Cali's budgetary issues

Most people have no concept of the magnitude of this downturn.
The auction rate securities market (CDO's and Municipal Bond market) completely collapsed on 02/07/08 and such instruments are currently trading at 2-80c on the dollar.
One of my ten licenses and three prinicpals licenses, is a Municipal Securities Principal License.
In other words, when registered, I can underwrite/issue such an offering and manage an investment bank/bank firm in that respect in regard to OSJ's, branch managers and underling series 7/52's in those branches.

Specifically in this state we are going to feel the brunt of this cycle.
For example, a fractional piece of the problem is housing/financing. Many other markets have/will collapse.
If you combine thirty-six states in the country, you still will not match the housing crisis brewing in California.
The Federal Reserve recently outlawed Alt-A mortgage last month which 80% of this market price was built upon.
The housing bill as was stimulus package was complete waste of money and will just contribute to length of the cycle.
Although, I do not make it part of my balance sheet, I have already mentally wrote down several million off one home as I know that we at the very least hit the mean.

Raising taxes is not the answer. It will do exactly what it did during the 1930's, exacerbate the problem and the cycle.
Charlie Gasparino was making this point as well this morning.

 

i'd guess it's the cutoff to make the top 1% or something like that.

 

The USDOJ, SEC and state DA's are taking care of top issue and are now taking action against those firms. As usual, too little, too late, especially for the seniors.

The consumer credit crisis is just beginning as the banks are reducing LOC's and simultaneous increasing rates. They completely removed the floor from the leasing market this last week. The personal property supported by that available credit will decline significantly in market price. The CEO of Weiss has stated the same conclusion.

Simultaneously we are now at the beginnings of a crash in the commercial credit space, the commercial real estate space and the commodities markets.

A few more statistics; One in sixty-three homes in Ca. entered into foreclosure last quarter. 15% are sixty-days late on their mortgage.

The state of California itself has suffered from broken math for quite sometime. The math always catch you in the end. This is what is bothering our Governator.

As for Socialism, we have the Federal Reserve and Treasury for that. It is not nice to be the owner of Fannie, Freddie, some Bear assets and about 1T in garbage they have traded U.S. Government securities for...Moral hazard...Wait until the U.S.Government gets downgraded by a E.U. rating firm. The spread between the Libor and Ten Year support this arguement.

For those who follow my posts on market direction, we are in wave 8 (mine you, I have never seen a wave 8 in the history of history) or wave 1. Myself and just about every other person that runs a desk is uncertain as well. As soon as this triangle breaks(very soon), I will be certain. At the time of the Fed. Meeting I will be likely entering derivative diagonal strattle’s (simultaneous positions in opposite directions with different time horizons; with stop losses and adding to the winning side) as the move will be extensive in a short time horizon.

 

Oh, how I've been praying for a collapse in the commercial real estate space in the bay area. If only that one part of your prediction could come true ...

 

i think that would end up costing us more money.

i agree with everything else you said.

 

$321,000 is the top tax bracket at 9.3%. Dems want increase that to 10%, and 11% for those over $642,000. Don't forget the millionaire tax already in place, so add an extra 1% to all those numbers for you unfortunate souls.

 

http://www.youtube.com/watch?v=7_IKcMl_a9A

 

I tried trying to navigate between Scylla and Charybdis over the last year by moving a huge chunk of my portfolio into Australian dollars (FXA)-- as well as any new cash coming in-- rather than watching my $US grow more worthless by the day. The 6-7% interest rate wasn't too bad either. But damn if this isn't collapsing as of late as well, hitting my stops and plunking me right back into $US, as apparently the word on the street is that Australia will be lowering their funds rate.

I'll probably sit on this cash for a while... but I'm running out of ideas... I just don't see any real turn around to the $US anytime in the next 3-5 years (if ever), but I think there's that growing distrust of all fiat currencies. I just can't stomach gold... as it's too easily manipulated by governments and their agendas...

Any new ideas? I'm just looking for a non-$US place to stash my cash.

p.s.-- I live in CA, and totally agree that we need to privatize many of these gov't services and kick those fat useless parasites out into the real job market, where they have to actually perform to get paid.

 

Perhaps a CFA should chime in. Sorry, I couldn't resist.

