MOORLACH UPDATE — OCBJ OC 50 — May 3, 2011

The Orange County Business Journal annually recognizes “key businesspeople plus academics, politicians and others who impact business” in the OC.  For the second year in a row, I have been selected as one of the County’s most influential people and I’ve found myself in phenomenal company with the other honorees.  Some minor adjustments to the article are necessary, however.  I am now 55 years old.  Street didn’t step down, he decided against rerunning.  My youngest is Daniel and after 20 years I still haven’t shortened it down to Dan. 

Speaking of Daniel, his Orange Coast College Men’s Second Varsity Eight boat finished in second place (6:25.7) on Saturday, behind UC San Diego (6:19.7).  This qualified his boat for Sunday’s Finals for a rematch.  On Sunday morning his OCC boat was leading nearly the entire length of the course, only to have UCSD catch up and win at the finish line (heart breaker!).  It was a very fast race and, if my photos are any indication, the times should be closer, UCSD (6:04.3) and OCC (6:05.8).   The event was the Championship Regatta on Natoma Lake, sponsored by the Western Intercollegiate Rowing Association.  Daniel had a great season and it was fun to cheer on OCC, the Giant Killers, at the events that we were able to attend.


John M.W. Moorlach

Orange County Supervisor, Second District

Born in Groningen, Netherlands

Age 54

Lives in Costa Mesa

Termed out in 2014, no longer dismisses talk of statewide office. Mega author Dean Koontz guest speaker at March fundraiser.

Higher office would continue trajectory launched when sky-is-falling warnings about then-county treasurer Robert Citron’s risky investments proved true with 1994 OC bankruptcy.

Burnished credentials with early cautions on public pensions. Cry since taken up by Gov. Jerry Brown, other governors.

Setback last month when state Supreme Court declined hearing on challenge to cushy pensions for sheriff’s deputies. County ran up $2 million in legal fees, could be on hook for other side’s bills.

Unapologetic, calls case defense of taxpayers. Could pull end-around on courts with ballot measure.

Stance makes him “Public Enemy No. 1” for union officials, some politicos. Backers love him for enemies he’s made, see problem-solver who bucks political convention.

Fighting posture hasn’t hobbled him in halls of government. Cooperated with county’s non-safety union on two-tier pension arrangement.

Hit other rough spots in past year.

Cut ties with Chriss Street, his hand-picked successor as county treasurer, after Street’s legal, political troubles. Street stepped down earlier this year.

Took hits on support for Irvine accounting firm up for work with Orange County Transportation Authority, where he serves as board member. Firm audited city of Bell, scene of recent L.A. County scandal. OCTA ultimately nixed deal.

“Teflon John” status largely deflected those downers.

Appointed Citron’s replacement in 1994, won two more terms. Elected supervisor in 2006; unopposed in 2010 re-election.

Six-foot-five Dutchman has booming voice, hearty laugh, membership in Orange County Noble Vikings. Drives Avanti with license plate DULL CPA, Impala with SKY FELL, tweaking pre-bankruptcy headline doubting his warnings.

Shutterbug. Collects books about Jewish history. Former chair, Orange County Employees Retirement System.

Former vice president of local accounting firm Balser, Horowitz, Frank & Wakeling. Cal State Long Beach grad.

Wife Trina. Children Sarah, Caleb, Dan all grown or in college.

Jerry Sullivan



April 29

In the Sunday OC Register Commentary section there was an “Unspin” column, titled “California bond rating takes a punch from S&P.”  Now with the United States taking a punch from S&P on April 18th, this column seems even more relevant.  Of course, California now has the lowest bond rating of all 50 states and was recently ranked the 49th best managed state. 

                We’ve been warning for years that the Legislature was foolish in putting more and more bond measures on ballots, which voters almost routinely approved, and which then resulted in escalating debt owed by the state.

                Last week the state’s bond rating was downgraded by Standard & Poor’s, to A+ from AA, because of the electricity crisis.

