Archive for April, 2008

Growing wild penstemon species

When I moved to Grass Valley in 1992, I bought a house, which was surrounded by two acres of old overgrown manzanita. A fire trap to be sure. After hiring a brush-clearing firm, Hillside Landscaping I was left with an acre of bare red dirt and a few scattered oaks trees.

I immediately set to work transforming this barren landscape into a garden. I put up a deer fence and built a path system-all the while thinking about what I would plant in my new garden. Because I have a low output well, I was restricted to drought tolerant plants. And because I wanted to create an eco-friendly garden, I chose to plant California native plants.

I decided to experiment with as many different species of penstemon as possible. I had observed several spectacular species in the wild and hoped they would grow well in the garden. My research told me that wild penstemons are tricky to grow and can be short-lived in the garden. Their primary requirement is well draining soil and many of them require minimal irrigation. For those gardeners with poorly drained clay soil, one solution is to import a good sandy loam from a soil vendor and mound it up on top of the existing soil. Both Eaton’s penstemon (P. eatonii) and P. pseudospectabils have thrived in my garden on mounded sandy loam soil. They receive morning sun and are shaded by tall pines in the afternoon. Both these plants form sprawling clumps and have semi-upright stems with tubular flowers that attract hummingbirds. Eaton’s penstemon has red flowers and P. pseudospectabils has outrageous red/pink/pruple flowers that defy description. Both are native to mountainous areas of the southwestern states, but can flourish here in the foothills.

The trick when watering penstemons is to give them enough to keep them looking fresh through the summer, but not too much, otherwise you can kill them with kindness. Many of the penstemon species that inhabit dry desert and mountain habitat in the Southwest, can survive the summer without irrigation once they are established in the garden. But after a long dry summer without water they will look pretty ratty. A more practical solution is create a semi-dry border by combining penstemon species with wild buckwheats, monkey flowers, California poppies, salvias and other drought-tolerant native plants and drip irrigating once every ten days in the summer, beginning in May. This will keep your plants looking fresh and extend their bloom well into the summer. In the Sierra foothills of Nevada and Placer Counties, azure penstemon (P. azureus) and foothill penstemon (P. heterophyllus) are native wildflowers. A hybrid of these two species called Penstemon ‘Margarita BOP’ is one of the easiest penstemons for garden culture. This hybrid was discovered next to the back porch at Las Pilitas nursery in Santa Margarita, Calif-thus its name Penstemon ‘Margarita BOP.’ It forms an evergreen, 3-ft wide sprawling mound covered with masses of tubular blue and purple flowers. Dave Roberts, President of EcoLandscape California, a non-profit ecological landscaping organization, grows P. ‘Margarita BOP’ in his Sacramento garden. He grows it in sandy soil and waters it once a week during the summer, beginning in May, which keeps the plant blooming and looking fresh through the summer.

Several penstemon species have persisted and thrived in my garden without any special improvement of soil drainage. They are all planted in full sun on a west-facing slope. Beginning in May, they are drip irrigated once every two weeks through their first summer after being planted in the garden. During subsequent years, I water them sparingly through July and then cease watering for the rest of the summer.

My hand’s down favorite has been Penstemon incertus. I grew it from seed that I purchased from the Theodore Payne Foundation in southern California.

The plant is clump-forming with multiple 2-foot tall stems, grey green foliage and beautiful blue/purple tubular flowers. It is easy to propagate from cuttings and seed and is now abundant in my garden. My original plant is still thriving after four years. Royal penstemon (P. spectabilis) has also thrived in my garden without soil improvement. This is a gorgeous three-foot tall clump-forming plant. When in full bloom it is covered with blue, pink and purple flowers and buzzing with visiting honey bees. Grinnell’s beard tongue (P. grennellii) also grows on a hot,Hillside Landscaping rocky slope in my garden. It reaches about two feet in height and has multiple stems with coarsely-toothed shiny green leaves. It has puffy balloon-shaped flowers that are lightly scented and colored pink with delicate mauve tracings. This species is very sensitive to over-watering and should not be irrigated in summer. I recommend planting this plant in a sandy loam of decomposed granite soil if possible.

