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

Peak Oil 'Demand' & The Duelling Narratives Of Energy Inventories

Courtesy of ZeroHedge. View original post here.

Crude oil inventories in the U.S. have fallen 23.9 million barrels since the end of April, but, as Bloomberg notes, oil bulls counting on further declines are fighting history. Over the past five years refiners' crude demand has fallen an average of 1.2 million barrels a day from the peak in July to the low in October.

 "The rough part will be once refineries start going into maintenance," said Rob Haworth, a senior investment strategist in Seat...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Buying the Deepest Stock Dips in 2016 Returned Three Times S&P 500 (Bloomberg)

It’s been a great year for catching falling knives.

Big Week Ahead Highlighted By Fed Meeting, Key Earnings, GDP Estimate (Forbes)

The recipe for this coming week? A stew of earnings, peppered with data and a Fed meeting. Also ahead: A first look at estimated Q2 gross domestic product.

...



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Phil's Favorites

Denial of the Obvious, Praise for Lies

Courtesy of Mish.

At yet another useless G-20 meeting, Italy’s finance minister, Pier Carlo Padoan,  made an official denial regarding  the plight of Italian banks:

“There is no risk in terms of systemic stability,” said Padoan. Supposedly, everything is “contained“.

Praise for Lies and Useless Talk

The New York Times reports Group of 20 Will Use ‘All Policy Tools’ to Lift Growth.

Actually, the only policy tools central banks are likely to use are tools that have long-term negative consequences such as negative interest rates and competitive currency devaluations.

Also expect a bunch of useless yap about f...



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Chart School

World Markets Weekend Update: The Global Rally Moderates

Courtesy of Doug Short's Advisor Perspectives.

The global rally in equities Moderated last week. The average gain of the eight indexes on our world watch list was a respectable 0.41%, down from the previous week's steroidal 3.87% average. Hong Kong's Hang Seng was the top performer with a 1.41% advance. At the other end, the chronic laggard Shanghai Composite fell 1.36%.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the compara...



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ValueWalk

Relypsa Inc (RLYP) Soars On Galenica Bid

By Jacob Wolinsky. Originally published at ValueWalk.

Relypsa Inc (NDAQ:RLYP) — to be acquired by Galenica AG (VTX:GALN) for $32 per share in cash is soaring this morning up about 58 percent at the time of this writing in early morning. On the other hand shares of Galenica are down on the announcement by about 8 percent. What are the details of the deal? Here is what the sell side analysts are saying about the pharma news.

Relypsa Inc (NDAQ:RLYP) bid – analysts react

Cantor Fitzgerald

Relypsa will be acquired by Galenica for $32 per share, a 59% premium over the last closing price. We have thought that Relypsa would likely be acquired at some point, given the opportunity to grow Veltassa to be a significant commercial brand, ...



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Kimble Charting Solutions

Doc Copper going to peak again at 200 Day moving ave?

Courtesy of Chris Kimble.

Doc Copper is often viewed as a leading indicator, for global growth or lack of.

The 200 day moving average is often viewed as the line in the sand to determine if an asset is in an up or down trend.

Is Doc Copper climbing above its 200 day moving average a good or bad sign?

Below looks at Doc Copper over the past decade with the 200 MA applied.

CLICK ON CHART TO ENLARGE

Copper peaked in 2011 and since, has continued to create a series of ...



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Digital Currencies

Demystifying the blockchain: a basic user guide

 

Demystifying the blockchain: a basic user guide

By Philippa Ryan, University of Technology Sydney

Companies around the world are exploring blockchain, the technology underpinning digital currency bitcoin. In this Blockchain unleashed series, we investigate the many possible use cases for the blockchain, from the novel to the transformative.

Most people agree we do not need to know how a television works to enjoy using one. This is true of many existing and emerging technologies. Most of us happily drive cars, use mobile phones and send emails without knowing how they work. With this in mind, here is a tech-free user guide to the blockchain - the technology infrastructure behind bitcoin...



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OpTrader

Swing trading portfolio - week of July 18th, 2016

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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Mapping The Market

No wonder Saudis are selling as much as they can!

Courtesy of Jean-Luc

We are getting much more energy efficient – no wonder Saudis are selling as much as they can! Who wants to be the one with trillions of dollars of oil in the ground unwanted:

http://arstechnica.com/science/2016/07/the-amount-of-energy-needed-to-run-the-worlds-economy-is-decreasing-on-average/#p3

...

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All About Trends

Mid-Day Update

Reminder: Harlan 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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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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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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