Protecting and Maximizing
Investments
Panelists: John Repsholdt, Ehlers Financial Advisor
Ken Herdeman, Community Investment Partners President
Ehlers Public Finance Seminar
May 6, 2010
1
What is Liquidity?
Liquidity refers to how easy it is to convert
an investment to cash
 Can be measured as the difference
between the bid price and the asking price
of a security
 For fixed rate bonds, Liquidity is indirectly
related to length of term
 Liquidity is indirectly related the risk that
the security will fail
Ehlers Public Finance Seminar
May 6, 2010
2
Too Much Liquidity Costs Money
Can one ever have too much liquidity?
Yes
Cashing in all of one’s chips and putting
the cash in a safety deposit box is a prime
example
Putting all of one’s assets in money funds
is another prime example
Ehlers Public Finance Seminar
May 6, 2010
3
Herd Mentality: Rush to Liquidity
At the onset of the Financial Markets
Failure, Investors moved $ Trillions from
less liquid assets to extremely liquid
assets




Lowest Money Fund returns in memory
Can’t borrow for long term fixed rates
Lack of interest among Banks to write CDs
Failure of bond insurance, auction rate
securities and swaps
Ehlers Public Finance Seminar
May 6, 2010
4
Current Investment Rates
Illinois Fund – Money Market Fund
 January 2010: 0.097%
 February 2010: 0.103%
 March 2010: 0.106%
Treasury Bill

30 days: 0.13%
 180 days: 0.23%
 365 days: 0.41%
Brokered CD’s
 3 months: 0.35%
 6 months: 0.40%
 1 year: 0.75%
Ehlers Public Finance Seminar
May 6, 2010
5
Illinois Fund
$60,000
$48,325
$50,000
$48,135
$40,000
2005
$30,410
$30,000
2006
2007
2008
$18,839
$20,000
2009
$10,000
$2,359
$0
Interest Earnings on $1MM in Illinois Funds Money Market Fund
Ehlers Public Finance Seminar
May 6, 2010
6
Current Yield Curve
Ehlers Public Finance Seminar
May 6, 2010
7
Risks
Credit Risk
 Little to none
Liquidity Risk
 Treasuries/Agencies – Little to none
 Muni’s – some
 CD’s – significant
Market/Interest Rate Risk




Significant
Interest Rates can’t go much lower
Values fall as interest rates rise
Your assessment of rates rising rapidly in a short
time
Ehlers Public Finance Seminar
May 6, 2010
8
After the Flight to Liquidity,
Land Safely!
Many assets remain in highly liquid funds
because of lack of confidence in the economy
 How much liquidity should you buy
 The yield curve is steep – providing you with some
yield in maturities of 1 to 2 years in length
 The Banks remain uninterested in writing CDs
what are the alternatives
 US Treasury Notes and Agencies provide
more yield and excellent liquidity
 Short term obligations of State and Local
governments offer better returns, low
default risk
Ehlers Public Finance Seminar
May 6, 2010
9
Protecting and Maximizing
Investments
Questions?
Ehlers Public Finance Seminar
May 6, 2010
10
Closing Remarks
Ehlers Public Finance Seminar
May 6, 2010
11
May 6, 2010
12
Taking Control
Ehlers Public Finance Seminar
Building an Outstanding
Community
“Communities Last Forever”
Building starts:




Idea
Understanding of financial condition
Review of your options
Tailoring an option to meet your needs
Ehlers Public Finance Seminar
May 6, 2010
13
Challenges Going Forward
Ehlers Public Finance Seminar
May 6, 2010
14
Future Strategies and
Opportunities
Continues because of your Leadership
and Management
 Succeeds due to collaboration from many
 Builds your community
Ehlers Public Finance Seminar
May 6, 2010
15
May 6, 2010
16
Remember Ehlers:
Public Finance Advisors
Ehlers Public Finance Seminar