Investing Today

Some Does and Don’tsFrom 20 Years of Experience

Bob Hullinghorst, Boulder County Treasurer

What Are Your Investment Goals?

•Safety

•Liquidity

•Yield

Why Do You Need Investment Goals?

• Bulls and bears make money, but pigs get slaughtered.

(Heard on Wall Street)

• NOBODY loses an election

because of a low yield.

(Heard from Bob Hullinghorst)

$$ Yield $$•Rule 1: The

more yield you are offered, the more risk you will be required to take.

– Credit Risk– Counter-Party

Risk– Structural

Risk– Market Risk– Liquidity Risk– Opportunity

Risk

Some Comparisons

0

0.51

1.52

2.53

3.54

4.55

3 Months 1 Year 2 Years 5 Years 10 Years

TreasuryAgencyCorporateCallablesBank CDs

OOPs• But what happens if rates go up on

your 10 year investment after one year?– GAAP requires that your financial report

shows any losses for investments that will not mature in the following year.

– A 3% increase in rates in a year will result in:•A $190,000 loss in the Treasury Bond.

OOPs II• And, you could

be held responsible for that loss,if you did NOT comply with CRS 24-75-601 in good faith…

1. Did your long-term investment match a long-term debt?

2. Did you get approval from your BOCC?

3. Were you caught in Vegas with your bond salesperson?

No Jail Time• You will probably not

be criminally liable unless kickbacks are proven.

• You will probably not have to repay the loss.

• But, you will be embarrassed and….you may lose your next election.

Horror Story 1:Jeff-Trust & ITC

• Steve Wymer, a failed Colorado builder, and his electrician, Steen Ronlove, started Jeff-Trust and ITC in the 1980s.

• They built a $2 B, multi-state Ponzi Scheme by 1991.

• Governments lost $200MM

• Wymer got 14 years

Horror Story 2: Merrill Lynch

• In 1992—Michael Stamenson was Merrill Lynch’s #1 Salesman WORLDWIDE.

• He said salesman needed “the tenacity of a rattlesnake, the heart of a black widow spider and the hide of an alligator.”

Merrill Lynch & Citron

• Stamenson sold Orange County’s Treasurer Bob Citron Billions in derivatives.

• Stamenson made $3M a year.

• The county: bankrupt with loss of $1.6 B

• Citron got 7 years

Horror Story 3: Me

• Invested in Colorado Diversified fund.

• Fund Rated AAAm.• Fund Managed by

First National Bank.• Fund Bought $5mm

of Lehman Bros CP.• Boulder County lost

$600,000 in a day.

How should YOU invest?

• Stay short—use “government only” money market funds or “pooled investment trusts.”

• Put longer reserves in 6-24 month agency “bullets” if you have $1 to $5 million.

• Invest locally—collateralized bank CDs.• Do not accept favors from any broker.• Never accept advice from any broker

without checking two other sources.

Take My Advice!• I should know, I

was a very successful cash management broker for 20 years and never lost my clients a dime!

• Bob Hullinghorst– Boulder County

Treasurer