Saturday, December 6, 2014

Weekly Commentary, November 2, 2012: Sandy, Bernanke and Money

October 30, from Dr. Jeff Masters of Weather Underground: “In a stunning spectacle of atmospheric violence, Superstorm Sandy roared ashore in New Jersey last night with sustained winds of 90 mph and a devastating storm surge that crippled coastal New Jersey and New York. Sandy’s record size allowed the historic storm to bring extreme weather to over 100 million Americans, from Chicago to Maine and from Michigan to Florida. Sandy’s barometric pressure at landfall was 946 mb, tying the Great Long Island Express Hurricane of 1938 as the most powerful storm ever to hit the Northeast U.S. north of Cape Hatteras, NC. New York City experienced its worst hurricane since its founding in 1624, as Sandy's 9-foot storm surge rode in on top of a high tide to bring water levels to 13.88' at The Battery, smashing the record 11.2' water level recorded during the great hurricane of 1821.”

The Financial Times (Stephen Foley) Friday reported that “Trillions of dollars of stock certificates are feared ruined after Hurricane Sandy flooded a vault at the Depository Trust & Clearing Corp, the Wall Street-owned organisation that manages important parts of the US trading infrastructure… As businesses in the affected areas continued efforts to pump out flooded basements, the DTCC admitted on Thursday that its vault remained underwater and officials had still not been able to assess the damage.”

Of course, with loss of life and such destruction, stock certificates are the least of our worries. And the world somehow survived with U.S. equities markets inoperable for a couple days. But, really, why not a little forward thinking here? Today, millions in the Northeast wait for electricity, and the New York area struggles with incredibly long gas lines, widespread fuel shortages and emptying grocery shelves. Phone service is intermittent, while millions wait for subway and train service to resume. In the past two days, estimates of the economic damage from Sandy have doubled to as much as $50bn. I’m no expert, but the scope of devastation and associated economic costs would appear to just dwarf Katrina.

In the face of human hardship, the big debate seems to be whether Sandy will be a positive or negative for GDP. Will rebuilding provide a needed boost to the U.S. economy? Is it good for stock prices? In the end, does a (Frederic Bastiat) “broken window” lead to wealth creation? Keynes, of course, argued that in desperate times the government should simply pay workers to dig and fill holes. We have instead incredible amounts of sand, debris and water.

My work focuses on risk. Sandy has been called a “once in a lifetime storm,” “a storm of unprecedented proportions.” It is worth noting that of the top ten costliest storms (prior to Sandy) to hit the U.S, eight (Katrina, Ike, Wilma, Ivan, Charley, Rita, Frances and Jeanne) have come over the past eight years. Allison hit in 2001 and Andrew slammed Florida as a Cat 5 back in 1992. At $108bn, record Katrina (2005) costs are more than triple those of runner-up Ike (2008). As for size, at 945 miles of tropical force winds, Sandy is said to be the largest ever to hit the U.S. Sandy is followed by Igor’s (2010) 920 miles, Olga’s (2001) 865 miles, Lili’s (1996) 805 miles, and Karl’s (2004) at 780 miles. Storms have become much bigger and the big storms much more frequent and atypical. The associated costs have grown exponentially. A decade or so ago, I would use my fictionalized “little town on the river” parable. I highlighted how a speculative Bubble in flood insurance led to a huge building boom along the riverfront. From both financial and economic perspectives, the boom distorted risk perceptions and, in the process, momentously increased systemic exposure to the inevitable devastating flood.

I’ll avoid the politics of climate change. I just believe it has become a reality and will profoundly impact our future. From my perspective, global warming adds an important additional layer of systemic risk upon already historic global financial and economic risks. I am amazed at how the world remains in this remarkable mode of disregarding risks of all kinds.

I admit to a fascination for weather and the issue of global climate change. Perhaps it dates back to my youth and love for watching how a big Pacific storm system would unleash crashing waves on the beautiful Oregon coastline. From my reading, a major North Atlantic storm was inevitable – the classic “when and not if.” And the probabilities were increasing by the year. Hurricane Irene (sixth most costly hurricane!) last year was a warning unheeded. Some years back I casually studied the flood maps for the New York region and was quick to revisit them last week when the National Weather Service warned of “Frankenstorm.” The vulnerability was well-understood, as were the fragile levees in New Orleans prior to Katrina. I’ll let others explain why the North East was not better prepared. For me, it’s part of a national affliction.

