may be brief (counter to my own personal beliefs), the ability to capture higher rates on your cash still exists in the marketplace.
As mentioned in previous blogs, while short-term rates may stay within a narrow range, the ability to extend your cash investments over a longer period may exist. This is a conversation you should have with your financial institution or financial advisor.
Knowing when you need your cash and how far your can extend your cash investments are the core elements of liquidity management.
At threeplusone we can provide you with time-horizon levels on all your cash, allowing you to take advantage of several opportunities that exist in today’s marketplace.
Keep in mind that every dollar you hold has value in the marketplace. As a result, having patience has its rewards. The longer you can sustain your cash investments, the greater the earnings your cash will likely produce.
Let us show you how our proprietary liquidity algorithms can help your entity—and your financial institutions—capture more earnings on your cash while staying legal, safe, and liquid.