Ten Reasons Why…

Ten Reasons Why…


Ten Reasons Why...

If your entity is not already making use of all its cash—and earning 1.0% or more in interest—let me share ten reasons why it makes sense to act now:

1.) To offer your taxpayers no tax increase—or even lower taxes.

2.) To help offset losses in the deduction of income and property taxes under the new tax reform law.

3.) To provide pay raises for your staff.

4.) To enable adding personnel to your police and/or emergency services departments.

5.) To fund the salary of one or more teachers or professors.

6.) To help offset likely increases in medical insurance premiums.

7.) To purchase previously unaffordable new technology.

8.) To cover unexpected budget expenses.

9.) To establish or add to reserve funds for future needs or projects.

10.) To fund high-efficiency equipment for your facilities that will provide additional savings or increased revenue.

We are at a crossroads as we see continually higher interest rates, possibly reaching 2.0% by year-end. If you do nothing, be prepared to explain yourself when your constituents ask “Why not?”

At three+one, we can help you take a proactive approach in making the most of higher rates through our proprietary liquidity analyses and data models. We are not a bank or a Registered Investment Advisor; our interests are solely those of your entity and your stakeholders.

The reasons are clear. Cash is a valuable asset that can make all the difference in meeting your budget goals—in 2018 and beyond.

Top 10 Predictions for 2018

Over the last several years, three+one has blogged frequently about the changing landscape of banking and the value of cash as an asset.

Last year at this time, I made a prediction of the top 10 trends for 2017. My batting average was in the same range as 2016, over 70% correct.

Top 10 Predictions for 2018

As we head into 2018, the top 10 trends I see evolving are as follows:

1. The Federal Reserve will approve three rate hikes of .25% each to reach a level of 2.00% on Fed fund rates.

2. The 30-day T-bill rate will break the 2.00% level.

3. The average bank Earnings Credit Rate (ECR) will break the 1.00% level.

4. The U.S. GDP will be on pace to reach 4.0%, and the nation’s unemployment rate will break the 3.75% level. Over two million new jobs will be created as a result of the newly approved federal tax reform legislation.

5. Continuing 2017’s trend, public entities will enjoy higher cash levels throughout 2018.

6. Under the leadership of the Federal Reserve’s new chair, Dodd-Frank regulations will be relaxed but not eliminated. The changes made will be beneficial to banks of all sizes.

7. There will be a spike in the number of community bank mergers.

8. Public entities and higher Ed institutions will issue a greater level of banking Request for Proposals (RFPs) due to greater pricing pressures, bank branch closings, and more competitive deposit-rate offerings.

9. Alternative payment options will grow, given new technology, greater restrictions placed on the usage of cash and checks, and more attention being given to digital currency and its regulation.

10. By year’s end, three+one will have helped public entities and higher Ed institutions realize upwards of $20 million in new interest income as a result of best practices in liquidity analysis and the proactive management of their cash.

At three+one we strive to help clients navigate through the changing landscape of banking and an environment of rising interest rates.

A Direct Link

The link between a stronger credit rating and stronger liquidity is direct, if an entity’s liquidity is well managed and well viewed by its credit agencies.

Liquidity analysis and management of all cash are important components in showing credit agencies that your entity has a strong handle on its sources of revenue. How effectively that cash is managed requires a strong plan that covers operating and capital payments.

A Direct Link

Outside of the basics of receiving and disbursing funds, the management of liquidity of operating and reserve funds is expected. But credit agencies take more favorable views based on how well the funds are managed while they’re under an entity’s control.

Think of it this way: liquidity is cash. If cash is viewed as an asset, it can be effectively managed, calculating in operating and capital payments, and lead to increased bottom-line income.

At three+one, we specialize in identifying and managing our clients’ operating and non-operating liquidity. Our pure and independent data allow entities to manage cash more effectively—and benefit from a significant increase in interest income. Frequently in the tens to hundreds of thousands of dollars each year.

A stronger liquidity initiative could lead to a stronger credit rating and lower rates on lending in the marketplace. The link between the two is a direct one.

With the proper management plan, the end result can be a “win-win” for your entity and to those you serve—in both lower costs and higher interest earnings

The Next Fed Chair is…

Last month President Trump nominated Jerome Powell to become the next Federal Reserve chair, replacing current chair Janet Yellen in January.

The Next Fed Chair is...

So who is Jerome Powell? What can we expect from him that will directly affect public entities, higher Ed, and health care institutions?

Jerome Powell will be the first Fed chair that comes from the world of investment banking. He has extensive experience as a lawyer, and investment/private-equity banker, with considerable government expertise, having worked closely with the U.S. Treasury Department. What differentiates Powell from previous Fed chairs is that he was never an economist.

Most observers consider Powell to have much the same outlook on economic issues as Yellen.

So what can we expect from the new Fed chair, assuming he will be confirmed by the U.S. Senate?

Powell will take a more corporate approach to managing his office. You will also see more direct messaging by him and fewer opinions offered by various Fed board governors in public.

Powell will likely maintain a similar, centralist approach as Yellen’s on monetary policy. I don’t expect a shift in current Fed policy; that should be calming to the markets.

Under his leadership, we can expect the Fed to stay on track to bring up Fed rates to 2.0% by no later than 2019.

As a former Goldman Sachs investment banker, we can expect Powell to ease up on the level of regulations being imposed on banks under the 24,000+ pages of Dodd-Frank. The same with other various Federal regulations, including the Volker Rule.

While I expect him to go easy on some regulations, I don’t think he will unravel the rules that were established after the financial crisis of 2008 to protect the liquidities levels of the banking system.

Powell will set a strong balance between what economic numbers are surfacing with a strategy that will sustain the U.S. economy in case of a future U.S. recession.

I think Powell was an excellent choice and will prove to be a strong Fed chair. You will find him to be more sensitive to issues affecting smaller banks, as well as to the unnecessary and burdensome regulations on big banks that have piled on onerous costs and needless overhead.

The changes under Powell could lead to a methodical approach in raising short-term rates while making bank deposits and lending more appealing to banks and the marketplace, with hopefully less paperwork.

Liquidity Analysis Holds the Key

$20,000 to over $430,000
$50,000 to over $800,000
$7,000 to over $57,000
$45,000 to over $540,000
it goes on and on….

The proof is in the bottom-line results. Time and time again, the financial success stories we have reported were due to well-structured liquidity analyses.

Liquidity Analysis Holds the Key

Over the last 23 years, our team has been a pioneer in performing liquidity analyses for public entities and higher Ed institutions. Using our proprietary model, we are able to identify all levels of cash and ensure every last dollar is recognized as a revenue-generating asset.

Will liquidity analysis lead to greater interest earnings? The answer is without hesitation “yes.”

Since three+one is not a bank, financial advisor, or registered investment advisor, we work differently. Our analytical approach identifies patterns of your cash and considers a time horizon. We then determine a marketplace value on all levels of your cash. At that point the data is yours to share with your financial institutions. Using it, they can help you achieve higher yields—while adhering to all legal, safety, and liquidity guidelines.

The difference can add up in the tens to hundreds of thousands of dollars a year.

A liquidity analysis is not something you do once. Nor is it just an annual practice. Rather it requires a disciplined and independent perspective that you will want to live by.

If you have followed our blogs, you have seen how liquidity analysis can be the key to earning more on your cash. Together with your financial institutions and advisors, you will simply earn more on your cash. That’s the very definition of “win-win.”

The first step to a profitable liquidity analysis is your call three+one. You’ll see how stress free and easy we make the entire process, not only for you but for your financial partners as well.