I have also experimented with several species of keckiella, which are the shrubby cousins of the perennial penstemons. They are sometimes called bush penstemons. My resident hummingbird loves the scarlet-colored tubular flowers heartleaf keckiella (K. cordifolia) in my garden. Bees favor the snapdragon-like flowers of yellow keckiella (K. antirrhinoides) in my garden.

All the penstemon species are very easy to propagate from cuttings or seed. I usually leave the spent blooms on some of the stems so that seed pods can develop. I harvest the seed and sow it in pots in the fall so that it is watered by winter rains. The seedlings germinate en masse in early spring. I transplant these directly into the garden or into 4 inch pots-in which case, I grow them through the summer and then plant them into the garden in fall.

Cuttings are easier. I usually wait until February and then cut year-old stems back to sprouting buds near the base of the stems. Then I cut the pruned off stems into 6-inch long sections, and stick these directly into the ground around the parent plants. With a little extra water, these cuttings root quickly and easily. In this way, as older plants die off, new young ones grow up to replace them.

All of these penstemon and bush penstemon species (plus many other California native trees, shrubs, perennials and grasses) will be available for purchase at the Spring Native Plant Sale and Wildflower Show at the Rocklin campus of Sierra College (Parking Lot S) on Saturday, May 3rd from 9:30 am to 1:30 pm.

Quantities of some of these are limited, so come early for the best selection. There will be a special presentation “Wildflowers of Placer and Nevada Counties - Where to See ‘em and How to Grow ‘em” before the sale at 9 am.

Tags: , , , , , , , , , , , , , , , , , , , , , ,
0

Sunday, April 27th, 2008

Ballsbridge House Has Hidden Depths

THERE IS a lot that’s elegant, bright and spacious about 31 Wellington Place, Dublin 2. A grand and notable home when it was built in 1798, it’s weathered the centuries well and, with a nicely gauged rear addition and recent refurbishment, is even more grand today.

The vendors are amongst just a handful of owners since the house was built. The Slazenger family were long-time owners. Now it’s set for auction through Bergins with an AMV of €12.5 million.

It’s a rare detached house set between terraced homes on a leafy, quiet road, that merges with Leeson Street. A big back garden also sets it apart from the neighbours.

The urbane mood of 31 Wellington Place and stylistic value of the addition are best seen from the first floor landing. This is an open, bright space with a sash window to the front and, to the rear, an original arch framing a view of the original wall with a stained glass, porthole window and, below, a second arch leading to the Velux-lit landing of the new return.

Original features, such as plasterwork, doors and the wide plank flooring of other centuries, abound. Fireplaces which aren’t original have been replaced with period-style mantels in marble, sandstone and wood.

Double-fronted, with two floors over a basement swimming pool, the space in the 557sq m (6,000sq ft) house is divided into four bedrooms, five reception rooms and a kitchen-cum-breakfast-room.

A much-used underground swimming pool is 27.3ft long and is part of a well-equipped fitness/leisure area with sauna and shower room. A spare room at this level could convert to a playroom/den. A gas-fired Aga and a large granite-topped island distinguish a kitchen given a whole other dimension by the garden room into which it leads. Part of the addition, this has a vaulted glass ceiling.

The front door of the house is the heavyweight original and has a lovely fanlight beaming shards of golden light onto the wide, honey-coloured planks of the hallway.

Off this, the main reception rooms have the traditional elegance of their period. Furnished as drawing and sitting-rooms, they have interconnecting concertina doors which fold neatly into the wall.

A French window to the rear opens to the patio and garden, an area enlivened by the use of a variety of stone in a variety of layouts, by giant terracotta pots, a gazebo and botanical collection which includes Japanese maple and Portuguese laurel.

A sloped ceiling, garden views and en suite give the bedroom on the return addition a self-contained, cottagey feel.

