By Gayl Mileszko
Market Commentary
Droning On
There are currently 19 active, large-scale wars and over 120-armed conflicts underway at this writing, and all are seeing drones heavily in use. Early models were used in Korea and Vietnam, but they have now come to replace motorized infantry, jet-fighter dogfights, carpet-bombing, snipers and booby-traps, the old versions of modern warfare. Both Ukraine and Russia have large fleets of drones and deploy them for daily attacks on everything from artillery to helicopters, and they have become the leading cause of battlefield fatalities on both sides. Ukraine has developed an entirely new domestic industry with hundreds of companies producing millions of drones while also accepting Switchblades, Phoenix Ghost explosive, Malloy all-weather heavy lifts and HF-1 plywood strikers from the U.S. and other NATO countries. Many if not most components are commercially sourced from China. Some drones are single-use kamikaze types, modified from commercial racers, which go for less than $1,000 apiece. The quadcopters are higher priced, mainly used in reconnaissance and battle damage assessments. Others include multirotor heavy bomber drones that drop mortal shells and deliver anti-tank mines and cost upwards of $20,000 each.
Who would think that a charter school in suburban Colorado would need to buy a drone like any one of these to protect its students from a shooting?
Charter School Drone Active Shooter Suppression
Indeed, John Adams Academy, a new charter school about to open next month in Sterling Ranch, Colorado, is installing a drone active shooter suppression system. What a sad state of affairs. Schools that have been using drones to teach aerodynamics, physics, geography, and photography now find they need to prepare to ward off bombs and gunshots. The proposed purchase made headlines when the headmaster sought $200,000 from a Douglas County school safety grant program created after the 2019 STEM School Highlands Ranch shooting. The technology comes from Austin, Texas-based Campus Guardian Angel, a company that counts one thousand school shootings in the past 3 years. They market “less lethal” drones the size of a pizza that can launch within seconds of a confirmed threat. These crafts are flown remotely and give responders rapid, real-time views of the scene. They can also spray pepper gel or fly at and incapacitate an attacker. Testing is underway at 10 schools in the south, including 3 in Florida, but parents in Colorado raised number of concerns about the technology, whether it might in fact hinder law enforcement or inadvertently harm students. The charter school has opted to fund the drone purchase on its own.
Charter Schools Shoot for “A” Grades
Charter schools in Florida are also making plenty of headlines on the academic as well as the security front now that the state performance report for the 2025-26 academic year came out on July 1. 78% of the Sunshine State’s charter schools (473) earned an “A” or “B” grade, beating traditional public schools at 76%. And 61% of charter schools (370) achieved the top “A” grade, outpacing other public schools at 48%. Results from all other states are expected to be posted in the next four months. Analysts will be dissecting these numbers as indicators of successful instruction methods, enrollment growth or loss, and praise or warnings from authorizers reviewing renewal applications. And students will be looking for career-focused programs that may involve drone technology. ZipRecruiter reports that commercial drone pilots are now making $130,916 a year.
Charter Schools Active in the Municipal Bond Market
In these first two weeks of July, analysts have reviewed 6 charter schools that have come to the public market via bond financings. HJ Sims underwrote a $23.9 million BB+ rated offering for the K-12 Cornerstone Charter Academy in Greensboro, North Carolina, brought through the Public Finance Authority. We priced the final maturity in 2066 at par with a 5.75% coupon. The Florida Development Finance Corporation had a $42.1 million sale for Dreamers Academy with 30-year-term bonds priced at par to yield 7.25%. Intrinsic Schools in Illinois sold $16.5 million of non-rated bonds including a 2045 maturity that priced with a coupon of 5.25% to yield 5.00%. The City of St Cloud, Minnesota sold $22.5 million of BB-minus rated bonds for Stride Academy that featured a 35-year maturity priced at 7.00% to yield 7.125%. The Massachusetts Development Finance Agency issued $35.9 million BB+ rated bonds for Lowell Community Charter School that included a 40-year term bond priced at 5.50% to yield 5.62%. And the South Carolina Jobs Economic Development Authority brought a $91.7 million non-rated deal for Gray Collegiate Academy that had a maximum yield of 6.55% in 2066.
