Guest View
User: Pass: | become a member
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


Tags: , ,




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


continue reading


Tags: , , , , ,




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

 


Tags: , , , , , ,




 
 
 

Zero Hedge

Greek Energy Minister Slams "Unscrupulous, Imperialist" Germany, Will Seek "Bold Alternatives" In Russia

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

With fresh rumors springing late on Friday that "this" just may be the weekend Greece - with close to no funds left in either the financial or government sector - imposes capital controls, a precursor to a full-fledged Grexit, the situation in Athens is on a knife's edge. Yesterday is also when the Syriza government submitted its list of 18 proposed reforms to the Troika: a reform package which the Guardian dubs "reform-for-cash", as Greece hopes the roughly €3 billion...



more from Tyler

Phil's Favorites

Buffett buys Kraft Foods: A big bite

 

View image | gettyimages.com

The Economist discusses the merits of Buffett's latest acquisition, Kraft Foods. 

Buffett buys Kraft Foods: A big bite 

Berkshire Hathaway’s latest big deal is quite a mouthful

WARREN BUFFETT says he likes to buy companies that are easy to understand and are performing well. His latest deal, the $50 billion acquisition ...



more from Ilene

Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

more from Promotions

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...

more from David

Insider Scoop

Raymond James Downgrades Power Integrations To Market Perform

Courtesy of Benzinga.

Related POWI Benzinga's Top Downgrades Benzinga's Volume Movers

Analysts at Raymond James downgraded Power Integrations Inc. (NASDAQ: POWI) from Outperform to Market Perform and removed the price target of $57.00.

Power Integrations shares have dropped 18.42% over the past 52 weeks, while the S&P 500 index has surged 10.69% in the same period.

Power Integrations' shares fell 1.51% to $51.65 in pre-market trading.

Latest Ratings for POWI DateFirmActionFrom...

http://www.insidercow.com/ more from Insider

Chart School

S&P 500 Snapshot: Selloff Ends with a Modest Gain

Courtesy of Doug Short.

Friday was a mixed bag of economic data. Hopes for an upward revision to Third Estimate of Q4 GDP were disappointed when the BEA left the annualized rate at 2.2%. The final Michigan Consumer Sentiment for March was an improvement on the preliminary reading, but it was below the February final and well off the January 11-year high. The S&P 500 spent the day in a narrow range, ending with a modest 0.24% gain, which snapped a four-day selloff. The index was down 2.33% for the week, its second worst weekly performance of 2015 (the worst being the -2.77% plunge in late January).

The yield on the 10-year Note fell 7 bps to 1.95%.

Here ...



more from Chart School

Sabrient

Sector Detector: Bulls retake the wheel, with a little help from their friends at the Fed

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

Courtesy of Scott Martindale at Sabrient Systems

Well, it didn’t take long for the bulls to jump on their buying opportunity, with a little help from the bulls’ friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing clichés continue to work -- “Don’t fight the Fed,” and “The trend is your friend.”

In this weekly update, I give my view of the cur...



more from Sabrient

OpTrader

Swing trading portfolio - week of March, 23rd, 2015

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 ...



more from OpTrader

Digital Currencies

Bitcoin vs. Uber: Bitcoin Lovers Respond to Mish

Courtesy of Mish.

I recently commented that it would not surprise me if bitcoin plunged to $1.00. That was not a prediction, it was a comment.

Still, I still feel a collapse in bitcoin is likely.

For discussion, please see Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?

In response, reader Creighton writes ...

Hello Mish

While I'm not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.

While it's likely that the US government watching Bitco...



more from Bitcoin

Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



more from Paul

Option Review

Cypress Semi Draws Bullish Option Plays

Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shar...



more from Caitlin

Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



more from Pharmboy

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. 

 

...

more from SWW

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!




FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>