“The irony is that the state of California is finding itself squeezed out of the market,” Orange County Treasurer-Tax Collector John Moorlach told us.  He said some institutions automatically won’t invest in bonds with lower ratings.  “The state will be where it put these two utilities, Pacific Gas and Electric and Southern California Edison:  one is in bankruptcy and one is on the brink.  When a bond rating goes down, the cost of interest will inherently go up.  It now needs to borrow to purchase more electricity.  And it has to pay more for higher rates.”

May 1

The industry magazine for corporate treasurers, Treasury & Risk Management, had an article on the direction of interest rates (they were falling and the nation was entering into a recession) in its May issue.  The article was by Richard Gamble and the title was “Hard Cash for Hard Times.”  It was the cover story and I’m providing the portion where I am mentioned.  It was a rare day when a reporter would write about our portfolios or our investing strategies.  When the reporter called, we had a very good story to tell, even while we were experiencing the Edison International noise, that told about how the Treasurer’s office had made a bold strategic move at a propitious time.  The County did not lose a penny on Edison, but it made a significant amount of additional interest income from implementing an extended strategy.  It goes to show you how the media loves negative news and rarely provides positive accomplishments.  This was one accomplishment during my tenure that I’m very proud of.

At the great majority of companies, cash flow itself is not a problem.  With business tailing off in many sectors and capital-intensive projects being postponed, many treasurers have more cash than usual to invest.  The key issues for them are how to preserve it and how to maximize returns at a time when monetary policy favors lower interest rates to stimulate the economy.

The renewed emphasis on forecasting means that treasurers are wrestling with ways to lengthen investment maturities.  How far out they can safely go depends on how accurately they can forecast cash needs and collections.

“The first thing to do in a falling-rate environment is hone your cash forecast,” observes Lee Epstein, president and CEO of Money Market One, a San Francisco-based investment-management firm.  “You don’t want to be investing overnight all of the time when the Fed is cutting rates.”

As corporate finance pros well know, of course, there are two sides to the maturity game.  When everyone expects rates to fall, issuers want to go short and investors want to go long.

“Once everybody catches on, it’s hard to beat the yield curve,” says Paul L. Soske, manager of treasury consulting at WISDOM Technologies in Pittsburgh.  “The greatest rewards go to those who move quickly, before the market can adjust to expectations.”

Another way of putting it is that the greatest rewards go to those who appear to have acted prematurely.  Take John Moorlach, for example.

                Perhaps the best-known municipal treasurer of the past decade, Moorlach played a central role in nursing Orange County, Calif., back to health following a $1.6 billion derivatives investment loss that drove the county into bankruptcy and his predecessor, Robert Citron, out of office and into prison.

Last summer, Moorlach moved $500 million into a newly created long-term pool that permits maturities out to three years and has an average weighted portfolio maturity of 18 months.  “The yield curve was so inverted that it was hard to justify going long at that time, but now we have a lot of securities we bought when yields were 6.5%,” says Moorlach, who also is the county’s tax collector.  “Our timing was good.”

Another Golden Stater with fortunate timing is Bob Prantis.  As treasurer of Xilinx, a $1.5 billion-revenue San Jose, Calif.-based semiconductor company, he last fall handed $100 million to outside investment managers with long-term strategies and is now reaping the benefits, he says.

Disclaimer:  You have been added to my MOORLACH UPDATE communication e-mail tree.  In lieu of a weekly newsletter, you will receive occasional media updates, some with commentary to explain the situation, whenever I appear in the media (unless it is a duplication of a previous story). 

I have two thoughts for you to consider:  (1) my office does not usually issue press releases to get into the newspapers (only in rare cases); and (2) I do not write the articles, opinions or letters to the editor. 

This message should appear at the bottom of every e-mail you receive.  If these e-mails should stop arriving in your mail box, it will be because your address has changed and you did not provide a new one.  If you do not wish to receive these e-mails, then please e-mail back and request to unsubscribe.