From a market perspective, Sandy was a so-called “tail” event – or “black swan.” Similar to the 2008 crisis, conventional wisdom would claim it as both an unpredictable and low probability occurrence. A “hundred-year” financial crisis followed by a “hundred-year” storm – what are the odds of that? Not worth worrying about – at least beforehand. Yet I’ve argued that the 2008 crisis was predictable. Indeed, a catastrophic bursting of the mortgage finance bubble was inevitable; it was just the timing that was unknown. While the true long-term odds of a Sandy or a bursting mortgage Bubble scenario were alarmingly high, the near-term probabilities were viewed as quite low. And we live in a world where the overwhelming focus is on the near-term. Like the focus of financial market professionals, it’s imperative to keep one’s eye on the ball: what’s going to happen next week or, for politicians, the next election cycle? Endemic short-sightedness comes with huge associated costs, some visible right now on cable news.

After beginning 1990 at $12.8 TN, Total System Marketable Debt ended June 2012 at $55.0 TN. And Washington politicians and central bankers are now doing everything they can to sustain the Credit boom and avert the downside of an historic Credit cycle. Similar efforts are afoot globally. In Europe, we are witnessing the dire consequences unleashed when the markets resist buying suspect Credit instruments. And, importantly, when the Credit spigot is inevitably tightened, economic revelations soon follow. Suddenly, economic structure matters. Is the system generally robust or fragile? And if the economy proves fragile, the systemic predicament will soon be compounded by huge debt and confidence issues.

From a Credit Bubble and economic structure perspective, Sandy and climate change are very relevant. The prolonged Credit boom has had a particularly profound effect on the North East. From beachfront homes and mansions, to automobiles, marinas, boats, and recreation and related businesses, the boom greatly increased the potential for catastrophic storm losses. This is in addition to the inflated economy-wide cost structure that will see repair and rebuilding costs profoundly higher than would have been the case in the past.

I would further argue that exorbitant costs are an important reason why more was not done to protect against a major Atlantic storm. The piper will now require payment. Our economy’s entire resource allocation system has been so distorted for too long. Finance flowed way too easily into home building, recreation and consumption. Our nation’s infrastructure has been badly underfinanced and neglected. This was made sadly clear with Katrina and again with Sandy. Our nation’s power grid is a bad joke.

Insurance companies will take a hit. From an economic perspective, a much greater cost will be borne by the millions of individuals and businesses impacted by Sandy and her aftermath. There will be enormous uninsured losses that will push many individuals, families and businesses to - or past - the edge. The impact on cash-strapped municipal governments is unclear, although most analysts seem to assume that Washington will be there with open checkbook in hand. In the grand scheme of things, the associated costs will barely impact the massive federal debt load. Along with recession or, even, subpar growth, Sandy will provide politicians another reason to defer fiscal restraint.

But let’s get back to climate change. Unfortunately, the issue gets bogged down on whether warming and associated extreme weather is a manmade or natural phenomenon. As such, most would surely argue that global warming and the prolonged/increasingly vulnerable global Credit Bubble are mere coincidental phenomena. In particular, my trips to China have left me fearing an unfolding environmental catastrophe. In a sad way, it doesn’t really matter if global warming is a human phenomenon or not. It’s pretty clear that no one is going to meaningfully confront the issue anyway. Politicians, central bankers and governments are trapped in “do whatever it takes” late-cycle reflationary measures. You can bet on it. Many have. And the global Credit Bubble dynamic will ensure that the world remains short-sided and blind to myriad serious risks until it’s too late.

We’re today in the midst of the manic financial Bubble phase. Especially here in the U.S., the markets will finance virtually anything. There’s hardly a junk bond the market doesn’t love. CDOs are back. Relatively higher-yielding municipal debt induces salivation. There are, then, no worries regarding the ability to finance Sandy recovery and rebuilding efforts. Costs really don’t matter. Wealth destruction is basically irrelevant. If it’s “money” that’s needed, well, we’ve got the Bernanke Fed. And why not just rebuild on the water’s edge and buy cheap federal flood insurance. “Broken windows,” broken subways, broken transformers, broken communication hubs, and broken neighborhoods are sure to incite a borrowing and spending boom. Dr. Bernanke’s “mopping up” strategy in action.

