economic viescientific, and technical services 7% management of companies and enterprises 1%...

Economic ViewMarch 29, 2017

Kalyan MadhavanFederal Home Loan Bank of Dallas

Disclaimer

1

Certain information included in this presentation speaks only as of a particular date or dates included in this presentation. The information in the presentation may have become out of date. The Federal Home Loan Bank of Dallas does not undertake an obligation, and disclaims any duty, to update any of the information in this presentation. The risks, uncertainties, and factors that could affect the Federal Home Loan Bank of Dallas and its financial results are discussed more fully in the Federal Home Loan Bank of Dallas’ reports filed with the Securities and Exchange Commission, which are available on www.fhlb.com

The data, scenarios and valuations provided to you in this presentation are for informational purposes only and are provided as an accommodation and without charge and are not intended for further distribution. The data, scenarios and valuations are estimates only and may not represent the actual or indicative terms at which new (or economically equivalent) transactions could be entered into or the actual or indicative terms at which existing (or economically equivalent) transactions could be prepaid, terminated, liquidated, assigned or unwound. The scenarios and valuations were derived using proprietary pricing models and estimates and assumptions about relevant future market conditions and other matters, all of which are subject to change without notice. The scenarios and valuations were prepared without specific information about your institution’s balance sheet composition, hedging strategies or financial assumptions and plans, any of which may affect the relevance of these valuations to your own analysis.

The Federal Home Loan Bank of Dallas makes no representations or warranties about the accuracy or suitability of any information in this presentation. This presentation is not intended to constitute legal, accounting, investment or financial advice or the rendering of legal, accounting, consulting, or other professional services of any kind. You should consult with your accountants, counsel, financial representatives, consultants and/or other advisors regarding the extent these scenarios and valuations may be useful to you and with respect to any legal, tax, business and/or financial matters or questions.

2

• Real Economy• U.S/Texas• Employment: Corpus and San Patricio

• Fed Moves and Inter-market moves• Oil and Corpus Christi• Water, Earth, Wind and Fire?• San Patricio: Demographics• Digital World- Sharing Economy, A.I

Agenda

3

If U.S/Texas were a home

How big a family lives here?

• 324.5 million (Jan,

2017)

• Grew by 0.70% (from a year ago)

• 27.8 million (Jan,

2016)

• Grew by 1.6% (from a year ago)

U.S Texas

4

• $16.96 Trillion (as

of Q4 2016)

• Grew by 1.60% (Percent Change from Year Ago)

How much did the family earn?Real Gross Domestic Product

https://fred.stlouisfed.org/series/GDPC1

U.S Texas

• $1.63 Trillion (2016)

• Grew by 0.13% (Percent Change from Year Ago)

5

U.S, Private industries, 88%

U.S, Government,

12%

TX, 90%

TX, 10%

https://fred.stlouisfed.org/series/GDPC1

In which sector did they earn?

6

U.S: Real GDP % of Industry TypeAgriculture, forestry,

fishing, and

hunting1%

Mining2%Utilities

2%

Construction4%

Manufacturing13%

Wholesale trade7%

Retail trade7%

Transportation and warehousing

3%

Information

6%Finance and

insurance7%

Real estate and rental and leasing

15%

Professional, scientific, and technical

services

8%

Management of companies and

enterprises2%

Administrative and waste management

services

4%

Educational services1%

Health care and social assistance

9%

Arts, entertainment, and recreation

1%

Accommodation and food services

3%

Other services, except government

2%

7

Texas: Real GDP % of Industry TypeAgriculture,

forestry, fishing, and hunting

1%Mining13%

Utilities2%

Construction5%

Manufacturing

15%

Wholesale trade9%

Retail trade7%


4%Information

4%

Finance and insurance5%


11%

Professional, scientific, and technical

services7%

Management of companies and

enterprises1%

Administrative and waste

management services

4%

Educational services

1%Health care

and social assistance

6%


1%


3%

Other services, except

government

2%

8

Sector Difference: Texas vs. U.S

0%

10%

0%

1%

1%

2%

0%

0%

-2%

-2%

-4%

-1%

-1%

0%

0%

-2%

0%

0%

0%

-2%

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12%

Agriculture, forestry, fishing, and hunting

Mining

Utilities

Construction

Manufacturing

Wholesale trade

Retail trade


Information

Finance and insurance


Professional, scientific, and technical…

Management of companies and enterprises

Administrative and waste management…

Educational services

Health care and social assistance



Other services, except government

Government

9

Back to 1970s level

What % is working/looking for work? (U.S Labor Participation Rate)

10

11

How much are they earning?