 

"Frankly they should disallow unionized workers for government agencies, stop paying caltrans and outsource that to private ocmpanies (they can't be any worse), and cut most of the moronic programs in place"
I couldnt agree more...contract out the prisons, cut the bleeding and get back to basics and re analyze the entitlement programs as well...

 

Residential & Commercial Data for Real Estate.
http://aida.econ.yale.edu/~shiller/index.html
http://web.mit.edu/cre/research/credl/rca.html
I can and I am more than qualified to answer any questions in this regard.

Referencing the comments to the top tax bracket. Having read his proposal, is also my understanding the intent of one potential nominee is to load the upper income brackets with an additional 6-7% payroll tax. I could be wrong, or he may have flipped flopped again. If you want to create economic stimulus, you need to lower taxes to be competitive on the world stage or as history has always told us, the capital will just find a home where it can be put to highest and best use. Most of the highest tax payers (Ultra-Rich) are running a, "world book." It is the people in the middle and closer to the top that will get completely smashed.

You don't like current administrations and Paulson's strong dollar policy? I would like to see what a weak dollar policy looks like. That being said, the gigantic spread and elongated multi-year move between the $USD and other currencies has now made it attractive in the face of restricted M2 money supply and an upward sloping yield curve. I will be unwinding positions and taking the opposing side the very beginning of next year. Rah Rah, Go USA, this Bud's for you.

I got a chuckle out this. Perhaps we should just, "laundry," our money. It might yield more than paper it is printed on.
http://news.yahoo.com/s/livescience/20080805/sc_livescience/highesttracesofcocainefoundonusbills

 

I know melting pennies is worth more than a penny...

 

I still have a hard on for the Aus$ as well... if it keeps slipping lower, and I don't find anything else compelling to shield my $US from further depreciation, I may pick it up again. I'm still waiting/expecting the $US to gap downwards at some point. Perhaps not on the scale of what happened to Argentina some years back (when they defaulted on their IMF loans), but something close. The debt load of our country is just too massive after the debacle of the last 8 yrs.

That said, I really can't see much compelling reason to short the British pound, as-- judging by the 1yr charts on finance.google.com-- it already appears to have decoupled from the Euro.
http://finance.google.com/finance?q=fxb

If you compare it to FXE (Euro), you'll see that there's a 20% delta between them. Moreover, the FXB is actually down for a 1yr period... and that's weakness when compared to the $US! I was ready to pick up a few "play money" puts of the FXB... but after looking at where it's been, I can't see much more downside.

Just my (ever depreciating) $.02 of course.

 

Most State, in fact most government employees, belong to a union. When you talk about CalTrans, you need to distinguish between the bureaucrats in offices and the field. CalTrans already contracts 90% or more of their work to private construction companies. Caltrans repairs guardrails and fixes potholes with its own forces. Field employees are mostly what are known as Resident Engineers who are basically inspectors. That's about it. Years ago, there was (and still is) a large backlog of projects that could not get designed because there were not enough engineers and they could not work fast enough. Gov. Wilson wanted to outsource some of the design work. PECG, the union representing the Caltrans engineers, fought Wilson in court and won. Engineers now have plenty of work to last through retirement while you sit on the freeway and idle. Contractors complain that the designs are faulty and in many cases cannot be built as designed. The incompetent designers are protected by union work rules. The RE's many of which come from countries that do not speak English, have a very hard time communicating with contractors and are on orders to make the faulty designs work, essentially at the contractors' expense.

Most of the money the State collects goes to schools. Is anyone here old enough to remember when we voted for the Lottery and what it was for? It was supposed to supplement school funding. It was going to pay for field trips and football uniforms that were being cut at the time. But your wonderful legislators just put that flow of money into the budget and spent more money elsewhere. Now the Governator want to sell the Lottery for cash now and forego future earnings? I think they should all go to jail because they are stealing. But that's just me.

 

This is more of a macro economic commentary...

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/06/AR2008080603569.html?hpid=topnews

 

Dan, that's hilarious. Reminds me of someone I know, it's like life imitating art.