Ceasing the Ceasefire
Iran and the Strait of Hormuz are back in the headlines as the ceasefire agreement ended with Iran’s resumption of attacks on commercial ships. Thursday marked the sixth straight day of U.S. retaliation; a naval blockade has been imposed and the license allowing Iran to sell oil has been revoked. Iran’s drone swarms and “shortcut air force” tactics have clearly prolonged a conflict that looks like it could go on indefinitely. They began building one of the world’s largest drone arsenals in the early 1980s during the war with Iraq. They found that they could use the Mohajer and Ababil models to threaten superior military powers – and very cost effectively. Most of their drones are being used in the Strait of Hormuz and Persian Gulf to monitor oil tankers, track enemy vessels, and conduct long range strike missions. They also now export the systems and technology to their proxies; some models cost as much as $2 million apiece. Many are used by Russia today in one-way attacks, but Ukraine’s unique naval and deep-strike drone operations as well as its ground robots have provided many advantages on the battlefield.
Fuel for Inflation
Oil prices have climbed by more than $13 a barrel since hostilities with Iran resumed and should set off the inflation alarms again. Instead, investors sighed with relief when the latest CPI and PPI numbers came out better than expected. Of course, the data reflected June conditions when oil fell by about $23 and the preliminary ceasefire terms buoyed moods. The drop in inflation may prove to be quite temporary, as we now see oil prices back in the $85 range, the Strait blocked once again, median home prices up 1.8% from a year ago to a record high $440,600, and the price of a regular postage stamp now up to 82 cents.
Washington Heats Up
The heat is on in Washington to get as much work done as possible before the August recess. Only 110 days remain before the November elections. This week, House and Senate Committees interrogated Kevin Warsh on his new task forces as well as his economic and interest rate views during his first semiannual Monetary Policy Report appearance. We just saw the 21st Century Road to Housing Act become law without the President’s signature. Existing home sales fell 2.4% in June. Another $200 million in Medicare fraud was identified. The Department of Government Efficiency (DOGE) was officially disbanded after 19 months. Americans started investing in the Trump Accounts. The Federal Aviation Administration announced that it is updating the locational identifier of the Palm Beach International Airport to “DJT” as Florida legislation renamed it The President Donald J. Trump International Airport
Municipal Bonds Sizzle
Many investors remain distracted by the final four games of the World Cup and summer vacations, but the municipal bond market continues to sizzle. Reinvestment flows are heavy, primary supply has moderated a bit, yields are attractive and many new issues are oversubscribed. Last week, Lipper reported weekly net inflows of $1.4 billion. This week’s calendar is expected to total $13 billion, including a $48.7 million non-rated North Carolina Medical Care Commission sale for Carolina Village. Senior living projects have been receiving significant attention of late, in large part due to the fact that communities are approaching near total capacity. Nationwide, the average occupancy rates reached 89.9% in the second quarter, with independent living properties averaging 91.3%.
Wall Street Week
New York City law prohibits the takeoff and landing of drones almost anywhere in the city without specific authorization but from perches across the city Wall Street traders have begun to watch the last commercial development start to rise from within the footprint of the twin towers destroyed on 9/11. As we approach the 25th anniversary, construction of the new American Express tower at 2 World Trade Center is underway and scheduled to be completed in 2031. Investors await the second quarter earnings report for American Express to come out next week on the heels of reports from six of the largest U.S. banks this week. Markets will also parse remarks from 13 Federal Reserve officials, and economic data that includes retail sales, pending home sales, housing starts, consumer sentiment and the Beige Book. After last week’s 30-year Treasury auction produced the highest yield (5.058%) since 2007, we will see 6 more auctions this week. The latest Bloomberg survey of economists shows a median forecast for a 4.35% 10-year Treasury yield in the fourth quarter, dropping to 4.25% by the end of 2027.
At this writing in the early weeks of the third quarter, the 2-year Treasury yield stands at 4.17%, the 10-year at 4.58% and the 30-year at 5.11%. The 2-year municipal general obligation benchmark yields 2.40%, the 10-year yield stands at 3.07% and the 30-year at 4.28%.