OK now I have officially had enough with this settlement bullsh*t. The state of New Jersey is allowed to lie about pension funding and defraud investors, and isn’t even levied a penalty? That’s not a slap on the wrist, it’s a slap in all of our faces.
Basically all it means for NJ is that they can’t sell these crap bonds anymore. Way to regulate, you lazy, toothless **cks. Now what about the idiots who invested in this crap? Throw them on the pile with the rest of New Jersey’s creditors?
The Securities and Exchange Commission accused the State of New Jersey of securities fraud on Wednesday for telling the bond markets that it was properly funding state workers’ pensions when it was not, The New York Times’s Mary Williams Walsh reports.
As a result, the S.E.C. said in a cease-and-desist order, investors bought more than $26 billion worth of New Jersey’s bonds, without understanding the severity of the state’s financial troubles. New Jersey, the S.E.C. said, has agreed to accept the order, without admitting or denying the finding. The agency did not impose a financial penalty.
Wednesday’s action was the first time the federal agency has accused a state with violating securities laws. The S.E.C.’s powers of enforcement against the states are tightly limited by states’-rights concerns and constitutional law, and it has standing to get involved only when there is a clear-cut case of fraud.
“The State of New Jersey didn’t give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement. The cease-and-desist order named only the State of New Jersey, and not the financial institutions that helped it issue the bonds. Its largest bond underwriters during the period in question include Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital.
Well who cares, even if they did name banks by name it’s not like they’d actually DO anything about it, right? Maybe they priced in a few million extra when they last settled with EACH of those banks for financial misdeeds.
I don’t feel sorry for the investors, actually, since this is what…
This week the focus shifted from Europe, where (apart from the French World Cup team) things are quiet, to the US, where state budget deadlines are forcing some tough, and occasionally bizarre, choices. Time Magazine’s cover, for instance blares “The Broken States of America”. An excerpt:
… Almost no one — and no place — is exempt. Nearly everywhere, tax revenue plummeted as property values tanked, incomes dwindled and consumers stopped shopping. Falling prices for stocks and real estate have made mincemeat of often underfunded public pension plans. Unemployed workers have swelled the demand for welfare and Medicaid services. Governments that were frugal in the past are just squeaking by. Governments that were lavish in the good times, building their budgets on optimism and best-case scenarios, now risk being wrecked like a shantytown in an earthquake.
How the Money Ran Out
For the first time in four decades of collecting data, the National Governors Association (NGA) reports that total state spending has dropped for two years in a row. In hard-hit Arizona, for example, the state budget has sagged to 2004 levels, despite blistering growth in population and demand for government services. Starting with the 2008 fiscal year, state governments have closed more than $300 billion in cumulative budget gaps, with another $125 billion already projected for the coming years, says Corina Eckl, fiscal-program director at the National Conference of State Legislatures (NCSL). Similar figures aren’t collected for the nation’s counties, villages and towns, but when the National League of Cities surveyed mayors recently, three-fourths of them described worsening economic conditions.
Accustomed to the ups and downs of the ordinary economic cycle, elected officials and budget planners are facing something none of them have experienced before: year after year of shortfalls, steadily compounding. Ordinarily, deficits are resolved mostly through budgetary hocus-pocus. But the length and depth of the recession are forcing governments to go beyond sleight of hand to genuine cuts. And that makes lawmakers gloomy in all but a handful of states. (It’s a swell time to be North Dakota.) According to an NCSL survey, worry or outright pessimism is the reigning mood in the vast majority of capitals.
And here’s a brief look at how some states are dealing with their deficits, starting with California:
In New Jersey, taxes are high, the budget’s a mess, government is inefficiently organized, and the public pension fund is blown to kingdom come. Which makes New Jersey a lot like most other states in 2010. What makes the state unusual is its rookie governor, a human bulldozer named Chris Christie, who vowed to lead like a one-termer and is keeping his promise with brio. He has proposed chopping $11 billion from the state’s budget — more than a quarter of the total — for fiscal year 2011 (which starts July 1). He’s backing a constitutional cap on property taxes in hopes of pushing the state’s myriad villages and townships to merge into more efficient units. He’s locked in an ultimate cage match with the New Jersey teachers’ union. It may be the bitterest political fight in the country — and that’s saying something this year. A union official recently circulated a humorous prayer with a punch line asking God to kill Christie. You know, New Jersey humor. And in an interview with the Wall Street Journal, Christie didn’t talk about the possibility that his fiscal initiatives might be compromised or defeated; he pictured himself "lying dead on State Street in Trenton," the state capital. Presumably that was a figure of speech.