Yet caution is in order. There will be more storms, some weather-related. And there will come a post-Bubble environment and a profoundly altered backdrop. Previous Credit excesses, suspect debt and market revulsion will make it profoundly more difficult to finance all types of spending. Deeply entrenched structural shortcomings will have surfaced conspicuously. And, importantly, I would expect previous consumption-based borrowing and spending excesses to restrict the system’s ability to finance needed investment and infrastructure projects. Along with economic structure, market confidence really matters.

The market’s love for all things debt today ensures a lot of hatred down the road. Over-issuance and malfeasance risk destroying faith in money. And when that day of reckoning finally arrives, “Keynesian” stimulus will have already exhausted its capacities in a futile effort to sustain an unsustainable Bubble. And perhaps people, businesses and investors will belatedly contemplate risk and head to safer grounds.

For the Week:

The S&P500 increased 0.2% (up 12.5% y-t-d), while the Dow slipped 0.1% (up 7.2%). The Morgan Stanley Cyclicals jumped 2.4% (up 15.0%), and the Transports gained 1.1% (up 1.8 %). The Morgan Stanley Consumer index was unchanged (up 9.6%), while the Utilities fell 1.1% (down 0.8%). The Banks were up 1.7% (up 27.2%), and the Broker/Dealers rose 2.0% (up 3.3%). The S&P 400 Mid-Caps gained 1.3% (up 12.4%), and the small cap Russell 2000 added 0.1% (up 9.9%). The Nasdaq100 was down 0.4% (up 16.6%), while the Morgan Stanley High Tech index gained 0.8% (up 10.4%). The Semiconductors rallied 1.4% (up 2.2%). The InteractiveWeek Internet index rose 1.0% (up 9.3%). The Biotechs declined 1.1% (up 29.4%). With bullion down $33, the HUI gold index sank 3.4% (down 4.9%).

One-month Treasury bill rates ended the week at 6 bps and three-month bills closed at 9 bps. Two-year government yields declined a basis point to 0.28%. Five-year T-note yields ended the week down 4 bps to 0.72%. Ten-year yields slipped 3 bps to 1.72%. Long bond yields were little changed at 2.91%. Benchmark Fannie MBS yields fell 3 bps to 2.20%. The spread between benchmark MBS and 10-year Treasury yields was unchanged at 48 bps. The implied yield on December 2013 eurodollar futures declined 3 bps to 0.385%. The two-year dollar swap spread was little changed at 10 bps, while the 10-year swap spread declined one to 3 bps. Corporate bond spreads were volatile but ended the week little changed. An index of investment grade bond risk was about unchanged at 98 bps. An index of junk bond risk declined 4 to 513 bps.

A decent week of debt issuance for such a short and strange week. Investment grade issuers this week included Verizon $4.5bn, General Dynamics $2.4bn, Microsoft $2.25bn, Aetna $2.0bn, Caterpillar $1.2bn, Capital One $1.0bn, Stanley Black & Decker $800 million, Royal Caribbean Cruises $650 million, Praxair $700 million, PNC Financial $500 million, El Paso Pipeline $475 million, Post Apartment Homes $250 million, Autozone $300 million, and Magellan Midstream $250 million.

Junk bond funds saw outflows of $619 million (from Lipper). Junk issuers included PQ Corp $600 million, Centene $425 million, Huntsman International $400 million, Chaparral Energy $150 million, and TMX $100 million.

I saw no convertible debt issued.

International dollar bond issuers included BP Capital $3.0bn, Bank of Montreal $2.0bn, Rabobank $1.5bn, Kazakhstan Temir Zholy $1.1bn, National Bank of Canada $750 million, Transalta $400 million, and Promsvyazbank $400 million.

Spain's 10-year yields rose 7 bps to a four-week high 5.62% (up 75bps y-t-d). Italian 10-yr yields rose 4 bps to 4.93% (down 207bps). German bund yields fell 9 bps to 1.45% (down 48bps), while French yields declined 3 bps to 2.22% (down 102bps). The French to German 10-year bond spread widened 6 bps to 77 bps. Ten-year Portuguese yields surged 31 bps to 8.16% (down 422bps), with a two-week gain of 78 bps. The new Greek 10-year note yield jumped another 96 bps to 17.76%. U.K. 10-year gilt yields were up 17 bps to 1.85% (down 24bps). Irish yields added 2 bps to 4.63% (down 361bps).

