We’ve been talking about this stuff for awhile now here on TRB, but no one was on top of the sovereign debt minefield like the Zero Hedge gang. In case you missed ignored it, they’ve basically been handing you what the market is awakening to now on a platter.
Bad news from Harrisburg, PA to Southern Europe to Los Angeles today. And those jobs numbers certainly didn’t help. We should be at roughly 0% employment by 2016 at this rate.
The Dow is down around 200 as we speak, flirting with the psychologically meaningful 10,000 level.
City workers and union members won a victory against financial prudence in Los Angeles today.
The city council spent all day yesterday discussing drastic cuts made necessary by LA’s $208 million budget gap. The city’s budget analysis proposed around 1,000 job cuts to save money.
And so the municipal unions went wild, packing the meeting with hundreds of workers.
In response, the city council voted to postpone budget-related layoffs for 30 days.
Frighteningly, on the same day the council members voted against cutting jobs and consolidating the disability, human services and environmental affairs department, it also agreed to discuss making jobs cuts in the police and fire departments.
Even worse, LA council members are talking about "unconventional ways" of addressing their looming financial crisis.
"If I’m facing hard times . . . I’m going to go to my uncles. I’m going to go to my aunt. I’m going to ask them to borrow money," Councilman Jose Huizar said, according to the LA Times. "But I’m going to tell them: ‘You know, I’ve got this ’67 Chevy. I could sell it a year from now and maybe I’ll pay you back with that.’ Can we do anything like that?"
The problem, of course, is that LA’s uncle is the State of California, which is facing a giant budgetary crisis of its own. It doesn’t have the money to bail out LA. And muni bond investors are unlikely to love the idea that LA will find some way to raise cash in the future to compensate for its inability to restrain spending now.
Will the ratings agencies wait 30 days before slamming LA? We’ll see.
With city officials declaring that "bankruptcy is not an option," Mayor Antonio Villaraigosa released a long-term plan for the city’s finances Thursday, including several billion dollars in potential savings and possible layoffs of 1,000 workers.
In a letter to City Administrative Officer Miguel Santana, the mayor and City Council leaders called for the start of steps needed to make layoffs and perform studies on dealing with this year’s continuing shortfall of $200 million and the projected $400 million deficit for next year.
"This mayor has no interest in going down the road to bankruptcy," said Deputy Mayor Matt Szabo, who has been assigned the task of developing the overall financial strategy for the city.
My Comment: It is irrelevant what the mayor wants now. The fate was sealed years ago with pensions. LA came to a fork in the road, and selected the road named "Bankruptcy". Now the mayor says LA has no interest going down that road. Well it is too late for that now, unless unions are ready to do some serious negotiation.
That’s the kicker, LA has no choice in the matter other than the mayor’s willingness to ask the unions for concessions. Whether or not LA goes bankrupt depends entirely on the response from the unions regarding wages and pension benefits.
The five-page letter from Villaraigosa, also signed by Council President Eric Garcetti and council members Bernard Parks, Jan Perry, Greig Smith and Dennis Zine, sets the stage for a series of decisions to reduce spending in the city’s $7.01 billion budget.
There are no plans to ask voters for a tax increase, but the mayor is looking at whether a ballot proposal will be needed to reform the city’s pension system.
My Comment: Good luck with that. You will need it.
Santana’s office also released a report showing the city’s revenues continue to decline, particularly in consumer-sensitive areas such as hotel and sales tax. Also, holiday season sales were much less than expected.
My Comment: Welcome to frugality, the new reality.…
In my larval, pre-blogging days, I always faced the back-to-school moment with abject dread. It meant returning to a program of the most severe, mind-numbing regimentation in the ghastly New York City public schools after a summer of idyllic unreality in the New Hampshire woods, where I went to a Lord of the Flies type of summer camp. And so here I am, many decades later, still uneasy as the final page of the August calendar flies away in a hot Santa Ana wind, and a great hellfire closes in on the far eastern reaches of Los Angeles, and the American money system falls into a peculiar limbo, and every fifth person is out of work, or going bankrupt, or glugging down the seawater of default, or being denied coverage by health insurance that he-or-she has already shelled out ten grand for this year, or getting shot in a trailer park.
I was in Los Angeles for a few days last week, as chance had it, marveling at the odd disposition of things there. I’ve been there many times over the years, but you forget how overwhelmingly weird it is. Altogether the LA metro area has the ambience of a garage the size of Rhode Island where someone happened to leave the engine running. To say that LA is all about cars is kind of like saying the Pacific Ocean is all about water. But one forgets the supernatural scale of the freeways, the tsunamis of vehicles, the cosmic despair of the traffic jams. The vistas of present-day LA make the Blade Runner vision of things look quaint in comparison.
You motor out of the LAX airport – personally, I love the name "LAX" because it so beautifully describes the collective ethos of the place – and you discover quickly that the taxi cab’s windows are not that dirty, it’s the air itself colored brown like miso soup. Going north on the 405 freeway, you see the looming Moloch of the downtown skyline through the brown miso soup. And you begin to understand why the products of the film industry are so fixated on the theme of machine apocalypse. Downtown LA looks like just such a gigantic machine as the FX crews would dream up, as if a day will come when those gleaming mirrored office towers will pull themselves
The current economic system is designed to fail, but so was socialism. That’s according to former GOP Congressman Ron Paul, who told RT’s Boom Bust show that we need to go toward a system of property ownership, voluntary contracts and individual liberty, while getting rid of central banks.
By Jacob Wolinsky. Originally published at ValueWalk.
The 2016 Sohn Conference starts on Wednesday (May 4th) at David Geffen Hall, Lincoln Center10 Lincoln Center Plaza New York City. As is our custom at ValueWalk we will be providing in-depth coverage of the most anticipated event of the year. The line up this year once again does not disappoint.
Yesterday, the first market day of the proverbial "sell in May" strategy, saw a 0.78% gain, but the second day of May trading erased the gain with a 0.87% loss. Today was light on economic news, with the big economic event of the week coming on Friday with the release of the April employment report. The popular financial press pointed to larger than expected contraction (at 49.4) in China's Caixin Manufacturing PMI, a diffusion index that has contracted for the past 21 months. Our colleagues at Investing.com had forecast a near break-even at 49.9. The S&P 500 plunged at the open and sold off to its late morning -1.28% intraday low. It rec...
Or, as Bespoke Investment Group put it in a note Monday, "Both reported demand and reported supply of C&I loans are suggesting that credit will stop flowing to business from banks in the near future, if history is any guide."
Over the past 12-15 months, the majority of global stock markets have been in a down trend, creating a series of lower highs and lower lows. The German Stock market peaked around 6-weeks ahead of the S&P 500 last year and could be considered a global trend leader, creating a domino effect.
Below updates the pattern in the DAX index-
CLICK ON CHART TO ENLARGE
The DAX index remains inside of long-term rising channel (A), no doubt ...
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Remember this? It was Monday. PRGO is down from around $130 to under $100 since I started following it LAST WEEK. That's down almost 25% in a week, and almost 50% in the last year. So I wrote,
"Perrigo CEO Joseph Papa leaves Perrigo (PRGO) to lead Valeant (VRX) while PRGO issues a warning about missing earnings expectations. Not surprisingly, PRGO stock plummeted today.
Robert Ingram, Chairman of the [Valeant] Board, stated, "The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time. He has a strong shareholder orientation,...
Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,
The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now.
And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now.
Phil writes back,
I was expecting them to start throwing poop at each other &n...
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 firstname.lastname@example.org 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.
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