By Gayl Mileszko
Shot Out of a Cannon
The Battle of Ain Jalut was fought in southeastern Galilee on September 3, 1260 between the Mamluks of Egypt and the Mongols. It was the first major battle that the Mongols lost and it effectively halted their empire’s westward expansion into Arabia and Europe. Heavy losses, estimated at 20,000 on each side, were sustained in close fighting which took place on the exact spot where King David of Israel was said to have killed the Philistine giant Goliath using only a sling and stones. At Ain Jalut (“Goliath’s Spring”) the first “midfa” or hand cannon was reportedly used. Over time, sources in differing languages have made similar claims. In any event, it was not until the 14th century that cannons came to be used first for anti-infantry then as siege weapons. The effective range of cannon increased over time; during the Revolutionary War, it extended to around 1,000 yards. Sizes and weights increased as well. Cannonballs became huge and cylinders grew wider and longer. In 1877, the cylinder width accommodated aerialist Zazel who was shot out of a cannon in London and became the first human cannonball.
Barrage of Post-Election Announcements
From Palm Beach and Washington, D.C. President-elect Trump now illustrates what it is like to be shot out of a cannon. As the second president in American history to be elected to a non-consecutive second term, he and his transition team are wasting no time laying the ground work for the first 100 days. With 68 days still to go until Inauguration Day, he is rapidly rolling out the names, nominations and designations of many of the principals in his new administration and outlining their transformative missions. The old D.C power players are being made dizzy by the barrage of announcements and names of outsiders being selected to serve. Things are moving much faster than they did in 1981 when Ronald Reagan assumed office with many similar mandates. Back then it took a year for President Reagan to authorize a commission led by chemical executive Peter Grace to work like “tireless bloodhounds” to root out inefficiency in government and “drain the swamp.” Today, Mr. Trump has tapped Elon Musk and Vivek Ramaswamy to direct a new “Department of Government Efficiency.”
Washington Shifts Again
Members of Congress, incumbent and newly elected, now swarm the Capitol, lobbying for leadership roles, chairmanships and ranking positions, prime office locations and talented staff. At this writing, there remain some 12 House races still to be decided. Two Senate candidates have yet to concede, and deadlines for requesting recounts approach. Despite some uncertainty, and only days after the election whirlwind ended, presumed leaders are being pressed by the President-Elect about to begin his second term to produce timetables for confirmations, and major tax and spending bills. In truth, entering office as a lame duck, Mr. Trump only has about two and a half years to try and accomplish the major goals laid out in his campaign and cheered by more than half of American voters. He plans to move quickly and corral legislators, quite a few of which have presidential aspirations of their own and may therefore seek larger headlines in either expediting or blocking his White House initiatives.
Overreactions and Pullbacks
The stock market shot out of a cannon as soon as the popular and electoral votes were called last Wednesday. On expectations of greater economic growth from less regulation, the S&P 500 broke 6,000 in setting its 50th record close of 2024 and continues on its upward trend as has the Dow, with its own 42nd record close. Given Mr. Trump’s pledge to make the U.S. the crypto capital of the world, Bitcoin has surged to all-time highs; at this writing it stands at $90,390, well above the level at $36,091 just one year ago. The bond markets initially sold off then recovered some ground. But yields are on the rise again as bond investors ignore the stock market’s expectations for growth and instead foresee the new Administration’s policies as fuel for inflation and impediments to continuing rate cuts. At this writing, the 2-year municipal AAA general obligation bond benchmark yield stands at 2.65%, the 10-year at 2.96% and the 30-year at 3.79%. The 2-year Treasury yield at 4.28% is below the 10-year at 4.45% and the 30-year at 4.63%.