U.SCorpus Christi

12

Employment

13

4.9%

Unemployment rates by State, Jan 2017(Not seasonally adjusted)

https://geofred.stlouisfed.org/map

14

New Hampshire : 3.2%

Texas : 4.9%

New Mexico : 7.0%

?

?


High:

Low:

Guess the State?

15


Texas : 4.9%

New Mexico : 7.0%


High:

Low: ?

Guess the State?

16


Texas : 4.9%

New Mexico : 7.0%


High:

Low:

Guess the State?

17

Corpus Christi AreaNon-farm Employment

(Jan, 2017)

189,100

0.2%From Jan, 2016

https://www.bls.gov/regions/southwest/summary/blssummary_corpuschristi.pdf

18

Corpus Christi Employment by Sector, Jan 2017


19

1.5%3.6%

-1.3%-4.1%

-5.5%

3.3%

0%

-0.3%

-5.3%

-3.8%


Sectors that grewJan 2016 to Jan 2017

20

1.5%3.6%

-1.3%-4.1%

-5.5%

3.3%

0%

-0.3%

-5.3%

-3.8%


Sectors that decreasedJan 2016 to Jan 2017

21

Starr County 15.8%

Dallam County2.4%


San Patricio: 8.9%

Unemployment rate by County, Jan 2017(not seasonally adjusted)

22

Unemployment rate change from a Year ago(not seasonally adjusted)


San Patricio: 2%

23

Civilian Labor Force % Change from a Year agoJan 2017


San Patricio: -1.75%

24

Average Weekly Wages, Q3, 2016(for all industries)

25

Equifax Subprime Credit population, Q4 2016


San Patricio: 39%

Percentage of population sample with a credit score below 660

26

Equifax Subprime Credit population, Q4 2016


Multi-family Rental Housing could be more important

Percentage of population sample with a credit score below 660

27

Fed Moves

28

Fed Dot plot

2016 2017 2018 2019 Longer term

1.5+%2+%

3%

1.0%

Federal Reserve, March 2017

29

10%

38%

52%

70%

76%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

5/3/2017 6/14/2017 7/26/2017 9/20/2017 11/1/2017 12/13/2017

Probability of Fed Hikes

Hike # 1

July

30

9%

37%

53%

70%

77%

81%

0%

8%

22%

38%

47%

54%

0% 0%3%

12%

20%

26%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

5/3/2017 6/14/2017 7/26/2017 9/20/2017 11/1/2017 12/13/2017

Hike # 2

July December

Probability of Fed Hikes

31

-

0.020

0.040

0.060

0.080

0.100

0.120

0.140

0.160

0.180

0.200

0.220

0.240

0.260

0.280

1.10

1.35

1.60

1.85

2.10

2.35

2.60

2.85

J-16 M-16 M-16 J-16 A-16 O-16 N-16 J-17 M-17 A-17

10 year TreasuryIs Copper and Gold hiding something?

10 Year treasury

32

0.140

0.150

0.160

0.170

0.180

0.190

0.200

0.210

0.220

0.230

0.240

1.10

1.35

1.60

1.85

2.10

2.35

2.60

2.85

J-16 M-16 M-16 J-16 A-16 O-16 N-16 J-17 M-17 A-17

10 year Treasury HGA comdty/XAU Curncy ratio

Copper/Gold Ratio

10 Year treasury

Is Copper and Gold hiding something?

