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
Note: With today's release of the Federal Reserve's Z.1. Financial Accounts of the United States for Q4 2015, we have updated this commentary to incorporate the latest data.
Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth at an all-time high — 58.9% above the 2009 trough and 28.3% above the 2007 peak. The nominal Q3 net worth is up 1.9% from the previous quarter and 3.1% year-over-year.
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Do you remember when you were growing up and all your friends were allowed Atari game consoles but you weren’t?
Well, I do and the things seemed as foreign to me as Venus. Mostly because the little time I managed to spend on the gaming consoles when my friends weren’t hogging them I found it all a bit silly. I never “got” computer games, and to this day still have poor comprehension of things like Angry Birds.
I suspect that many people around the world view Bitcoin in the same way as I view Angry Birds: with mild amusement and a general lack of understanding as to what the hell all the fuss is about.
I was thinking of this since a buddy of mine recently started ...
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.
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 email@example.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.
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