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Posts Tagged ‘budget crisis’

Here’s Why California’s Budget Crisis Is Going To Be Much Worse Next Year

Here’s Why California’s Budget Crisis Is Going To Be Much Worse Next Year

california

Courtesy of Joe Weisenthal, Business Insider 

California recently closed its budget, but in January the state will need to begin working on its next one.

According to the LA Times, a $19 billion hole is already projected, and here’s the problem: The easy budget cuts and the easy tax hikes are already in the books.

The are other problems, too. The new governor, whoever that is, will be reluctant to waste political capital (Schwarzenegger had the benefit of being a lame duck) and fresh legislators will once again have to learn how the whole process works (California has term limits, meaning nobody ever sticks around long enough to know how it works).

Also, the public has unrealistic expectations:

In a survey of 1,000 Californians conducted in June by the Pew Center on the States and the Public Policy Institute of California, half of respondents believed state spending could be cut 20% or more with no impact on services. The report points out that the state would have to eliminate the equivalent of its entire prison system, all welfare programs and all transportation spending to save that much.

The authors went to Mike Genest, Schwarzenegger’s former budget director, for some perspective.

"Reality hasn’t caught up with the voting public," Genest told them. "Politicians have made it sound like there are other alternatives, like we can simply get rid of fraud, waste and abuse and [have] a spending freeze and … have the same kind of government we’ve always had. … That’s just not true."

Anyway, assuming a big GOP sweep in November in DC, there won’t be much help coming from the Feds. Barring another tax-revenue-creating bubble, this should be quite a horror show.

Now see the 11 states most likely to default >

Image: AP


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California’s $100 Billion Whooping

California’s $100 Billion Whooping

Courtesy of Leo Kolivakis at Pension Pulse

 
California's $100 Billion Whooping

As if California didn’t have enough to deal with its budget crisis, now the FT reports that the two largest pension funds in the US have recorded steep losses following the turmoil in stock markets, with the value of their combined portfolios shrinking by almost $100bn:

The California Public Employees’ Retirement System (Calpers) and the California State Teachers’ Retirement System (Calstrs) were hit by the real estate slowdown and the slump in global equities. Calpers said the fall in the value of its assets was the most severe in its history.

“This result is not a surprise; it is about what we expected, given the collapse of markets across the globe,” said Joe Dear, investment chief at Calpers.

The value of Calpers assets fell 23.4 per cent for the year to June 30, raising concerns that state employees and local governments might have to increase their ontributions to cover the shortfall.

But Calpers presented a bullish view. “The system has more than enough cash through contributions and income from investments to meet our present liabilities, so we are in a good position to ride out the current downturn and come out stronger,” said Mr Dear.

The market value of Calpers assets was $180.9bn (£110bn) on June 30, down from $237.1bn on the same date the previous year. The value of the portfolio had fallen to $160bn in March of this year but rebounded by $20bn by the end of June thanks to a partial recovery in equity markets.

Both organisations shifted a portion of their portfolios out of equities and into fixed income and real estate during the year to take advantage of lower prices.

Calpers also said it was “realigning relationships with hedge funds and private equity partners”. This would lead to “reduced fees, better alignment of interests, and more mutually beneficial long-term relationships”.

The value of Calpers real estate and private equity investments fell by 35.8 per cent and 31.4 per cent respectively in the year to June 30.

Calstrs was hit by the same macro-economic factors, with the value of its assets falling from $162.2bn to $118.8bn in the 12 months to June 30.

The organisation wrote down the value of its property holdings rather than spread the


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IOU and State of Emergency

Joe Weisenthal at ClusterStock updating on California’s budget crisis drama.

IOU

schwarzenegger tbiYou know, all this time we’ve been saying that the difference between California and the Federal Government was that California couldn’t print currency to get out of a pinch.

But really, isn’t printing currency exactly what issuing IOUs is? Granted, it’s not the most solid currency given with the state you’re dealing with, but it’s something.

Anyway, we’ll get to find out, because California has missed (surprise!) its deadline for closing its budget gap and is now set to hand out IOUs instead of actual money.

