Cali's budgetary issues

Warning to all here that I concerned with. On the top of this bear market rally ...everything will likely get sold and sold heavy (true capitulation, unless it breaks out)...The true definition of a bottom (one in this case) is when all markets collapse and there is simply no where to hide…anywhere in the world. That will be another low. Assuming a typical bear market, the decline will be likely near 20% (I have a target since May)...This is not a typical bear market, many markets have breached 1929 levels.

The S&P has posted what in lay men’s terms is a massive head and shoulders pattern (very bearish). The latest decline was the second shoulder. The arm should be interesting.

FRE (Freddie Mac) posted a loss three times Wall Street leading estimates this week. They are either completely retarded or as usual, have some ulterior motive. Shhh…distribute and sell you, stuff.. Myself and several other money managers contacted the press, other institutional executives, the press, regulatory bodies, the legislative branch and the executive branch starting 10/01/2002 when spreads started going negative. I still have the first e-mail and initial write-up from 04/15/2003. Disclosure; FRE is a previous client of mine.

Fannie Mae posted a substantial loss as well.
Disclosure: FNMA is a previous client of mine.

AIG posted a 25B loss this quarter. World’s largest insurance carrier. Earning for insurance carriers before this loss, were down 95%. Disclosure: One of my intermediate family members still owns founders shares in AIG.

ARS (Auction Rate Securities)

District Attorney’s are suing selling entities(Distributors) for fraud. Selling entities offer to buy back securities from customers (at some discount and over time. Woo Woo) so they do lose customers or deposits and so they do not go out of business for not meeting minimum net capital requirements. Most are still paying a dividend. Entities trade the ARS on their books to the Federal Reserve for (T-Bills/Cash required (SEC/Reserve requirement) for operations and collateralize your account, so we do not lose money and the SRO’s/SEC do not shut them down the next morning. Federal Reserve/U.S. Government takes on risk (moral hazard). Tax payer ends up paying for it. U.S. Government potentially gets downgraded by EU (Spread between the Libor/Ten Year has been at widest spread both in term and duration). Rates go up. This is prime example of a Ponzi scheme and socialism.

Got lost yet….

C (Citigroup), MER (Merrill) & UBS (United Bank of Switzerland).
The firms are stating this is immaterial. This is absolutely not correct in regard to Broker-Dealers. I will not say what I think it is. These are allowable assets, however they are subject to haircuts-greater of long or short, function of maturity. They are not cash and they are not U.S. Treasuries. They are presently trading at 2-80c on the dollar due to risk/preservation of principal. There is significant risk. Municipalities have significant cash flow problems and the reinsurer’s are trading between a buck and eight bucks.

BAC (Bank of America) & Bank of New York Mellon (Bk) are now both being investigated regarding ARS. Disclosure. In one trust, we have a substantial position in BAC.

When are they going to be banks in the business of lending money when they are using their money (our money) to acquire bad, non marketable assets. Answer, no time soon.

LOL, the, “admins,” are not on vacation and this is not China. Given the frequency of the commentary, this thread serves a specific benefit and interest to those that are interested. Further, for numerous reasons Californians are feeling the brunt of this cycle. That knowledge and freedom of expression allows us to potentially manage our lives better. Some would conclude, to buy a larger stable of horses, bulls or what-ever-your favorite animal (Ferrari’s., Lamborghini’s, etc..).

How's that for some shorthand....

 

Oh, what have I done...

 

bobafett-- You're probably too kind to say "I told you so" so I'll mumble it to myself for you. You were spot on with your call on the British pound... it's melted down 6.5% since your first post (and would've made a healthy return had I bought the puts I was toying with!)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeyMkT0NVi_8&refer=home

I'm not sure if there's a heck of a lot more downside from here considering I have very little faith in the recent "strength" of the $US--and fiat currencies in general-- given this credit crunch, so I'm not sure if I'll pull the trigger on an out-of-money put on the FXB. (which means of course, it'll drop by another 6.5% ) I am however pooling my $ and purchasing precious metals on this artificial dip... and having a heck of a time finding platinum coins/bullion, so the dealers are fattening up their spreads accordingly.

 

So California broke a new record today...the longest time for not having a budget after fiscal year ending 07/01/08.
It current not paying some of its bills.
California has C credit rating and cannot obtain funds thru new debt issuance in this "market."
Sixty-Two S&P 500 A rated companies cannot raise capital thru debt at rates over 10 points over tresuries (14%+).
A triple Aaa rated company had to go back to their inside investors yesterday to raise 1.75B and they had to pay 9.75% on a preferred convertible. They could not go to the institutional markets, as new issuance is dead.

The left side of the isle in Ca wants to increase taxes 10B. That would destroy the economy here.
Let's try cutting the budget like any other business or household would do (Very Unpopular).
E.G. Paying bills with what you have, not passing the buck to the detrimate of the future.

Irronically, the Governors (both Democrats) of NJ & NY have done the same and now lobbyists are spending 2mm to get them out of office.
How about serving the people (not sticking it too them) thru good fiscal management instead of serving the lobbyists.