33

3/27/2017, 2.359

y = 14.301x - 0.7167R² = 0.8812

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

0.150 0.155 0.160 0.165 0.170 0.175 0.180 0.185 0.190 0.195 0.200 0.205 0.210 0.215 0.220 0.225 0.230 0.235 0.240

10 Y

ear

Trea

sury

Rat

e

Copper to Gold Price ratio

High Correlation

US Oil from Shale

35

WTI stabilizing around $50

$48

36

Price of WTI at $48

More shale formations could be profitable

Shale formations that should be

profitable

37

Break-even cost per barrel

40

• 70 miles south of the shale play • Access to

• natural gas refining• Manufacturing • Agriculture industries

• Quick access to the Gulf of Mexico and the entire United States inland waterway system

• Access to overland transportation and direct connections to railroads

41

Port Corpus Christi renews agreement with Panama Canal

AuthorityDec 19, 2016

http://www.bizjournals.com/sanantonio/news/2016/12/19/port-corpus-christi-renews-panama-canal-agreement.html

42

• Seamless steel pipe manufacturing facility on a 253-acre site east of Gregory, Texas.

• Tianjin Pipe (Group) Corporation is planning to invest in excess of $1 billion through TPCO America

http://tpcoamerica.com/about-us.html

Local Economic Activity

45

http://af.reuters.com/article/energyOilNews/idAFL2N1GZ29E

HOUSTON, March 22 (Reuters)

• Royal Dutch Shell plc, Chevron Corp and Exxon Mobil Corp bid in a government auction

• Prices up 76 percent over a year ago• The auction of offshore oil and gas parcels

received nearly $275 million in high bids, compared with $156.4 million a year ago.

Gulf of Mexico off-shore oil bids increase in price

46

• fuelfix.com/blog/2017/03/02/730-mile-epic-permian-to-corpus-pipeline-in-the-works/

Permian-to-Corpus pipeline in the works

• Plan to build a 730-mile-long crude oil and condensate pipeline from West Texas to Corpus Christi

• Will be operational by the first quarter of 2019

• From points in Permian Basin to an affiliate’s terminal in the Port of Corpus Christi

47

Widened Panama

canal

Pipelines from

Permian Basin

Proximity to

Population growth areas

Proximity to Shale play

Off-shore Energy

play

Inland Access for

Goods

Jigsaw pieces

fit well

Originally it was energy (whale oil)

from water..

From 2015 “Heart of the Sea” Movie

Sometime in 1850s

Old Thomas Nickerson: You know, I heard a man from Pennsylvania drilled a hole in the ground recently and found oil. That can't be true.Herman Melville: I heard it, too.

Old Thomas Nickerson:

Oil from the ground! Fancy that.

From 2015 “Heart of the Sea” Movie

http://www.imdb.com/name/nm0322407/?ref_=tt_trv_qu



In 1880s, whaling industry was the fifth largest sector of the

economy

https://www.theatlantic.com/business/archive/2012/02/the-spectacular-rise-and-fall-of-us-whaling-an-innovation-story/253355/

Later it was energy (petroleum)

from the earth

Could it also be from the wind?

54

Wind Power

https://www.eia.gov/state/maps.php?v=Renewable

Texas leads the nation in wind-powered generation

55

Wind Turbines

https://www.bloomberg.com/news/articles/2017-03-23/oil-majors-take-a-plunge-in-industry-that-may-hurt-fossil-fuel

56

Big Oil uses Rigs as Wind Turbines

https://www.bloomberg.com/news/articles/2017-03-23/oil-majors-take-a-plunge-in-industry-that-may-hurt-fossil-fuel

North Sea

… and energy from the eternal fire?

58

Solar Energy

https://www.eia.gov/state/maps.php?v=Renewable

North Carolina

California ?

Solar Energy

59

If we can

capture the solar energy hitting the earth

for 15 seconds each day

then

we can have as much energy as humanity uses in an entire day

There are 86,400 seconds in a daySource: Scientific American

https://blogs.scientificamerican.com/guest-blog/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

Solar Energy

60

If we can

capture the solar energy hitting the earth

for 15 seconds each day

then

we can have as much energy as humanity uses in an entire day

There are 86,400 seconds in a daySource: Scientific American


61

dollars per watt

of

solar photovoltaic cells

has reduced

7% annually over last 30 years

Source: Scientific American


62

Population growth Projections

http://txsdc.utsa.edu/Resource

The Institute for Demographic and Socioeconomic Research is part of the College of Public Policy at The University of Texas at San Antonio

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2015 2020 2025 2030 2035 2040 2045