The German DAX equities index rose 1.8% (up 24.9% y-t-d). Spain's IBEX 35 equities index jumped 2.5% for the week (down 7.0%). Italy's FTSE MIB gained 1.2% (up 4.5%). Japanese 10-year "JGB" yields added 2 bps to 0.77% (down 26bps). Japan's Nikkei gained 1.3% (up 7.1%). Emerging markets were higher. Brazil's Bovespa equities index jumped 1.9% (up 2.9%), and Mexico's Bolsa added 0.2% (up 12.6%). South Korea's Kospi index gained 1.4% (up 5.1%). India’s Sensex equities index increased 0.7% (up 21.4%). China’s Shanghai Exchange rallied 2.5% (down 3.8%).

Freddie Mac 30-year fixed mortgage rates declined 2 bps to 3.39% (down 61bps y-o-y). Fifteen-year fixed rates fell 2 bps to 2.70% (down 61bps). One-year ARMs dipped one basis point to 2.58% (down 30bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates up 3 bps to 4.04% (down 77bps).

Federal Reserve Credit declined $18.4bn to $2.811 TN. Fed Credit was down $7bn from a year ago. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 10/31) were little changed at $3.609 TN. "Custody holdings" were up $189bn y-t-d and $214bn year-over-year, or 6.3%.

Global central bank "international reserve assets" (excluding gold) - as tallied by Bloomberg – were up $544bn y-o-y, or 5.3% to a record $10.768 TN. Over two years, reserves were $1.759 TN higher, for 20% growth.

M2 (narrow) "money" supply was little changed at a record $10.212 TN. "Narrow money" has expanded 7.2% annualized year-to-date and was up 6.9% from a year ago. For the week, Currency increased $1.9bn. Demand and Checkable Deposits dropped $14.9bn, while Savings Deposits jumped $16.4bn. Small Denominated Deposits dipped $1.8bn. Retail Money Funds slipped $0.7bn.

Money market fund assets were down $22.7bn to $2.546 TN. Money Fund assets have declined $149bn y-t-d, with a one-year decline of $76bn, or 2.9%.

Total Commercial Paper outstanding jumped $21.4bn to $946 billion CP was down $14bn y-t-d and $34bn from a year ago.

Currency Watch:

The U.S. dollar index gained 0.7% to 80.59 (up 0.5% y-t-d). For the week on the upside, the Norwegian krone increased 0.6%, the South Korean won 0.6%, the New Zealand dollar 0.3%, the Canadian dollar 0.1%, and the Taiwanese dollar 0.1%. For the week on the downside, the South African rand declined 1.5%, the Japanese yen 1.0%, the Danish krone 0.8%, the euro 0.8%, the Swiss franc 0.6%, the British pound 0.5%, the Mexican peso 0.4%, the Australian dollar 0.4%, the Singapore dollar 0.3%, the Brazilian real 0.2%, and the Swedish krona 0.1%.

Commodities Watch:

The CRB index declined 1.5% this week (down 4.3% y-t-d). The Goldman Sachs Commodities Index fell 2.0% (down 2.9%). Spot Gold was hit for 1.9% to $1,678 (up 7.3%). Silver sank 3.7% to $30.86 (up 11%). December Crude declined $1.42 to $84.86 (down 14%). December Gasoline dropped 2.6% (down 3%), and December Natural Gas sank 4.6% (up 19%). December Copper fell 1.9%. December Wheat was little changed (up 32%), while December Corn added 0.2% (up 14%).

Global Credit Watch:

October 31 – Bloomberg (Jeff Black): “The European Central Bank said euro-area banks increased tightening of credit standards to businesses in the third quarter and expect a similar degree of tightening in the fourth. ‘The impact of risk perceptions on the net tightening of credit standards increased in the third quarter of 2012 compared with the previous quarter,’ the… ECB said… For the fourth quarter, ‘banks expect a similar degree of net tightening in credit standards for loans to enterprises and households,’ it said. Lending to households and companies in the euro area contracted at the fastest pace in almost three years in September as the 17-nation currency bloc teetered on the edge of recession.”