The other bedrooms are in the original building with the main bedroom, which has a sandstone fireplace, dressingroom and en suite, facing the front. A third, rear-facing en suite bedroom overlooks a spreading ash in the neighbouring garden. Landscaping to the front allows both shrubs and seven parking spaces to happily co-exist while passages to either side of the house allow for rear access.

Tags: , , , , ,
0

Sunday, April 27th, 2008

Eco Gardens: How To Grow Fruit And Vegetables

The vegetable patch has become the most fashionable home improvement accessory, a makeover for the credit crunch era that should add value to your property in the long term. The “home allotment” (its virtues are extolled by Jamie Oliver) is not only proof of your impeccable green credentials, it is also a source of cheaper food Landscaping Stone. The cost of staples such as rice, bread, eggs and meat are rising relentlessly around the world, with no sign of let-up, and consumers are increasingly being forced to opt for less expensive fruit and vegetables to make their household budgets stack up.

But all that sowing, mulching, watering and reaping to grow your own may not be as much of a chore as you suppose, and fruit and veg simply tastes better if you eat it fresh from the ground. It’s all to do with the sugars: the natural sugars in a courgette, for example, will start turning to starch within minutes of it being cut from the vine, a process that will rob the courgettes of much of their beautiful sweet flavour.

Can anyone grow their own fruit and vegetables? The answer is yes. Even someone with a window box or small balcony can cultivate a wide variety of herbs, vegetables - or even fruit. Home allotments are easy to get going and now is the perfect time of year to start.

First, you will need a growing area. This can be a few large pots or a couple of grow bags. If you have the space, build a raised bed using timber. In my work as a garden designer in southeast London, I build stylish raised beds for my clients using untreated French oak railway sleepers, which are bolted together. These raised beds are normally 480mm (19in) high by 2.6m long by 1.3m wide, but they can be virtually any size.

A raised bed is prepared by first adding a layer of shingle for drainage. It is then filled with a mixture of good landscaper’s loam and farm manure. Choosing the right location for your raised bed can be difficult within the restrictions of most gardens, but try to find the sunniest spot and not under overhanging trees.

The principles for large pots, grow bags and window boxes are the same: just remember that the smaller the container the more watering they will need. One useful tip for containers is to stand them on a tray or saucer filled with gravel. This helps to stop the soil from drying out, while the gravel stops waterlogging around the roots. Now you have prepared your planting area, you can choose what to grow. The options are vast, from exotic pak choi to the humble spud. My choice for the garden allotment would have to include courgettes, French beans, strawberries and sweetcorn. You could also try an apple tree. Or why not be adventurous and give blueberries a go?

Courgettes (Cucurbita pepo): these are among the most productive vegetables you can grow. Aim to have three or four plants and to stagger the planting. Start by sowing the seeds in 7.5cm pots, 3cm deep in moist compost, placing the pot on a warm windowsill. When well-established, plant out in their final position and give them room to grow.

Sweetcorn (Zea mays): freshly picked, they are a treat. Again, sow them in pots or trays indoors and stagger the sowing, so that you get a steady flow of ripe cobs and not a flood. Sweetcorn is a hungry plant, so before planting out make sure to add plenty of organic fertiliser to the bed. Plant sweetcorn in blocks and not rows, so that they crosspollinate. Try them straight on to the barbecue - just fabulous.

Beans: French beans (Phaseolus vulgaris) and runner beans (Phaseolus coccineus) are a must in any home allotment. They like well-drained soil and need support: dwarf French beans require a few twigs to support the plants, while runners need a framework of bamboo poles or similar. Sow the seeds in 7.5cm pots, 4cm deep in moist multi-purpose compost, and place on a windowsill. Once germinated, harden off by placing outside in the shade during the day, and plant out two to three weeks later. Water well.

