When the Street comes a-knockin’, best hide your wallets


My Sunday Washington Post Business Section column is out. This morning, we look at Did Black Friday save the season? Beware the retail hype.

The print version had the full headline When the Street comes a-knockin’, best you hide your wallets while the online version was 10 inviolable rules for dealing with the sharks on Wall Street.

Its a comparison of the Greeks lying their way into the EU and the Poway School District (San Diego) taking a no interest for 2o years loan that costs 4X what doing a regular bond offering would. The underwriting was by Stone & Youngberg, which was acquired  some years ago by Stifel Nicolaus. (You can see the specific terms of the underwriting here).

Here’s an excerpt from the column:

“Once again, a new group of rubes got rolled by The Street.

I know what you are thinking: Those silly Greeks. Something like that could never happen here. Before you begin tsk-tsking, allow me to point you to the latest group of suckers to get taken in by The Street’s three-card monte: the Poway Unified School District in San Diego. It took a page from the Greek school of bad finance, agreeing to an exotic and costly bit of Wall Street shenanigans. Despite the district’s strong tax base and good credit rating, its officials bought a complex Wall Street-originated exotic loan offering.

Reminiscent of the bubble days of exotic mortgages, this debt deal makes no payments for 20 years. Over the course of the 40-year financing, it pays a very rich tax-exempt interest of 6.8 percent. Had the district done a straight-up school bond offering, it would have paid 4.1 percent. Over the course of 40 years, this interest rate differential is enormous. Poway borrowed $105 million. Instead of paying $300 million for a normal bond offering, the townspeople are going to pony up nearly $1 billion.”>

I cannot access the print version, but I can see from the thumbnail that their is the classic Wall Street sign in the art work


10 inviolable rules for dealing with the sharks on Wall Street
Barry Ritholtz
Washington Post, published August 31 2012 for September 2nd Sunday paper

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