The tone of the New Jersey budget battle may be distinctive, but many of the same notes can be heard in state capitals across the country. From Hartford to Honolulu, once sturdy state governments are approaching the brink of fiscal calamity, as the crash of 2008 and its persistent aftermath have led to the reckoning of 2010. Squeezed by the end of federal stimulus money on one hand and desperate local governments on the other, states are facing the third straight year of staggering budget deficits, and the necessary cuts will cost jobs, limit services and touch the lives of millions of Americans. Government workers have been laid off in half the states plus Puerto Rico. Twenty-two states have instituted unpaid furloughs. At least 28 states have ordered across-the-board budget cuts,…
Thousands of protesters bused down by labor unions and social service advocates rallied at the Capitol today in an attempt to pressure state lawmakers into raising the income tax to avoid more budget cuts.
A spokesman for Illinois Secretary of State Jesse White estimated the rally crowd at 15,000, with more than 12,000 marching around the building. That would appear to make it the largest Capitol protest since the Equal Rights Amendment crowds a quarter-century ago.
Bus after bus pulled up on streets surrounding the Capitol complex and dumped sign-waving protesters clad in purple, green, red and blue shirts that represented a show of strength from a variety of public employee unions and dozens of groups that formed what they named the “Responsible Budget Coalition.”
"Raise my taxes! Raise my taxes! Raise my taxes!" they chanted, lined up shoulder to shoulder for a few hundred yards stretching a street in front of the Capitol.
Springfield Pro-Tax Rally
Save our Schools is a farce. Save our Salaries is what the protest is all about.
Barack Obama’s home state of Illinois is near the point of fiscal disintegration. "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget."
The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400m (£263m), are closing one day a week. Schools are owed $725m. Unable to pay teachers, they are preparing mass lay-offs. "It’s a catastrophe", said the Schools Superintedent.
In Alexander County, the sheriff’s patrol cars have been repossessed; three-quarters of his officers are laid off; the local prison has refused to take county inmates until debts are paid.
Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing crises. California has cut teachers salaries by 5pc, and imposed a 5pc levy on pension fees.
This is not to pick on America. Belt-tightening is the oppressive fact of 2010-2012 for half the world. Hungary, Ukraine, the Baltics and the Balkans are already under the knife. Latvia’s economy may contract by 30pc from peak to trough as it carries out an "internal devaluation", ie wage cuts, to hold its euro peg.
The eurozone’s fiscal squeeze is well advanced in Ireland. Brussels has told Greece to cut by 10pc of GDP in three years, Spain by 8pc, Portugal by 6pc. Britain must slash soon, or face a gilts strike.
The Bank for International Settlements says Britain needs a primary surplus of 5.8pc of GDP for a decade to stabilise debt at pre-crisis levels, given the ageing crunch as well. The figure is 6.4pc for Japan, 4.3pc for the US and France. It warns of "unstable dynamics", posh talk for a debt spiral. "Action is needed now."
The West risks a slow grind into debt-deflation unless central banks offset fiscal tightening with monetary stimulus – QE, of course – to keep demand alive. Yet the Fed and the European Central Bank are letting credit contract.
Gov. Christie today declared that New Jersey had veered to the edge of bankruptcy and
ordered a broad array of state cuts in an effort to make up a $2.2 billion deficit in the current budget amid falling revenues.
Christie froze aid to more than 500 school districts and public colleges and universities, ordered the end to several state programs and the Office of Public Advocate, and seized unspent money across state government.
"Today, we come to terms with the fact that we cannot spend money on everything we want,” Christie told a special joint session of the legislature. "The days of Alice in Wonderland budgeting in Trenton are over.”
The state’s sales tax revenues are 5.5 percent below projections, corporate business tax receipts are down 8 percent, both below what had been planned under former Gov. Jon Corzine’s administration, Christie said.
Christie also announced the state would not contribute $100 million toward pensions costs and signaled that he would push for massive pension restructuring.
Christie highlighted the benefits for unnamed individual teachers as an example: a retired teacher who contributed $62,000 in total toward her pension who would be expected to receive $1.4 million in pension payments and $215,000 in medical benefits over the rest of her life.
"Is it fair for all of us and our children to have to pay for this excess?” Christie said.
Christie said the state would have to pay $7 billion a year to make up unfunded pension and medical liabilities. ""We don’t have that money. You know it and I know it,” Christie said.
Hello Alice, Wonderland Accounting Is Over
Hello New Jersey, "Wonderland" accounting is over. Hello public teachers and unions, you better be prepared for the results.