Strawberries (Fragaria x ananassa): Fruit such as these are best bought as plants in late summer or early autumn. Choose a good all-round type such as “Cambridge Vigour” or a perpetual fruiter like “Aromel”. I like to plant strawberries through a landscaping fabric. Simply spread a sheet over the area to be planted and secure it with pegs to the raised bed surround. Cut holes in the fabric and then plant into the prepared soil beneath. This will keep the soil around the shallow roots moist and warm, ensuring an early crop of fat beautiful strawberries. I have tried the landscaping fabric planting method on many plants, and it also works well for courgettes, tomatoes and sweetcorn.

Apples (Malus Sylvestris var. domestica): To achieve the best results you need a sunny, sheltered spot. Apples are best grown in the ground, but there are some varieties that can be pot-grown. The height and size of an apple tree is mainly determined by the root stock; ask your garden centre for advice on which variety to choose. Most apples require a second tree for pollination, so buy two trees of similar varieties. After planting, water well throughout the first two summers and thin out fruit as they develop.

Blueberries (Vaccinium corymbosum): Landscaping Stone For the more adventurous gardener, these fruit bushes prefer acid soil and slight shade or sun. Blueberries are also good in pots: use a 38cm or bigger pot and plant in ericaceous compost. One tip is to use collected rainwater and to feed with organic seaweed extract regularly throughout the growing season.

Tags: , , , , , , , , , , , , , , , , ,
0

Sunday, April 27th, 2008

Landscaper Transforms Old School’s Courtyard Into Garden

If this question appeared on an MCAS exam, it might have left students at the Henry T. Wing School scratching their heads.

The question: How do you get a mini excavator, a Landscaping Design  Bobcat and 60 cubic yards of topsoil into the enclosed school courtyard?

The answer: Very carefully.

Wednesday, work crews with Miskovsky Landscaping Inc. and Baxter Crane Services were hoisting the heavy equipment and dirt over the school’s front entrance and into the 1,100-square-foot courtyard.

Huge chunks of concrete ripped up from the courtyard were sent back over for disposal.

Paul Miskovksy, owner of the Falmouth-based Miskovsky Landscaping Inc., is transforming the longtime concrete jungle into a Monet-style garden for students, staff and the community to enjoy.

The idea was dreamed up by Wing School art teacher Maryellen MacDonald and librarian Janet Vallee, principal Matthew Bridges said.

The pair applied for and received a $7,500 grant from the Sandwich Kiwanis Club for the project. Then they found a willing accomplice in Miskovsky, a 1975 graduate of the Wing School — the last year it served as a high school. His two children, Natasha and Roman, have attended what is now a K-8 school. Roman is now a sixth-grader.

Miskovsky is making up the difference from the Kiwanis grant. The project will cost an estimated $30,000 in materials, labor and equipment, he said.

“They don’t have the pockets to do it and I don’t either, but I believe people have to do things for others and just extend themselves a bit,” Miskovsky said.

Miskovsky persuaded companies like Baxter Crane, Falmouth Bark & Topsoil and Cape Cod Stone to pitch in.

School officials can’t believe their good fortune.

Miskovsky doesn’t just have a green thumb. His company took home a bucket full of prizes from last month’s New England Spring Flower Show.

“For him to sacrifice this amount of time, Landscaping Design it’s extraordinary,” Bridges said.

Eventually, the garden will include a half-dozen trees, low-maintenance plants like azaleas, ever-blooming roses and decorative grasses, bistro tables and a water fountain, MacDonald said.

The bulk of the excavation work is being done this week while students are on spring break.

Eventually, the brick walls will be dressed up with colorful paintings by Mindy Reasonover of Color My Wind, Miskovsky said.

Tags: , , , , , , , , , , ,
0

Sunday, April 27th, 2008

Angie’s List: Landscaping

It’s the time of year to get out and work in the yard. But should you tackle the landscaping or hire someone else to reshape your lawn and pick out the plants? In this week’s Angie’s List report, Jim Donovan has some advice on how to get the yard of your dreams.

According to a recent Angie’s List poll, landscaping is going to be the one of the most common projects that people are tackling this year. “Landscaping, if it’s well done, can add anywhere from 7% to 14% to the value of your home,” said Angie Hicks, founder of Angie’s List. She added, “Keep in mind, adding shade trees in the right spots around your house can cut your air conditioning bill by as much as 25%.”