November 1 – Financial Times (Peter Spiegel and Kerin Hope): “The magnitude of Greece’s fiscal challenge was painted in sharp relief on Wednesday as Athens unveiled new budget projections exceeding the worst-case scenarios envisioned by international lenders when they agreed a €174bn rescue eight months ago. Instead of Greece’s debt peaking at 167% of economic output next year, as predicted in the March bailout agreement, it will hit 189% and climb to 192% in 2014… The new projections all but dash hopes that Greek debt will come down to 120% of GDP by 2020 – once held out as the standard for a manageable debt load… The scale of the faltering has yet again put Germany and other eurozone creditors in a political quandary, forced to come up with as much as €30bn in new funding to meet Greece’s needs…”

November 1 – Bloomberg (Ben Sills): “Prime Minister Mariano Rajoy’s hesitation in triggering European Central Bank bond purchases may cost Spain its investment-grade credit rating. Rajoy, who yesterday portrayed indecision as a virtue, risks seeing Spain downgraded to junk unless he requests European support, Moody’s… said… The nation’s bonds, which yield 5.61% for 10 years, are graded one step above junk with a negative outlook. A junk credit rating would cut Spain’s access to funds from investment managers who avoid riskier credits, making it more difficult for Rajoy to haul the nation out of its financial hole. It also may undermine his resistance to a rescue, forcing Spain to negotiate a deal from a weaker position. ‘The longer Rajoy waits to ask, the more likely it becomes that Spain gets downgraded to junk and all of the economic problems that go along with that,’ Dominic White, chief European economist at Absolute Strategy Research Ltd. in London, said…”

Germany Watch:

November 2 – Bloomberg (Nicholas Comfort): “Charging the European Central Bank with overseeing German savings and cooperative banks won’t serve financial stability in Europe, according to a leading member of Chancellor Angela Merkel’s Christian Democratic Union. The European Commission’s plan for the ECB to supervise all of the more than 6,000 euro-area banks isn’t appropriate, David McAllister, prime minister of the state of Lower Saxony, said… Germany’s upper house of parliament, the Bundesrat, adopted a critical position toward the plan… European leaders are wrangling over how to set up a joint bank regulator as they seek to break the link between governments and lenders to ease the sovereign debt crisis. Germany’s more than 420 savings banks are pressing for only Europe’s largest banks to be subject to ECB oversight.”

October 30 – Bloomberg (Brian Parkin and Tony Czuczka): “German Chancellor Angela Merkel’s government said it is willing to consider a European Central Bank proposal for a buyback of Greek debt, as it stepped up opposition to imposing more losses on Greece’s creditors. A restructuring of Greek sovereign debt held by its public sector partners ‘is out of the question’ for Germany and ‘not in Greece’s interests,’ Steffen Seibert, Merkel’s chief spokesman, told reporters…”

Global Bubble Watch:

October 30 – Bloomberg (Matt Robinson): “Federal Reserve Chairman Ben S. Bernanke is fueling a record-long winning streak in corporate debt as the money he pumps into the economy spurs investors to seek riskier assets to generate returns. Bonds sold by companies around the world, from the neediest to the most creditworthy, are on pace to generate 11 straight months of positive returns, bringing gains over the period to 12.9% through Oct. 26… After four years of holding its main interest rate at about zero, Bernanke said in September he expects no change in policy through mid-2015 to complement $40 billion of monthly mortgage-bond purchases… With central banks across the world using similar strategies, investors have turned to corporate debt…”

November 2 – Bloomberg (Krista Giovacco): “Loans obtained in the U.S. by speculative-grade borrowers have risen to $233 billion, surpassing 2011 levels as investor demand for debt with the highest claims on a company’s assets grew amid fiscal uncertainty and a struggling global economy. Companies… in October got more than $47 billion of the debt that was sold to non-bank lenders, such as collateralized loan obligations and hedge funds, the most in 20 months, according to JPMorgan… Issuance for the year is now within 40% of the records set in 2007 and 2006…”

China Bubble Watch:

November 1 – Financial Times (Simon Rabinovitch): “China’s central bank pumped a record $60bn into the country’s money markets this week in an attempt to ensure that there will be ample cash in the economy to support the government’s push for more infrastructure investment. The People’s Bank of China was continuing its pattern in recent weeks of injecting a large amount of short-term liquidity into the financial system… The previous record was set in late September, just before a weeklong national holiday when demand for cash spiked. This time, however, there was no immediate prompt for the massive injection, apart from the central bank’s determination to keep monetary conditions relatively loose.”

