Routt County Treasurer Jeanne Whiddon listens as Scott Prickett, with Davidson Fixed Income Management talks with Routt County Commissioners on Tuesday. Prickett briefed the commissioners on the $47.5 million the county has in investments.

Photo by Matt Stensland

Routt County Treasurer Jeanne Whiddon listens as Scott Prickett, with Davidson Fixed Income Management talks with Routt County Commissioners on Tuesday. Prickett briefed the commissioners on the $47.5 million the county has in investments.

Gloomy financial briefing

Adviser tells county that crisis is worst since Great Depression

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— Routt County government's investments aren't performing as well as officials budgeted for this year, and financial adviser Scott Prickett said the slump could be a prolonged one.

County officials were briefed Tuesday by Prickett, who is a registered investment adviser with Davidson Fixed Income Management and manages the county's portfolio of managed assets. Prickett spoke not only to the county's specific holdings but also the state of the broader national economy. Prickett said while economists disagree about whether the nation is in a recession, there is no denying the economy is weak.

"To me, it's splitting hairs," Prickett said. "We're in the worst crisis with housing since the Great Depression."

In its 2008 budget, the county assumed a 4.75 percent rate of return on its investments. As of April 30, the county's average annual yield on $47.5 million was 3.43 percent. That includes a 4.16 percent rate on the assets Prickett manages and a 2.89 percent rate on the county's more conservative, unmanaged assets, such as CDs. The 28 percent rate decrease from what was budgeted represents about $500,000.

Prickett said he believes the economic downturn will be prolonged. Places such as Steamboat have been relatively insulated from the nationwide crisis in the housing market, but other regions have seen home prices plummet 20 percent. Prickett said it will take the economy some time to rebound.

"There's about an 80 percent correlation between consumer spending and home prices," Prickett said. "I think its going to take the average consumer a long time to dig out of the leveraged position they're in. : I think we're just barely seeing the tip of it."

Prickett said that while corporate balance sheets, in general, are strong and the wealthy have not changed their spending habits, nearly every single other economic indicator is negative. He said oil could hit $150 a barrel. Crude oil was trading at $128.50 a barrel at closing Tuesday, and Routt County communities such as Oak Creek have seen the price of a gallon of regular unleaded gasoline rise above $4.

Prickett said this and other inflationary concerns mean the Federal Reserve will probably put an end to its recent rate cuts at its next meeting in June. The Fed's core interest rate is 2 percent.

"We don't see the Fed going to 1.75 due to global inflation," said Prickett, who added later that there is a 41 percent chance the rate will actually be raised to 2.25 percent by year's end.

With the current economic climate, Prickett sounded a cautionary tone and suggested the county invest in shorter-term investments so it doesn't get locked in at low rates should the Fed reverse course.

"We believe the course of action for the Routt County portfolio is to err on the side of caution," Prickett said.

Comments

carlyle 6 years, 7 months ago

A good article on housing... Amir Sufi and Atif Mian have published "The Consequences of Mortgage Credit Expansion: Evidence From the 2007 Mortgage Default Crisis" (http://papers.ssrn.com/sol3/papers.cfm?abstract_id+1072304). This paper was cited by Gail Marks Jarvis in yesterday's Chicago Tribune and in US News and World Report.

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id04sp 6 years, 7 months ago

It's a good thing the county wasted $18,000,000 of OUR MONEY to build the STATE JUDICIAL SYSTEM a new injustice center. If they hadn't done it already, we wouldn't be able to afford it now.

Why not get the county to ask the State to appropriate $18,000,000 to reimburse Routt County for the expense? That should help make up the shortfalls, no?

Hey, how about taking whatever money is left and use it to put on a World's Fair? That should bring in some cash!

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shadow 6 years, 7 months ago

My 401K is struggling. Gas, utility, insurance & food prices are zapping our household budget. We have to cut back in other areas, so will the County.