Wife: Oh, I just can’t get these numbers to add up
Husband: Like we’re never going to get out of this hole.
Wife: Credit card debt, does it ever end?
Salesman: [entering from who-knows-where] Maybe I can help.
Husband: We sure could use it.
Wife: We’ve tried debt consolidation companies.
Husband: We’ve even taken out loans to help make payments.
Salesman: Well, you’re not the only one. Did you know that millions of Americans live with debt they can not control? That’s why I developed this unique new program for managing your debt. [Holds up book] It’s called, “Don’t Buy Stuff You Cannot Afford”
Wife: Let me see that. [Reading from book] If you don’t have any money, you should not buy anything. Hmmm … sounds interesting.
Husband: Sounds confusing.
Wife: I don’t know honey, this makes a lot of sense. There’s a whole section here on how to buy expensive things using money you’ve “saved”.
Husband: Give me that. And where do you get this “saved” money?
Salesman: I tell you where and how in Chapter 3.
Wife: OK, what if I want something but I don’t have any money?
Salesman: You don’t buy it.
Husband: Let’s say, I don’t have enough money to buy something. Should I buy it anyway?
Salesman: No.
Husband: Now I’m really confused.
Salesman: It’s a little confusing at first.
Wife: What if you have the money, can you buy something?
Salesman: Yes.
Wife: Now, take the money away. Same story?
Salesman: Nope. You shouldn’t buy stuff when you don’t have the money.
Husband: I think I’ve got it. I buy something I want, then hope that I can pay for it. Right?
Salesman: No. You make sure you have money, then you buy it.
Husband: Oh, then you buy it! But shouldn’t you buy it before you have the money?
Salesman: No.
Wife: Why not?
Salesman: It’s in the book. It’s only one page long. The advice is priceless and the book is free.
Wife: Wow. I like the sound of that.
Husband: Yeah, we can put it on our credit card.
Announcer: So, get out of debt now. Write for your free copy of “Don’t Buy Stuff You Cannot Afford”. And, if you order now, you’ll also receive, “Seriously, If You Don’t Have the Money, Don’t Buy It” along with a twelve month subscription to “Stop Buying Stuff” Magazine. Order today.

 

http://movies.yahoo.com/movie/1809963002/trailer

 

From the California Department of Social Services Food Stamp application form http://www.dss.cahwnet.gov/foodstamps/entres/forms/english/DFA285A1.PDF

➤ You can apply for and get food stamp benefits for eligible family members, even if
your family includes other members who are not eligible because of immigration
status. For example, immigrant parents may apply for food stamp benefits for their
U.S. citizen or qualified immigrant children, even though the parents may not be
eligible for benefits.

➤ You do not have to provide immigration status information, social security numbers,
or documents for any family members who are not eligible for food stamp benefits
because of immigration status and who are not asking for food stamp benefits.

➤ Using food stamp benefits will not affect your immigration status or the immigration
status of your family. Immigration information is private and confidential.

 

dakharris...Former Treasury Secretary Summer's and I, both support immediate Federal investment into infrastructure (roads, bridges, etc.) on state and local projects. Specifically, the projects on the table, that do not have funding and that will be utilizing private construction companies to complete the work. I also am a strong supporter of Executive privilege for energy infrastructure. E.g. Nuclear, Refineries, Drilling, Solar and Wind. Subsides, also need to be removed from agriculture for producing ethanol, it has created substantial dislocations, stagflation and harm on many different levels.

Sound familiar...FDR's New Deal. This would create stimulations thru improved net cash flow on P/L’s, efficiencies, commerce, reduction of unemployment, eventually restoration of the markets and the economy.

Good articles and commentary gentlemen.

Frefan. These social ideal’s came from a time, when the majority could support the minorities, several generations prior to today. The minorities by a ration of 4/5 to 1 (I will use that figure loosely and call them the participants in the national CDC census) are now the majority, yet they are still feeding off the system and thinking that they are absolutely entitled to such. They are paying how much in taxes? Reality, it is a net negative equation on almost every level and it can no longer be supported in perpetuity. The illegal alien issue should just be looked at for the first word in its own descriptive name…”illegal.”

 

Don't really want to be a wet blanket, and I'll prob take sone s___ for this, but I guess I will since the F-chat administrators appear to be on vacation. This thread had nothing to do with Ferraris. Remember this is F-chat, not California Budget-chat!

 

LOL, but hey, the California budget effects all of us Ferrari owners here in Nor Cal. And this thread is giving Grim an outlet to speak about budgets and finances.