By Gayl Mileszko
Going Gray
Melanocytes are the cells that produce the pigment melanin which gives us our hair, eye and skin color. For our ancestors, these colors afforded much-needed protection from the sun. The genes we inherit from them still determine our original shades. But over time we have figured out many ways — including tanning and contact lenses — to alter them, often in an effort to appear more attractive, younger or healthier. Dyeing one’s hair is quite common but it is no small task, given that we have an average of 100,000 individual follicles on our head to cover and we lose around 75 a day. Each hair has a growth cycle of about four years but, as we age, the melanocyte cells within tire. Most eventually stop producing pigmentation. Hair shafts then fill with air and come to appear silvery or white. Environmental factors, stress, and genetics can also contribute to pigmentation loss, so a good percentage of us will see half of our hair gray by age 50 and that can make us go a little crazy.
Coping in a Stressful World
We live in a stressful world and it’s a wonder that every hair on every head has not turned gray. About 15% of us live within 3.1 miles of a violent conflict; the UN reports that our current level of global conflict is the highest since 1945. Iran is close to producing a nuclear weapon. Russia and China seek to dominate space, exploit Antarctica, Africa and Latin America. Cyberattacks increasingly threaten business operations and personal data security. Vicious gangs terrorize our citizens. Workloads are heavy, 8.7 million Americans work multiple jobs, and artificial intelligence threatens much of our white- and blue-collar work. Economic uncertainty is widespread and the wealth divide is growing. Financial anxiety is pervasive. Wildfires, hurricanes, floods, drought and earthquakes have devastated many communities. Global debt is at all-time highs. The Wall of Worry grows and is harder to climb. But generations upon generations of us somehow always manage to get through these crises – or worse — relying upon the latest or most reliable coping strategies and mechanisms which always means strong governance and communities.
The Whole World is Graying
Some seniors, like this author’s own parents, never had their hairs turn gray despite the unspeakable stresses of the Great Depression, World War II, and raising a big family amid the sky-high inflation of four and five decades ago. Their forever brown hair genes, however, somehow never got passed along to their heirs. Around the world, as a result of declining birth rates and rising life expectancy, people over 65 are starting to outnumber those under 16 in many countries. The gap continues to widen between super-ageing and young folks. The worldwide graying population of those over 60 has doubled from 605 million in 2000 to 1.2 billion in 2025. However, the number of good years lived in good health lags. Elder care costs are well outpacing inflation and affordability of care is becoming not only personal family concerns but potential national havoc.
Bright Fireworks and Gray Ash
The New Year began, as always, with fireworks. Whether or not they were responsible for any of the Los Angeles wildfires, we may never know. But there were other explosions to forever mark the start of 2025. Terror struck in New Orleans and Las Vegas. There were earthquakes in Tibet, Japan, China, Chile, Mexico and El Salvador. Panama and Greenland suddenly popped on the radar screen. An underwater volcano off the U.S. coast is expected to erupt at any moment. Wildfires have decimated parts of southern California and grey ash covers untold thousands upon thousands of acres in California. In Washington, there was drama over the vote for House Speaker. Controversy over several of Mr. Trump’s cabinet nominees as well as his DOGE and External Revenue Service plans persist. The debate is loud over the timing and vehicles to be used for tax reform, debt limit, and border closings. On Wall Street, markets experienced the opposite of a Santa rally, with stocks and bonds slumping over fears over inflation and higher rates for longer. Corporate bankruptcies hit a 14-year high. Bitcoin prices plummeted from $108,000 to $91,940.
Excitement Over Change But Concern Over The Gray Areas
Every new year begins with a sense of joy and optimism, the excitement of a new start, a proverbial blank slate, the earnestness inherent in our big resolutions. But volatility is to be expected with the swearing-in of a new president and reactions to policies that are not only new but the total reversal of those in place, the “known-knowns” of the last four years. Main Street voted for major change and Wall Street is watching to see how much of it will occur given the divisions on Capitol Hill and the brakes constantly applied by the massive Washington bureaucracy, the press of the fourth estate, and the lobbyists who want the status quo that they have engineered to last forever. There are a lot of gray areas and quite a bit of “inside baseball” at play in Washington as new coalitions are formed and we encourage all with interests in the senior housing and care, education, student housing, hospital, and utility to become active both directly with their elected officials and through their trade organizations and associations, urging support for tax-exempt financing, private activity bonds, and policies supportive of the most precious of our citizens and our essential public service providers.
Cheers and Fears from Wall Street over our Gray Leaders
Traders monitor the goings-on in Washington from a distance with a blend of concern and elation. Generally, divided government ensuring stable policies is preferred by investors but, this year, there is great enthusiasm over the promise of higher tariffs, lower corporate taxes and policies favoring U.S. businesses, deregulation, lower inflation, lower rates, and a booming economy. We saw some of the “animal spirits” at work since Election Day. They may have subsided but are likely to rise again with a few quick wins for the White House and GOP-controlled Congress. The average age of House members is 57.7 and the average Senator is 63.8 years old. The President-Elect is 78.