There's some novel ideas.
Andy Rooney, move over.

P.S. What I forsaw last month is occuring, "Warning to all here that I concerned with. On the top of this bear market rally ...everything will likely get sold and sold heavy (true capitulation, unless it breaks out)...The true definition of a bottom (one in this case) is when all markets collapse and there is simply no where to hide…anywhere in the world. That will be another low. Assuming a typical bear market, the decline will be likely near 20% (I have a target since May)...This is not a typical bear market, many markets have breached 1929 levels."

Target's are new low's (I two targets at the moment (one is below 10,000). The NYSE (Not DJIA) has already breached the July lows. Volume is as anemic at best, to the point where I would say 25% (or less) of normal (limited/no market) for this time of year. We will see if Treasuries unwind and reboumd, "the markets," a little as they have overtradded.

Got to run.

P.P.S. Forgot to add..the market rally was literally bought up by Treasury (shh..don't tell anyone) on the CBOE and Fed issued the financinal institutions 16-17B a day of our money for their garbage. The, "third goal," of the Fed is too support markets. At least they have doing it, on and off since 1987. I will be quiet now, before they disappear me. lol.

 

Have to disagree with you on that one. San Jose is not an easy place to work. New officers work 3rd shift and, in this town, you see craziness at that hour. They are worth their wage IMO.

 

so it's now official: the taxpayer is on the hook for a MASSIVE chunk of the stupidity and outright fraud that is on the books at FNM and FRE. disgusting, but it really was inevitable. FNM and FRE have direct access to the printing presses, and the erosion of the "value" of the $US-- and by extension, all fiat currencies-- can only accelerate.

I can't understand however how the $US is so recently and suddenly finding strength not only against foreign currencies, but against the precious metals as well??

my instincts tell me to buy up gold and platinum, but I'm reticent to catch those shiny falling knives. I just don't quite understand what caused them to fall... unless "helicopter Ben" will soon be *raising* the Fed funds rate??

I'm going to be hedging like hell next week...
buying Au and Pt bullion, if the $US reverses its strength and deteriorates thanks to the printing presses being cranked up to full speed for the benefit of FRE and FNM.
buying puts on the XLF and even the general market, if the $US strength is due to some insiders knowing that Ben is about to defend the dollar... and raise rates, at the expense of the stock market (hello '29 all over again...)

 

babafett, you are correct sir (as usual) in your Spartan answer(s).

It is quite disturbing.

The situation is so complex (a 200 Trillion dollar problem), it is difficult to articulate it others that are not as astute on these issues.
99% of the talking bobble heads have zero real comprehension of what it occurring or frankly they have some ulterior motive (sell side, fee collecting idiots', series 6/7's, etc., etc., that have zero business calling themselves financial advisors or their reprsentatives).
Someone of my caliber could debate the issues over weeks with the best minds of our time (I have) and not due this proper justice.

This is the latest paper (light reading) being passed around Washington.
While interesting, it is completely useless.
Containing Systemic Risk: The Road to Reform
http://www.crmpolicygroup.org/


Treasury Default Swaps- (The cost to insure that our federal government does not default) had now increased to 18bp's, the widest spread ever. I mentioned that this would occur on several occasions on prior posts. Funn...the world is not buying it...unless there is a premium attached now.

It would appear that several of the other banks, "to big to fail," are indeed going to fail. Didn't I say this before. Time for another government meeting over the weekend, so that they will have their mandatory reserve accounts in place by the required following Tuesday within a half hour of opening (required to protect depositors).

Socialism, rah rah rah.

P.S. I hope everyone's spare change is in Money Market instruments or cash spread across the board (many institutions)/or Treasuries. CD's are going to be certificates of depreciation, where you cannot get your principal back in timely fashion or fractionally at best over 100k. The FDIC is greatly undercapitalized and has one third the work force it did in the nineties. It took them an average of eighteen month to process insured accounts at that point in time.

 

so where do you park big money?

 

I have a 52 year old ret. Mountain View police officer living down the street from me and he gets 90% of his pay??? My dad worked 45 years at in aerospace and never got anything close to that. This state is messed up.

 

You have to look at that type of retirement as deferred compensation. A deal is a deal and he worked all of those years knowing he'd have a cushy retirement. No doubt many government employees are overpaid, though...especially the elected ones. Don't think that all government employees get such a nice retirement package, though. Police, Fire and Politicians get the best deals. If you are a clerk at city hall, you probably get 30-40% plus benefits.

 

Your dad never risked getting shot and killed every day he went to work. He wasn't hated by the sleaziest most unappreciative members of society for doing a tough job. If you or your dad wanted to have 90% of your pay at age 54, you could've opted to not sit at a desk during the day and instead patrolled the street the night, assuring that nice citizens like you and I could sleep well.