The Cost of Free Elections Rises
Federal Election Commission reports due next month will provide the definitive count, but spending on the 2024 elections, state and federal, has been estimated at more than $20.6 billion, an astonishing sum reflective of the passions and concerns of the electorate, a myriad of political action committees and hundreds of independent issue-oriented groups. The level of spending also tells quite a story about the huge amount of cash swashing around in our economy. We learned that many Americans are struggling to pay day-to-day expenses, often relying on credit, while the top donor to candidate Trump and groups supporting him contributed $150 million. In the corporate world, Warren Buffett’s Berkshire Hathaway has 28% of its assets, a staggering $325 billion, sitting in cash. In the last week ending post-election, money market fund investors added $79 billion into funds that now have total assets of $6.58 TRILLION.
Expect More Cannon Fire
Financial markets need to brace for a roller coaster ride in the coming months and years. Election results upended a lot of conventional thinking about transparency versus coverups on the vitality of the nation’s top leaders, polling, podcasts, prediction markets, moderated debates, the value of celebrity and newspaper endorsements, major donors, major news network anchors, cable news programs, social media, and social unrest. The electoral college meets December 17. The House counts the electoral votes on January 6 with Kamala Harris certifying the election results. Some big deadlines approach: FY25 federal spending levels after December 20, the debt ceiling as of January 1, the tax code as of next December 31. Major changes in regulations, the structure of the federal government, the management and mission of our law enforcement agencies, foreign policy, trade policy, the deportation of undocumented immigrants, and executive actions disrupting the status quo are in the works. Mr. Trump will have a Republican majority in the Senate and most likely in the House for at least two years, but these bodies are not rubber stamps: members were elected on their own platforms, have their own distinct district and state interests, and treasure their checks-and-balances role.
HJ Sims Continues to Navigate Volatile Markets
A lot has changed in the past week, but the fundamental strengths of our nation and financial markets endure. Bond markets have been volatile since the Fed made its first rate cut and have been rattled as investors digest the Republican wave and speculate on how changes in tariffs, regulations, monetary and fiscal policy may impact specific asset classes, sectors, companies, and borrowers. HJ Sims has been active in the primary and secondary markets all year long. We see the fundamentals supporting our fixed income markets at present and going forward. Our investors continue to present demand for the higher yielding tax-exempt bonds in our sectors of specialization. When other firms have pulled deals and limited trading until election outcomes and rate decisions became clear, we have worked with our clients to offer attractive coupons and yields, take advantage of sudden market opportunities, and put their cash to work.
HJ Sims Reads and Braves the Market When Others Pause
Last week, two days after the elections, we brought a $24.9 million BBB-minus rated financing for Integrity Charter School through the California School Finance Authority. We structured the transaction with four term bonds and sold the final maturity in 2064 at par with a 5.60% coupon. It was the only charter school in the market and met with solid demand. Integrity, a K-8 charter school serving 396 students in National City, will be using the proceeds to acquire and construct a new campus and fund capitalized interest. Bonds were sold in $100,000 denominations and sales were limited to qualified institutional buyers.
HJ Sims Offers “The James”: Largest Senior Living Deal of The Year
This week, HJ Sims is back in the market with the largest senior living deal of the year. We are thrilled to be working with a very experienced development and management team to finance a $455.1 million transaction for a new 350-unit rental community with independent living, assisted living and memory care units in Irvine, California to be known as The James. Bonds are being offered only to accredited investors and qualified institutional buyers through the California Public Finance Authority. Please reach out to your HJ Sims representative for more information.
Use Your Firepower Before Year-End
Including this week, we only have four 5-day trading weeks left in the year. It is a great time to reach out to discuss tax considerations, cash investment options, and 2025 strategies with us. We understand that there are many concerns about the direction of rates, inflation, our federal debt and deficit, future spending priorities, geopolitical alliances and threats, and many others specific to our practice in senior living, charter and private schools, student housing, hospitals, and utilities. We remind you that HJ Sims, founded in 1935, has been a steady guide through 23 presidential election cycles, 10 Federal Reserve chairs, 23 unified sessions of Congress and 25 divided ones. No year is ever the same, but there are always loose cannons to quash as well as shot-out-of-the-cannon moments to place in perspective. Count on us always for high caliber service.