Reuters: The notes will mark the first time in 17 years the most populous U.S. state’s government will have to resort to the unusual and dramatic measure.

Democrats who control the legislature could not convince Republicans late on Tuesday night to back their plans to tackle a $24.3 billion budget shortfall or a stopgap effort to ward off the IOUs. The two sides agree on the need for spending cuts but are split over whether to raise taxes.

The state still has some cash, but that will be reserved strictly for its bondholders and education spending (the kids!). But vendors, college students, state agencies will get some paper.

Please, please, please let there be an after-market in these IOUs. We’d love to see how they’re valued and how businesses will conduct exchange using them.

STATE OF EMERGENCY

Gov. Arnold Schwarzenegger has now declared a State of Emergency for the sunny state of California.

Meanwhile, former Gov. Grey Davis was on CNBC saying he wouldn’t expect most banks to take California IOUs.

Oh, if only the constitution Article 1 Section 10 didn’t prevent the state from declaring IOUs a legal tender.

See Also:

California, killing dogs

Bail Out California, Or They’re Going To Kill Dogs

***** 

Hotel California – Eagles

 


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Zero Hedge

The Burning Questions For 2015

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The Burning Questions For 2015

By Louis-Vincent Gave, Gavekal Dragonomics

With two reports a day, and often more, readers sometimes complain that keeping tabs on the thoughts of the various Gavekal analysts can be a challenge. So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.

1. A Chinese Marshall Plan?

When we have conversations with clients about China – which typically we do between two and four times a day – the talk invariably ...



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Phil's Favorites

Russia Not Selling Gold, It's Buying; Reflections on Extremely Sloppy Reporting

Courtesy of Mish.

On December 17, ZeroHedge asked Will Putin's Next Step Be To Sell Gold?

On December 18, ZeroHedge answered his own question wrongly with Russia Has Begun Selling Its Gold, According To SocGen.

I did not believe that when I saw it yesterday, and I sure don't today after viewing a few charts from Nick at Gold Charts "R" Us.

Russia Gold Reserves Up 600,000 Ounces for November

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Insider Scoop

Oppenheimer Initiates Coverage On Twitter, Believes Stock Is Appropriately Priced At Current Levels

Courtesy of Benzinga.

Analysts at Oppenheimer initiated coverage of Twitter Inc (NYSE: TWTR) Friday by issuing a Perform rating and setting a $36.00 price target. Twitter is a global social networking platform with over 280 million active users.

The Numbers

While Oppenheimer analysts fully recognize the strength in Twitter as a company, they believe that Twitter’s stock is appropriately priced at current levels. “While TWTR is the best Internet platform for real-time content discovery, we believe that the stock’s current valuation of 10x 2015E sales, a 52% premium to peers, fully reflects future prospects based on current growth rates.”

Insider Dumping

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Chart School

Relief Bounce in Markets

Courtesy of Declan.

Those who took advantage of markets at Fib levels were rewarded.  However, this looked more a 'dead cat' style bounce than a genuine bottom forming low.  This can of course change, and one thing I will want to see is narrow action near today's high. Volume was a little light, but with Christmas fast approaching I would expect this trend to continue.

The S&P inched above 2,009, but I would like to see any subsequent weakness hold the 38.2% Fib level at 1,989.


The Nasdaq offered itself more as a support bounce, with a picture perfect play off its 38.2% Fib level. Unlike the S&P, volume did climb in confirmed accumulation. The next upside c...

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Digital Currencies

Chart o' the Day: Don't "Invest" in Stupid Sh*t

Joshua commented on the QZ article I posted a couple days ago and perfectly summarized the take-home message into an Investing Lesson. 

Chart o’ the Day: Don’t “Invest” in Stupid Sh*t

Courtesy of 

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OpTrader

Swing trading portfolio - week of December 15th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Energy sector rains on bulls' parade, but skies may clear soon

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Scott Martindale of Sabrient Systems and Gradient Analytics

Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S. economy and corporate profits despite the collapse in oil, and now the overbought technical condition has been relieved. While most sectors are gathering fundamental support and our sector rotation model remains bullish, the Energy sector looks fundamentally weak and continues to ran...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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