In The News...
I have debated whether to discuss a particular topic, given that many of you will not care (namely our clients outside of Western Washington). But some recent news and the potential impact it could have on Seattle has tipped the scales.
What is it? The Seattle Arena.
Background: Ever since the Seattle Supersonics departed a decade ago, conversation has swirled about when another NBA team (and potentially NHL team) might come to town. Among the many issues has been the lack of a suitable arena to host either sport, which was the primary reason the team left in the first place.
To address this, competing interests have debated whether to a) build a new arena in the greater Seattle area, or, b) renovate existing Key Arena. The efforts to build a state-of-the-art arena in the SoDo district have been spearheaded by Chris Hansen's group, which includes local magnates like the Nordstrom brothers and (yes) Russell Wilson. The Key Arena renovation efforts have been championed by the mayor's office -- and seemingly -- the Seattle political engine at-large. Key Arena won out and plans are currently being made to rebuild it by the Oak View Group (the winning bidders). This comes despite Hansen peeling back a litany of his group's proposal requests along the way. Chief among those was pivoting from an original proposal that included minimal public financing (likely taxpayer money) to one that is 100% privately financed.
Why is this news now? Because in the midst of sweetening his offers and fighting to the bitter end, Hansen has pushed his chips all-in. His latest proposal involves not only paying for 100% of the SoDo arena construction, but also 100% of the Key Arena renovation to transform it into a premier concert venue (which you can see here).
Oak View Group claims no public money will be paid in the efforts to rebuild Key Arena. I am dubious about that, as are many others (including Hansen, apparently). Taxpayer-funding is always a polarizing topic, especially in Seattle where there have been two stadiums constructed using public money in the past 20 years (Safeco Field and CenturyLink Field).
The Oak View Group proposal does not yet clearly identify how it will deal with the massive traffic and parking problem that will ensue when 20,000 people are spilling into downtown 100 times each year. Hansen's proposal at least attempts to address this by proposing a smaller, concert-specific venue site and the addition of 500 underground parking spots carved out beneath the arena.
Last, but not least, Oak View Group has no interest in owning any franchises that might come to town. They are strictly developers who would build and then sit back and collect landlord checks. Hansen's group wants to both build the arena and own the NBA franchise. In my view that streamlines the entire process, which is a plus, and might actually ensure that what happened to the Sonics does not happen again.
Why does this matter? If you don't live in/around Seattle, it doesn't. But if you do this is a major economic boon for the already fastest-growing city in America. This is all positive, whether or not you enjoy sporting events and concerts. This helps fuel more and more business growth.
This also matters because, selfishly, I like sports and am partial to Hansen's SoDo arena team. I continue to believe that the SoDo district, which is largely industrial, has the greatest economic potential of any Seattle neighborhood. Plop an arena down in there and it will blossom. Oh, and did I mention it would be 100% privately paid for?
Dirty Politics? The elephant in the room surrounding all of this is the perceived bias the mayor and city council hold toward the Key Arena renovation efforts. Based on everything I have read and heard, including the mayor's constant snubbing of the SoDo idea in interviews, the playing field has never been level for Hansen. This stems from the Seattle Port, which opposes the shut down of a specific street that Hansen's team needs vacated in order to build the SoDo arena.
The mayor has been able to dance around questions of being in bed with the Port by ignoring the street vacation and instead taking issue with other elements of Hansen's proposal. In fairness there have been some, but Hansen has corrected most of them, including this latest hammer-drop.
Now that Hansen and Co. are ponying up to pay for BOTH projects, the city could reopen negotiations if it wanted, in light of this massive gift that Hansen is offering. Sadly though, I doubt that will happen.
In The Market...
The S&P 500 fell -0.6% this past week. Let's look under the hood...
STOCKS: It was a whimpy, holiday-shortened week for stocks. The S&P opened the week lower than where it closed last Friday and never recovered. Sector-wise things were mixed, with Health Care, Energy and Utilities leading the way and Financials as the biggest loser. All in all though, a pretty mixed week considering half of the major sectors were up and half were in the red.
BONDS: To no surprise, bonds thrived as the riskier stock sectors and Financials fell. Long-term Treasuries (TLT) were up +1.8%, as interest rates have fallen now in 5 of the past 6 weeks.
In Our Opinion...
Speaking of Treasury bonds, we sold our Long-Term Treasury position (TLT) this past week. Why would we sell it when it has gained in 5-of-6 weeks? Two reasons:
- We got very close to our target price to sell this investment, which was $130.00. Our investment process relies on discipline. As market conditions change our process has to flex somewhat, but we need to stick to the gameplan.
- The below chart indicates to me that we could now see interest rates start to reverse course and begin rising after weeks of falling (which means bond values fall). This is because of the historical tendency for Treasury bonds to sell-off right around this price-point. Take a look...
Notice how the $129-$131 price range was a point where investors decided to sell back in January 2015 and again in February 2016. I will side with history, for now, and presume the same could occur here. And if I am wrong? I will reevaluate and invest accordingly. Remember, we can always buy it back in the future. Most importantly, we bought this a few months back with a specific price target in mind. We got there and so now it is time to part with Treasury bonds for the time being.
In Our Portfolios...
Quick caveat when looking at this week's chart... The sale of the Nasdaq-100 fund (QQQ) was only executed in certain portfolios. Some accounts still own it. I won't get into why that is, but feel free to ask if interested.
Do you use Mint or a similar financial budgeting tool?
If so, or if you think you could benefit from such a thing, I may have good news. I met with our vendor rep at Morningstar this week, who informed me that Morningstar is in the process of integrating a tool called Hello Wallet into the Client Web Portal that you all currently have access to. Hello Wallet functions similarly to Mint and other related applications by allowing you to organize your income, spending, savings, etc. in one online database.
We already perform most of this through the financial planning model I created, however, one thing we lack is a system for allowing you to easily input items such as various income sources or line-by-line monthly expenses. We have to manually obtain that info from you by email.
This development can only have upside. If it works well, great. If it does not, we discard it. To that end, there are some reasons I am skeptical. For one, I actually do not like many of the functionalities within Mint, which is problematic considering it is essentially the industry leader. Second, Hello Wallet for Morningstar is still in the beta phase of testing so it remains to be seen how useful the finished product will be. Third, we have to successfully implement it and it needs to be easy for you to use. Many technologies are not.
With all that said, I am eager to see what the new-and-improved Morningstar Client Web Portal looks like. I will let you know when that time comes, which is supposed to be around year-end.
What's New With Us?
FOOTBALL IS HERE! I will be watching both college and pro games this weekend, defending my fantasy football title and sharing in our daughter's first Seahawks experience. Go Hawks.
Have a great weekend,
Brian E Betz, CFP®