Angie says the most common complaint about landscaping is that the plants or trees died despite good care by the homeowner. So whether you’re hiring a landscaper or buying directly from a nursery, Landscaping Rock be sure to know their replacement policy.

When it comes to landscaping, you need to be really honest in assessing your skill level. Just because you like working in the yard on an occasional Saturday doesn’t mean you’ll want to put an entire flower bed into place. A couple of benefits that people don’t always realize when hiring a landscaper is one, they can many times, get the plants at wholesale price versus retail which can save you a few dollars. Secondly, there is a guarantee on the plants. Landscaping Rock If you buy them at a greenhouse and install them yourself, there may not be a guarantee.

Tags: , , , , ,
0

Friday, April 25th, 2008

Match Tree To Landscaping Site

Answer: Matching the tree to the site is critical. Site considerations include location of space above and below ground, water availability, drainage issues, Landscaping Contractor soil texture and pH, sunlight levels and exposure. Tree considerations should include growth rate of the species. The mature size and form of the tree in addition to hardiness, heat tolerance and drought tolerance also should be considered. Pest resistance, maintenance issues and native versus non-native species also impact tree selection. Most trees will outlive the people who plant them.

Answer: Honeycrisp is a late-fruiting apple cultivar that it is very cold hardy, which means the tree should survive Front Range winters well. Honeycrisp blooms in the early to middle part of the apple flowering period. Honeycrisp does not carry any known exceptional resistances to disease or insects. Apple scab and cedar apple rust lesions have been observed on the leaves, but these diseases have been readily controlled with a standard spray program. Landscaping Contractor It has shown moderate susceptibility to fireblight. The fruit, which usually matures around mid-September, is very crisp and juicy with a flavor balance between sweet and tart. The fruits can be eaten fresh or cooked in pies or other recipes.

For more information, visit www.planttalk.org and read #1201, “Apples.”

Question: What do I need to know before signing a contract with a tree care company?

Answer: Typical services include consultation, problem diagnosis, planting, fertilizing, insect and disease control, cabling and bracing and pruning and removal. All tree care companies offering insect and disease control services with pesticides must be licensed by the Colorado Department of Agriculture.

Tree care companies should be able to provide product labels and safety data sheets on fertilizers and chemicals before treatment. Landscaping Contractor Ask for a list of references where a company’s finished work can be checked. Some tree care companies may employ certified arborists that have passed the test given by the Rocky Mountain Chapter of the International Society of Arboriculture on the principles of tree care and issued a license.

Tags: , , , , , , ,
0

Friday, April 25th, 2008

Gimme Shelter- Bloomin’ Summer: Get Landscaping Started Now

Q: Last summer, the terrible August heat sapped the color right out of our garden. This year, I’d like to make sure we have some colorful blooms around. When should I start thinking about planting summer bulbs? Garden Landscaping And what are some good summer bulb choices?

A:To ensure great color in your garden in the heat of summer, you’ll need to think about planting your summer bulbs now. Summer bulbs can provide beautiful blooms once your roses and other spring flowers have lost their luster. Also, most of these bulbs will bloom late into the fall Garden Landscaping, giving your asters and chrysanthemums some company.

However, given the cold temperatures we’ve had this spring, the timing can be a little tricky. That’s because summer bulbs need to be planted after all danger of frost has passed. Most folks start planting them at the end of April, but if we get a sudden May frost, you’ll lose them. Even if the outside temperature is warm, the ground can still be cold, and if these colder temperatures persist there’s a chance of a sudden cold snap in May. With summer bulbs it’s best not to jump the gun: keep your bulbs in the fridge until you’re pretty sure those cold nights are past us.

Popular bulbs include gladiolas, dahlias, and lilies. Glads are very popular because they’re tall-stemmed, good for cut flowers, provide a good back-boarder for your garden because they’re so tall, Garden Landscaping and come in vivid colors. They’re also a favorite of hummingbirds. Dahlias, too, provide marvelous color and make great cut flowers.