63

% Population growth from 2015

Texas 62%


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2015 2020 2025 2030 2035 2040 2045

64


Texas 62%

Corpus Christi: 19%


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2015 2020 2025 2030 2035 2040 2045

65


Texas 62%

Corpus Christi: 19%

Nueces: 22%


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2015 2020 2025 2030 2035 2040 2045

66


Texas 62%

Corpus Christi: 19%

Nueces: 22%

San Patricio: 5%


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

2015 2020 2025 2030 2035 2040 2045

67


Texas 62%

Corpus Christi: 19%

Nueces: 22%

San Patricio: 5%

Challenge/Opportunity


Young29%

Prime54%

Senior17%

68

Texas 2016

Up to 19 Years

20-59 Years

60+ Years


Distribution by Age Group

Young28%

Prime51%

Senior21%

69

Corpus Christi2016

Up to 19 Years

20-59 Years

60+ Years



Young30%

Prime49%

Senior21%

70

San Patricio

2016

Up to 19 Years

20-59 Years

60+ Years



71

How many prime-age folks are there for every young and

senior folk?

Ratio of Prime to Young + Senior

116%

105%

110%

94%

90%

95%

100%

105%

110%

115%

120%

Texas Corpus Christi Nueces San Patricio

72

Prime Age Group vs. [Young + Senior] Age Group

100%


73

Forecast of ratio of prime-age folks to young and senior folk

70%

75%

80%

85%

90%

95%

100%

105%

110%

115%

120%

2015 2020 2025 2030 2035 2040 2045

74

Forecast of Prime vs. [Young + Senior]

Corpus Christi

Nueces

San Patricio

Texas

75

Challenge for San Patricio

Prime Age Group segment• need to grow• should be productive• adapt to a fast changing future

Economic Opportunities Key to attract prime age group

76

Digital World

Asset Builders Service Providers

Technology creators Network Orchestrators

Barry Libert, Megan Beck, Yoram Wind

Industrial Revolution 4.0

77




Business Models

78




Business Models

79

Ownership vs Efficiency

OWNERSHIP

EFFI

CIE

NC

Y

Personal Group Public

Low

High

Novice

Specialist who manages the resource

Bureaucracy

Peer to Peer

80

Transportation Efficiency

OWNERSHIP

EFFI

CIE

NC

Y

Personal Public

Low

High

Uber

My car

Taxi

Public Bus

Group

81

Real-estate Efficiency

OWNERSHIP

EFFI

CIE

NC

Y

Personal Public

Low

High

Air BnB

My Home

Hotel

Public Housing

Group

82

Investing Efficiency

OWNERSHIP

EFFI

CIE

NC

Y

Personal Public

Low

High

Lending Club

My Savings

BanksWealth Front

Group

83

Sharing Economy

Middle Men

84

Technology+

Today

You

85

Technology

Artificial Intelligence

+

Tomorrow

You

+

86

Technology

Artificial Intelligence

+

Near future

Imagine

87

You

88

Before 2007

89

Telephone

90

Telegram

91

Rolodex

92

Alarm Clock

93

Camera

94

Camcorder

95

Photo Album

96

Voice Recorder

97

Walkman

98

CD Player

99

Radio

100

Television

101

Compass

102

Wallet

103

Pedometer

104

Watch

105

Books

106

Flash light

107

Maps

108

Metronome

109

Karaoke Machine

110

Games

111

Computer

112

Document Scanner

113

Remote Control

114

Now

116

You throw all these away…

117

…and have one of this

118

It can be your assistant today

119

Who knows what technology can do in the fut re?

122

Uber’s self-driving truckdelivers 50,000 beers!

October, 2016

https://www.wired.com/2016/10/ubers-self-driving-truck-makes-first-delivery-50000-beers/

123

Uber’s self-driving truckdelivers 50,000 beers!

October, 2016

https://www.wired.com/2016/10/ubers-self-driving-truck-makes-first-delivery-50000-beers/

124

Society grows great when

old men plant trees whose shade

they know they shall never sit in

Anonymous Greek proverb

125


men plant trees whose shade


Anonymous Greek proverb

126


men plant trees whose shade


- Greek proverb

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