2024 Investing
The year just passed was another fantastic one for stocks, gold, silver, and natural gas. The S&P 500 closed up 25%, the Nasdaq gained 29%, the Dow rose 15% and the Russell 2000 ended 10% higher. Silver returns were 21%, gold 27% and natural gas 45%. It was a bit of a roller coaster ride in the run-up to the elections but prediction markets called the red wave correctly. There were plenty of opportunities in AI, crypto, and other areas for those willing to take risk. But prices remained elevated, wars still raged. Recession warnings continued to flash and the cost of borrowing remained high despite 100 basis points of cuts in the federal funds rate. The Fed continued to shrink its balance sheet while its operations still ran at a deficit. Treasury auctions remained largely successful despite big moves into gold by some of the largest holders of our notes, bills and bonds, and the skyrocketing interest costs that surpassed defense and Medicare spending for the first time in history, a milestone that seemed unimaginable only a few years ago.
Bond Markets Last Year
Bond moves were more extreme but it was a very good year for high yield bond investors. The Bank of America MOVE Index swung between 82.4 and 136.25 during the year and currently stands at 102. The 3-month Treasury yield hit a high of 5.40% in April. The 2-year Treasury yield, inverted by 37 basis points from the 10-year and 22 basis points from the 30-year at the start of the year, but ended the year flat at 4.24% and more of a normalized curve: 32 basis points under the 10 year and 54 basis points below the 30-year. The 10-year at 4.56% rose 69 basis points over the course of the year and the 30-year increased 76 basis points to close at 4.78. Overall, Treasury index returns were +0.51% in 2024. This was well below mortgages at +1.33%, high grade corporates at +2.76%, preferred at +7.05%, high yield corporates at +8.20%, and convertibles at +10.91%.
Municipal Bonds
Municipal bonds also experienced an unprecedented inverted curve that began in December of 2022 and did not undivert until January 8, 2025. The 2-year AAA tax-exempt general obligation benchmark yield rose by 30 basis points in 2024, ending at 2.52%. The 10-year yield rose 78 basis points to close at 3.06% and the 30-year increased 48 points to finish the year at 3.90%. Taxable muni index returns for the year were only +0.26%, investment grade munis +1.58%, non-rated munis +6.07% and high yield munis +7.66%. BBB range munis added 3.65% while AAA’s only gained 0.80%. Maturities of 22 years and longer saw returns of 1.93% while 1-3 year maturities gained 2.59%. HJ Sims began the year with a $135 million A+ rated Public Finance Authority deal for Kahala Nui, a life plan community in Hawaii featuring 270 independent living units, 40 assisted living apartments, 22 memory support suites and 60 skilled nursing beds, with a 20-year operating history. We priced this financing with a final maturity in 2061 at 5.25% to yield 4.95% and were thrilled to have broad participation from more than 32 major institutions.
Focus on Income and Seize Opportunity
Bond investors properly focus on coupon and dividend income as well as the potential for price appreciation. We are seeing 30-year AAA tax-exempt yields over 4.10% and some trades in the secondary over 6.10% at present. There is more than $6.9 trillion sitting in money market funds right now, $135 billion in tax-exempt money market funds, the highest of which yields about 3.70%. Cash abounds as a result of tax loss harvesting in the fourth quarter and interest and dividend income that has not yet been reinvested. This month, an additional $41 billion of principal and interest will hit muni holder accounts. Some borrowers who have been on the sidelines waiting for things to get better cannot wait any longer and are lining up to take advantage of upbeat investor hunts for yield. Please reach out to your HJ Sims representative for the most attractive current offering yields for bonds with your state tax-exemption in your investment profile.
Annual HJ Sims February Conference in Texas
We at HJ Sims welcome all the promise and opportunity of this New Year. We not only attend but sponsor numerous events throughout the year, and this one will be an active one for us. We have a professional team well known for its expertise in senior living and school finance. We also have a significant pipeline of innovative financings to assist these borrowers as well as those in other sectors including student housing, hospital and utilities. We always look to share our knowledge and expertise so, to that end, we invite you join us in Fort Worth at our 22nd Annual Late Winter Conference from February 25 to 27. Please contact your HJ Sims representative for more information on a forward-looking, trend-capturing agenda for senior living, charter and private school operators and investors, featuring engaging speakers, interactive panels, and entertaining activities. For those unable to attend, including our valued private wealth and smaller institutional clients, we look forward to guiding you and your families, colleagues and employees to success in meeting your plans, strategies and goals for 2025, so please contact us to schedule a call, Zoom or Teams session, or in-person meeting soon.
Care and Support for Those in Los Angeles
We ask readers to join our HJ Sims family and the nation in holding dear in our hearts and minds the sacrifices and heroic efforts being made by the firefighters, both local and volunteer from around the world, in Los Angeles. We send ongoing thoughts, prayers and support to family members, friends, colleagues, and all those whose lives have been disrupted and lost, and homes, schools, care facilities, and businesses damaged and destroyed. In much the same way as we continue to support our friends still suffering from the impact of the 2024 hurricanes, we hope that these darkest and grayest days brighten soon and that all newly forged communities grow and become stronger.