And lilies, like the popular orange tigers and stargazers, are sturdy plants that can grow in a variety of soils. If you get past the danger of frost, you can expect beautiful blooms to appear in late June or July, and they’ll stick around through August, September, and even October.

Keep in mind, though, the majority of summer bulbs will not over-winter here, so you’ll need to treat them as annuals and be prepared to plant them all over again next spring.

Tags: , , , , ,
0

Friday, April 25th, 2008

Benefits Of Plants And Landscaping Lecture April 28

Hanover - Steven R. Tomasi, RLA, ASLA, and president of A.J. Tomasi Nurseries will speak about the benefits landscaping can provide such as providing natural air conditioning and protection from wind, trapping and filtering air pollutants, screening noise and unsightly views to name just a few.

Learn how to use landscaping techniques and plantings to make your yard a healthy oasis from 7 to 9 p.m. Monday, April 28, at the South Shore Vocational Technical School auditorium, 476 Webster St Backyard Landscaping. (Route 123), Hanover. The lecture is sponsored by the Greenscapes program and the North and South Rivers Watershed Association.

Tags: , , , , , ,
0

Friday, April 25th, 2008

Rethinking The Home Garden

Delusions of grandeur run rampant in the gardening aisle. Lush landscaping and overflowing vegetable rows sound sweet and attainable. How hard can it be? Dig in the dirt; keep it watered.

Ah, neophyte exuberance.

Bob Polomski, chair of Clemson University’s horticulture department, said “smart small” is a better maxim. Garden Landscapin “It’s easy to buy and plant; where the rubber hits the road is in maintenance during the really hot summer months,” Polomski said. “Gardening doesn’t seem as much fun during the first week of August as it did in the first week of May.”

It’s an interesting time in gardening. Green concepts, the rage in industries ranging from autos to appliances, are hitting horticulture as well. So-called softer materials, including organics, have reduced the need for pesticides and other toxic goop.

“In addition to being more environmentally friendly, these softer materials, such as horticulture oils, are very pest specific and break down very rapidly,” Polomski said. “The whole idea of sustainability in landscaping and recycling materials, all of that is trying to make us better gardeners.”

The time to plant is now. (According to Polomski, the last frost date for the Upstate is April 15.) So the “What” and “where to plant” are two other matters. Fruit or vegetable producing crops need at least six to eight hours of daily sunlight. Leafy plants require a minimum of four hours.

Proximity should also be considered. A vegetable plant shouldn’t neighbor a bush or tree requiring gnarly pesticides. For example, various hybrid roses need to be sprayed for black spot. Planting rosemary peppers beside those roses could turn your homegrown salad into Jonestown.

But why would produce and non-edible plants intermingle, anyway? Two reasons: ease and aesthetics. Planting row after row is convenient if vegetables are grown en masse. But for casual gardeners, mixing a few producing plants into the landscape allows for simpler watering responsibilities.

The strategy can also add compelling texture to your yard. Polomski recommended a few edible plants for landscaping:

• Fairytale eggplant — The variety’s violent and purple stripes provide subtle yet exotic color.

• Hole mole pepper —“This is a good looking pepper that has a dark chocolate color,” Polomski said.

• Purple haze carrot — Polomski called the purple haze, named after the Jimi Hendrix tune, “really cool.” And yes, it is purple.

Red lettuces, purple cauliflower and various hues of potatoes can also invigorate sightlines.

“This idea of intermingling works great if you don’t want to donate a whole section of your yard to a garden,” Polomski said.

Container gardening is another consumer-friendly trend. The niche involves the pre-packaging of vessel and plant. Some nurseries will even custom assemble containers to a gardener’s specifications.

The practice is an extension of transplants —the tiny plants that are purchased for planting instead of seed. In additions to instant gratification benefits, transplants are also usually more successful than crops grown from seed, Polomski said.