Japan Watch:

October 30 – Bloomberg (Andy Sharp): “Japan’s central bank said it will offer unlimited loans at low interest rates to lenders to try to boost credit demand among companies and households. The money will be for terms of up to four years… The move was alongside an 11 trillion yen ($138bn) expansion of the central bank’s main easing tool, its asset-purchase program. Japan is turning to a wider array of unconventional tools for monetary easing as the global slowdown, waning auto sales and a dispute with China set back an economy that remains mired in deflation.”

November 1 – Bloomberg (Anna Mukai): “Toyota Motor Corp., which saw September sales in China tumble the most in a decade, reported deliveries slumped for a second straight month in the world’s biggest car market as Chinese consumers shunned Japanese cars. October deliveries declined 44% from a year earlier to 45,600 vehicles, Asia’s largest automaker said… That follows the 49% drop in September…”

European Economy Watch:

October 31 – Bloomberg (Simone Meier): “The euro-area jobless rate climbed to a record in September as the fiscal crisis and tougher austerity measures threatened to deepen the economy’s slump. Unemployment in the 17-nation region rose to 11.6% from 11.5% in August… The data also showed that youth unemployment is at 23.3%, with Spain’s rate more than double that, at 54.2%... Economic confidence in the region fell in October, according to a report yesterday, while data today French consumer spending rose less than economists forecast in September.”

October 30 – Bloomberg (Rudy Ruitenberg): “World wine production is forecast to fall 6.1% in 2012 with output down in France, Argentina, Hungary and New Zealand, the International Organisation of Vine and Wine said… Wine production in France, the biggest supplier, may slump 20% this year to the lowest in at least four decades after winter drought, cold and wet weather, hailstorms, a heat wave, and summer dryness damaged vineyards, according to the country’s Agriculture Ministry.”

U.S. Bubble Economy Watch:

October 30 – Bloomberg (Simon Kennedy): “The U.S. slid from the top ten most prosperous nations for the first time in a league table which ranked three Scandinavian nations the best for wealth and wellbeing. The U.S. fell to 12th position from 10th in the Legatum Institute’s annual prosperity index amid increased doubts about the health of its economy and ability of politicians. Norway, Denmark and Sweden were declared the most prosperous in the index… With the presidential election just a week away, the research group said the standing of the U.S. economy has deteriorated to beneath that of 19 rivals. The report also showed that respect for the government has fallen, fewer Americans perceive working hard gets you ahead, while companies face higher startup costs and the export of high-technology products is dropping.”

November 1 – Bloomberg (Noah Buhayar): “Sandy, the Atlantic superstorm that caused flooding, damage and blackouts throughout the U.S. Northeast this week, may lead to higher insurance rates and tighter terms in the affected areas. Carriers that underwrite business property may be ‘pushing rates’ in the aftermath of Sandy, said Al Tobin, managing principal of the property practice at Aon Risk Solutions… ‘I also suspect they’re going to be looking hard at deductibles’ and limiting the amount of flood coverage they write, Tobin said…”

November 1 – Bloomberg (Susanne Walker): “Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., said there is no evidence that investments is being incented by the Federal Reserve’s quantitative easing program. ‘All of the money being created and freed up is elevating asset prices, but those prices are not causing corporations to invest in future production,’ Gross wrote in a monthly investment outlook… Lower interest rates are being used ‘to consume as opposed to invest,’ he said.”

Central Bank Watch:

November 2 – Financial Times (Jeff Kearns): “Federal Reserve Bank of San Francisco President John Williams said the central bank should extend its program of bond purchases into next year by buying both mortgage-backed securities and Treasuries. ‘We should continue the MBS purchases into next year and continue the Treasury purchases,’ Williams said… ‘I haven’t seen the kind of improvement in labor-market conditions that would call for ending the MBS purchases.”

Muni Watch:

November 2 – Bloomberg (Darrell Preston): “Local-debt investors absorbing the steepest annual issuance jump in almost a decade are bracing for added sales to pay for damage that Hurricane Sandy caused to the New York metropolitan region. From New Jersey coastal towns where the storm hit Oct. 29 to the area’s transit network, investors are tallying the costs. The New York vicinity’s public-transportation infrastructure, including the city’s 108-year-old subway system, may suffer $10 billion in physical losses from a storm such as Sandy, and the transit tab may reach eight times that amount when including the economic impact, according to a 2011 state study. That compares with a $100 billion loss for Hurricane Katrina in 2005.”