New Jersey, the third-most indebted U.S. state, will sell more than $200 million in bonds today to finance voter-approved capital projects a week after Governor- elect Christopher Christie said he opposed borrowing more money.
The state will issue $209.1 million of bonds, including $205 million of tax-exempt securities, the largest such competitively bid offering in the market today, according to Bloomberg data. Christie, a Republican who defeated Democratic incumbent Jon Corzine last month, said he opposed new bond sales after the state last week detailed $2.7 billion in borrowing it plans for the remainder of the fiscal year, which ends in June.
The state’s bond sale today will finance clean water and open-space preservation projects, according to a preliminary official statement. The state is also planning to sell $1.4 billion of bonds for transportation and $1.1 billion for school construction before June 30, according to a Nov. 30 report.
Christie, 47, a former U.S. attorney, told Bloomberg News last week that New Jersey “can’t have any more debt” and that any projections for borrowing will be “rendered meaningless” when he takes office on Jan. 19.
New Jersey has $36.5 billion of gross tax-supported debt, the third highest of the 50 states, according to a report released in July by Moody’s Investors Service. Moody’s rates the state’s bonds Aa3, the fourth highest ranking. California has the most, at $75.2 billion.
New York City is leading the municipal market this week as issuers seek to borrow more than $10 billion, according to Bloomberg data. New York, the largest borrower among U.S. cities, is selling $1.4 billion of taxable and tax-exempt securities, including $616 million of Build America Bonds. By yesterday, the city had taken orders from individual investors for $440 million of the tax-exempt bonds, and for $20 million in Build America Bonds that it expects to finish pricing on Dec. 10, according to Ray Orlando, a spokesman for the city Office of Management and Budget.
Yields on conventional 20-year municipal debt fell to an eight-week low of 4.24 percent,
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.
The other day I posted what I consider to be an elemental chart about income growth (or lack thereof) since the recovery began. Neil Irwin explained that the only people who’ve seen a recovery in wage growth were those who were already doing well anyway.
This has had a huge impact on the rich-poor divide that everyone’s been talking about these past few years. Here is another possible root cause behind the new dynamic, via Richard Kirshenbaum at the New York Observer:
In the past month, a group of radical Islamic extremists based in the Middle East beheaded at least 23 people and enforced a ban on Christianity by arresting a group of people for practicing the faith in a private home.
No, I’m not talking about ISIS. The real culprit is the Kingdom of Saudi Arabia, one of the America&rsqu...
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Price Deflation Hits Italy First Time in 55 Years
The Italian National Institute of Statistics (ISTAT) reports that consumer price inflation declined by 0.1% from August 2013 to August 2014.
Italian consumer prices fell 0.1 percent year-on-year in August of 2014, matching preliminary estimates. The country’s annual inflation rate touched the negative territory for the first time in nearly 55 years due to a drop in energy prices.
Year-on-year, prices of energy fell 3.6 percent in August, mainly driven by a 1.2 percent drop in cost of non-regulated energy products. Additional downward pressures came from food ...
If GOOGLE, the NSA, and Bill Gates all got together in a room with the task of building the most accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you… they never got around to building it, but my colleagues at Market Tamer did.
Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-r...
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In a report published Monday, Compass Point analyst Michael Tarkan reiterated a Buy rating and $21.00 price target on Navient Corp (NASDAQ: NAVI).
In the report, Compass Point noted, “We reiterate our Buy rating on NAVI shares after analyzing updated credit data within the company's private student loan trusts, which indicate continued YOY improvement in delinquency and default rates. The data captures statistics for trusts originated from 2002 through 2014 for the three months ended August 31, 2014, providing a good leading indicator for 3Q14 credit trends. The ongoing improvement should give management flexibility to continue to lower provision expenses to drive earnings higher.”
The CBOE Vix Index is in positive territory on Friday morning as shares in the S&P 500 Index move slightly lower. Currently the VIX is up roughly 2.75% on the session at 13.16 as of 11:35 am ET. Earlier in the session big prints in October expiry call options caught our attention as one large options market participants appears to have purchased roughly 106,000 of the Oct 22.0 strike calls for a premium of around $0.45 each. The VIX has not topped 22.0 since the end of 2012, but it would not take such a dramatic move in the spot index in order to lift premium on the contracts. The far out-of-the-money calls would likely increase in value in the event that S&P500 Index stocks slip in the near term. The VIX traded up to a 52-week high of 21.48 back in February. Next week’s release of the FOMC meeting minutes f...
Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.
Opinions differ as to what constitutes "money."
The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...
Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).
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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.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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