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colowoodsman 6 years, 7 months ago

Oil prices? Housing crisis? We have oil right here in Routt Co. and more than enough housing for TWICE our population. What's up with that???

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ybul 6 years, 7 months ago

The county should not be looking at short term investments. It should be looking towards investing in wealth producing assets within the county, which will appreciate with inflation (biomass energy plants to utilize the beetle kill), work with PERA or other agencies to invest in a wind farm, which will increase in value as other energy prices climb.

We are in interesting times, how to best manage for the changes we will see in the future.

If the government would quit printing money and supplying loose credit terms, to fund our war, prop up the housing market and let free markets work, we would not be in this mess. Central planning tends to make a problem worse. Community driven solutions work the best. It is time the community leaders start thinking about what they can do to invest in the community, for a sustainable future.

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WZ4EVER 6 years, 7 months ago

FORTY SEVEN MILLION in investments? Does it strike anyone that is a lot of money for a rural county government to have? Why don't they sell some of that to fix the roads that the Commissioners wanted higher taxes for? I think the County is collecting WAY TOO much if they can create a $47.5 investment fund. Lower our mill levies or spend it on roads.

No wonder the County acts wealthy (take a look at the Courthouse renovations). They are!

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housepoor 6 years, 7 months ago

wz, it seems prudent and very conservative to me, the city should be such a stable financial position......

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WZ4EVER 6 years, 7 months ago

I guess so, but that still seems like a lot. The City is way worse off as far as that goes.

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colowoodsman 6 years, 7 months ago

WZ-it does sound like a lot of money, enough to buy a couple of local oil wells and build a pellet plant. They would be better investments that the shaky stock market!

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ybul 6 years, 7 months ago

Here is a renewable, carbon negative, oil well I am studying the feasibility of. Much better option than a conventional well. Much less expensive also and probably will provide better economic, environmental and social, return than buying a hole in the ground,

http://www.advbiorefineryinc.ca/home/

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SilverSpoon 6 years, 7 months ago

Have you heard the YVEA advertisement? Big bad Xcel is raising prices to YVEA, and YVEA is sucking it up and not raising rates or passing the cost onto consumers. Sounds like they are setting the stage for COAL to save the day, and save consumers money.

YVEA doesn't, invest in renewable energy for its owners(CO-OP consumers). Since YVEA is a CO-OP they can opt out of Amendment 37, which should set their renewable portfolio at 10 percent by 2015. Instead YVEA invests in rail spurs to transport and sell the coal to china.

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colowoodsman 6 years, 7 months ago

Gee, I thought China had way more coal than we do. Someone must have drilled a hole clean through the middle of the planet to make shipping it there cheap enough. What won't they think of next?

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SilverSpoon 6 years, 7 months ago

ok, maybe not to china yet but.... http://www.eia.doe.gov/cneaf/coal/quarterly/html/t4p01p1.html coal exports are up 20%, 10 million short ton increase.

If china pays the right price, I am sure the energy producers would pay the extra to ship it across the ocean.

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ybul 6 years, 7 months ago

China has to spend its money somewhere, they do have a $200 billion trade surplus with the US. I have heard they are contemplating increasing imports of coal to retain their domestic supply, for national security purposes.

Forecasts have them becoming a net importer of coal in the very near future.

The shipping probably is not as great an expense as you might think, as they have all sorts of container ships heading back to China every day, empty. Filling up the containers would be difficult but not out of the question, if they wanted to have something other than a piece of paper with a promise of some future value.

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housepoor 6 years, 7 months ago

coal is the only fuel that can meet our immediateshort term needs, it is also the most abundant and cheapest to extract, it does have a large carbon footprint so look for clean coal tech stocks to take off. I'm curious if the local mines have the capabilities to expand production?

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colowoodsman 6 years, 7 months ago

Great ideas! Maybe we can sell sand to the Arabs and ice to the Eskimos too!!!

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