If it takes some great retirement benefits to draw in top quality police officers, I'm all for it. And I haven't exactly heard of people standing in lines just itching to become a cop. I live in Mountain View, it's a great city, very safe. The police officers do a damn good job keeping it that way, and from not becoming the war zone that is some parts of Oakland, or many cities in So. Cal.

Note: I'm not a police officer, nor are any members of my family. I just know how to show respect and gratitude for those who do a thankless job. If they put in the years of personal risk to earn their retirement benefits, I hope they enjoy many decades of them in good heath on my tax dime.

 

Don't get me wrong I appreciate the job this special group of people do, but if you want your state to go bankrupt then you take the attitude that that you pay them whatever it takes to hire them.

 

If you want to talk about the herds of gov't workers too sorry to make it in the private sector, then I think we're on the same page. But you *specifically* mentioned police officers.

I don't mind paying a premium to assure there is a good pool of candidates competing at the police academy to earn the right to patrol my streets and hopefully one day have great retirement benefits. These are the people who assure our safety, I don't want this job being given out to the lowest common denominator. And as I said, if it's such a great job with great benefits, it's open for anyone to apply-- and I don't exactly hear about lines of people itching to sign up.

If you're talking about some unionized person being a useless lump standing behind the counter at some gov't office... then we're on the same page. But when it comes to those who protect me and my family, I want the best and brightest, and I'm willing to pay for it.

 

I think we are on the same page, But when I read your comments I can't help but think about all the people in the military service that don't get anything close to what the police officers get, yet they have an even greater risk, so it all ties back to having an even playing field that pays wages and retirement that are balanced, One that the states and citizens can afford.

 

My intermediate family has given to twenty-four law enforcement agencies since 1984. We have a signed picture of every President on walls of one family home since IKE. We have given ourselves to our country in countless ways and have put ourselves in the line of fire. I have done numerous things in a Pro Bono capacity on many occasions.

That being said...pay structures will be changed to a substantial discount or their will be layoffs...There is a big dislocation with reality.

We all have to revisit what constitutes real value and worth in everything. In this, environment, the pay structure, in this instance, far exceeds the structure that needs to be met to zero out the mathematical solution. In other words, the revenues no longer support the excesses. Absence, of a serious change of equation in fiscal (keynesian/supply side economics) or monetary (demand side economics) or new debt issuance, in the end, the settling of the math will ultimately and always is the final end game solution. They should be happy they have a secure government job, can feed/provide heat/sheler for their families and reasonable living...whatever the pay.


On another note...This is what I think of BAC/MER and this was bothering me late last night.
Awful run investment firm, BAC (garbage) + MER (failing extremely poor losing garbage) = a bigger pile of B.S.
Ironically, this guy uses the very same exact analogy...Yes, that is Henry Bloggent, formally the Dot Com Analyst of MER, interviewing him. lol.
http://finance.yahoo.com/tech-ticker/article/60575/Merrill-Faces-%27Calamity%27-If-Deal-with-%27Fragile%27-Bank-of-America-Collapses?tickers=bac,mer,leh,gs,c,wb,wm
I personally think they merged to make them, "to big to fail, " in an attempt to stick us with the bill.
To obscure the books.
The firms have two completely different cultures.
BAC has done way to many mergers and historically 90% of single mergers fail.
BAC's balance, "as reported," left a lot to be desired before this.



In answer, to which firms are safe... there are some, based on todays assumptions of value, assuming what they are reporting on the books is the truth and they further are not playing the SPV/SPE shell game.
What bothers me most is that some of these national institutions in this day in age are very much lying (commiting fraud) about the marks of their books, as they clearly do not correspond to reality and have not, for quite sometime.
I can see it plain as you walk.
Look out below.

 

http://blogs.usatoday.com/ondeadline/2008/09/schwarzenegger.html

California Gov. Arnold Schwarzenegger says he will veto a state budget passed after a 78-day stalemate, setting up a historic showdown with the Legislature. California toppled its own record for fiscal dysfunction.

 

Yep. My local PD used to have killer benefits and pay. Now they do not. The folks hired under the new plan...not all, but a lot of them...are overgrown boy scouts and hicks with badges. Low quality cops are bad news. Not a big problem now since there a lot of old planners still on the street, but doesn't bode well once the real cops retire and all is left are a bunch of knobs.

 

Im sorry if it is a stupid question. I am young, 19, and very interested in politics, just not far enough into it since I really only know history. My question is why can Indian Casino's get away with so much? I get the fact that we beat them to hell long long ago and this is somehow our turn to bend over and give everything back to them and have enough to help this state out by a ton. But I don't understand how I work so hard for my 80 hours a paycheck to make 1/4 of what the table dealers make. I know one card dealer personally who drive's a C6 Corvette. Their a monopoly that keep getting richer, I see it everyday, but the hard working class are getting nothing for anyone. Also, I understand that our law enforcement deserve good pay, thats for sure, but 90% sounds a bit outrageous. I moved from Va last summer, where police make 45k a year, teachers make 35k, and fire dept. making 30k. I understand that the cost of living is way different, but I can't understand why the pay is so outrageously higher, almost double in some careers.