“According to a recent Garden Writers Association survey, home vegetable gardens are increasing in popularity this year. Part of the reason is the price of food has made people think about growing their own vegetables again,” Polomski said. “I think that bodes well because I’ve been under the impression home gardening has been on the decline for a long time. You have to go back to the World War II victory gardens. Now it’s easier. You don’t have to have 40 acres of property; you just need a container.”

When selecting a limited amount of vegetables to grow, opt for the nutritious and expensive. The first requirement is easy to understand, and sweet potatoes offer the most healthful pop. For the latter consideration think of it this way:Garden Landscapin If it costs a lot at the grocery store, grow it. Red and yellow bell peppers, for instance.

But your decision needs to be practical. If you’re going to grow okra, make sure you’re not the only one in your family that will eat it.

“Growing your own vegetables is not only about trimming your grocery bill,” Polomski said. “It’s just great exercise and I like to see people, especially younger kids, spending more time outdoors and seeing how stuff is grown. It doesn’t just show up on grocery store shelves. Some of the younger generation may be completely unaware of that bit of the story.”

Tags: , , , , , , , ,
0

Tuesday, April 22nd, 2008

All Fixed Income Investments Come With Risks

Investors relying on fixed income investments for income have been hit with the double whammy of rising inflation and lower interest rates. In the search for higher income, they often overlook the many risks associated with fixed income investments.

The Wall Street Journal recently ran a story about a Philadelphia mortgage lender, American Business Financial Services Inc. The company raised capital for lending by touting a “24 month investment yielding 9.14 percent annually” in newspaper and direct mail ads,Landscaping at a time when the two-year Treasury notes were paying 3 percent.

For additional capital, ABFS also securitized their mortgage loans and sold them off to investment banks. When mortgagees began to refinance, the loans were paid off and ABFS found itself owing both its noteholders and the investment banks. By January 2005, ABFS was out of money and forced into bankruptcy. The noteholders ended up with nothing.

The lesson we can draw from this vignette: All fixed-income investments carry some sort of risk, and investors must be able to recognize the risks when lending their money.

The most common risk, and most easily understood,Landscaping is the risk of not being paid back. Is the lender reputable? How strong is its balance sheet? Does the lender have a viable business that will earn the money to pay back the loan on time? Is the lender’s business in an industry that is stable?

As is typical of most corporate loans, the ABSF notes were not secured by collateral. Investors had to rely strictly on the creditworthiness of the borrower. Creditworthiness of corporations, banks and governments can be checked through one or more of the seven reporting agencies that provide business and government credit reports.

Moody’s and Standard & Poor’s are the most commonly quoted reporting agencies. Both use a letter system to rate borrowers. Their respective highest ratings are Aaa or AAA. Ratings lower than Baa or BBB are considered speculative and not investment grade.

Some municipal bonds may be insured for repayment of principle and interest, offering a higher degree of safety for the investor. Bank deposits are also protected up to $100,000 per depositor by the Federal Deposit Insurance Corp. (FDIC).

Finally, in the event of bankruptcy, bond holders have preference over stock holders when it comes to the assets. However, if the borrower has secured other loans with those assets, the bond holder is second behind the other secured interests.

More subtle risks that are not considered by credit reporting agencies include interest rate risk, reinvestment risk and purchasing power risk. A maturing investment has to be reinvested in order to continue the income stream. If interest rates have fallen, the new CD or note will carry a lower interest rate and generate a lower income stream. If interest rates go up, the noteholder’s note is worth less and, if forced to sell, the holder may not get back the entire investment. Purchasing-power risk means simply that a dollar of income tomorrow may not buy as much as a dollar today.

In the ABSF case, we have investors who were lured by the 9.14 percent return and ignored the risks. They bought into a complex financial engineering scheme laid out in a 230-page prospectus by ABSF that supposedly spelled out the risks. Landscaping If this had been a truly low-risk investment, the world’s capital markets should have drowned the company in cash. The high spread between the two-year Treasury and the 9.14 percent offered was too good to be true. Even my brother-in-law looks good compared to those guys!

Tags: , , , ,
0

Tuesday, April 22nd, 2008