by Gayl Mileszko
It is said that the difference between a good lawyer and a bad lawyer is that a bad lawyer can let a case drag out for several years while a good lawyer can make it last even longer. This is just one of the dozens of jokes we tell about attorneys. But it is no laughing matter when we have been hurt or wronged and need to hire the best legal mind to represent us. In the wake of the Pandemic, hundreds and hundreds of claims have been filed in state and federal courts against airlines, cruise lines, fitness chains, hospitals, colleges, insurers, and nursing homes, among others, challenging decisions made by companies, institutions and government officials during the crisis. These cases reflect much of the devastation, loss, and hardship suffered by individuals, families, employees, patients, residents, citizens, and consumers. They remind us of the steep economic toll that the coronavirus has taken, and that it is still rising.
Hunton Andrews Kurth is just one firm tracking cases and complaints related to the Pandemic. At last count, there were 9,521 in the U.S. Some ask for corrective actions, others seek monetary damages. There are family members who accuse senior care facility managers of failing to protect their residents and public health departments for failing to properly monitor the facilities they regulate. There are nurses suing the hospitals, cashiers suing grocers, ticket takers suing railways where they work for failing to provide proper protective equipment. Concert-goers and frequent flyers and cruisers are seeking cash refunds, students want tuition refunds, prisoners are seeking release, laid off workers are chasing unpaid wages, hospitals are suing patients for outstanding medical debt, restaurants are trying to have their business interruption insurance claims paid. Landlords, wedding reception venues and others are testing force majeure and other legal concepts alongside workplace class actions on compensation and discrimination. No doubt new standards if not precedents will be set in the months, perhaps years, to come.
To forestall waves of action, a number of states have imposed various immunity measures for certain health care providers. Discussion of liability shields or protections for businesses has been underway in Washington for the first time since Y2K. Financial markets have been provided with a form of loss prevention shield for more than a dozen years now. The Federal Reserve has stepped in to protect, if not sustain, and propel markets in every way imaginable with dozens of heretofore unheard-of programs. Starting with tools first brought out in 2008 and new ones devised within days of the 2020 Pandemic’s declaration, the Fed has shielded the so-called free market from itself and kept the global markets afloat as well. Since March of 2009, there has been intermittent volatility, sometimes very pronounced, but the Dow is up 330 percent, the S&P 500 is up 394 percent, the Russell 200 has gained 436 percent, and the Nasdaq has gained 436 percent. Gold prices are up 89% to $1,740, and silver prices have doubled to $25.73. The 2-year Treasury yield has fallen 82% to 0.14%. The 10-year is down 37% to 1.69% and the 30-year has fallen 32% to 2.39%. The 10-year Baa corporate bond yield has dropped 409 basis points to 3.25%. In the tax-exempt market. The 2-year AAA general obligation bond benchmark yield has fallen more than 80% to 0.19%. The 10- and 30-year yields are down 63% to 1.16% and 1.79%, respectively.
This week, the Fed chair and Secretary of the Treasury appear together before the House Financial Services Committee and Senate Banking Committee to discuss the government’s response to the Pandemic plus the fear du jour – inflation – and explain why the Treasury and central bank have to keep galloping in on a white horse to save markets that were meant to be driven by supply and demand, not controlled by central authorities. Our economy is widely expected to surge in the next few months as a result of the nation’s extraordinary vaccination campaign and the multi-trillions of federal stimulus funds. Inflation, as calculated by the PCE (personal consumption expenditures) index will be 2.4% at the end of 2021 according to the Fed’s median forecast. But the Administration is planning another package of relief that could add another $3 trillion to the deficit. There could be some offsetting tax hikes proposed simultaneously or separately. Markets have suddenly turned aflutter over the prospect of big jumps in consumer prices, China’s new posture, the Fed’s decision to end regulatory capital relief for banks, and the resiliency of a Treasury market which will see $183 billion of new sales this week alone.
Municipal bonds have reacted with somewhat of a yawn to most of the goings on in Treasuries and the stock market. The Fed’s plan to keep short term rates as low as possible until 2023 and continue buying $120 billion of corporate and mortgage-backed bonds every month came as no surprise to the tax-exempt market, which has been fueled by all the Democratic leadership talk of tax increases, continued inflows into bond funds and ETFs, and light supply. High yield issuance, the center of most demand, has been paltry. Last week, buyers scooped up $1.25 billion of State of Illinois general obligation bonds at the lowest end of the investment grade scale at Baa3/BBB-/BBB-. The huge demand for bonds from the Land of Lincoln elevated prices to the point that buyers could only register a 2.75% maximum yield which came on term maturities in 2046. Among other higher yielding new issues, the Government of Guam sold $58 million of Ba1 rated refunding bonds due in 2040 with a 2.66% yield. Brooks Academies of Texas borrowed $42.9 million through the Arlington Higher Education Finance Corporation, including non-rated 2051 term bonds priced with a 5% coupon to yield 4.20%; Royal School System came 3 days earlier with a $9.9 million deal due in 2051 with a 6% yield. Oak Creek Charter School of Bonita Springs in Florida sold $17.8 million of non-rated revenue bonds structured with a 2055 term maturity that priced at par to yield 5.125%. As always, we encourage you to contact your HJ Sims representative for our latest views on pricing and our secondary market offerings.