short interests: tips, trends, observations

Brokers gonna go broke?

Bond brokers may have to start thinking about selling their yachts.

Last week, the city of Pittsburgh sold $57 million of bonds directly to investors over the Internet, a first that proved it’s possible to reach investors without the help of Wall Street middlemen (InvestmentNews, Nov. 8). In the past, only commercial banks and securities firms bid on bond offerings and then resold the bonds to investors at a higher price.

Institutional investors bought $16 million of the Pittsburgh bonds and brokerage houses purchased the remaining $41 million. To be sure, few actually participated in the offering: Of the 750 investors invited by Pittsburgh to join in, only 14 institutions bid, and four had winning bids.

Still, it was enough interest to suggest that selling bonds directly to investors over the Internet could gain popularity.

The major advantage to institutions, of course, is lower cost.

“We had been paying five bucks, now we’re paying 50 cents — that’s a no-brainer for me,” said Pittsburgh City Councilman Sala Udin,

who chairs the budget and finance committee. The disadvantage of eliminating Wall Street is that investors rely on brokerage firms to make markets in the bonds.

Meanwhile, 13 brokerages bid on the bonds (five were winners), shattering the notion held by many observers that Wall Street would treat the new issuance like a Red Sox fan at Yankee Stadium.

Nice guys finish fast

Forgive do-gooders if they gloat.

Once spurned by investors wary of sacrificing returns merely for the sake of their consciences, socially aware investments now boast $2.6 trillion in assets, up 82% since 1997, according to the Social Investment Forum, a non-profit membership group. That accounts for about 13% of the $16.3 trillion under management in the United States.

What’s more, assets in socially aware investments grew at about twice the rate of all assets under management in the United States, which climbed 42% between 1997 and this year.

The non-polluters have gotten a big lift from their heavy concentration in tech stocks. The Domini 400 Social Index has beaten Standard & Poor’s 500 stock index this year with a return of 5.55% (vs. 5.30%) through September. It is also ahead on a one-, three- and five-year basis, up 32.09%, 28.44% and 27.31% respectively.

Not surprisingly, money managers eager to cash in on the popularity of social investing are flooding the market with new mutual funds. The number of socially aware funds is up 218% to 175 since 1995.

How to get a job

There’s nothing like an award from your peers to put the seal of approval on a new job in a related field, apparently. Richard Cortese, who had been Vermont’s securities administrator, has been chosen for this year’s Outstanding Service Award by the North American Securities Administrators Association.

The honor, interestingly enough, came shortly after he left his state job to become vice president of consulting for National Regulatory Services in Lakeville, Conn. The company provides regulatory oversight services for, yup, securities and insurance companies.