The almost certain failure of Tuesday’s ballot initiatives will also push the state’s borrowing needs into the stratosphere, placing a commensurate burden on taxpayers for years to come. California legislators had been planning to borrow about $13 billion in the coming fiscal year, but that figure will likely have risen to about $20 billion by Wednesday morning. Under the circumstances, what incentive would anyone have to live in California, assuming one is not trapped in a home worth less than its mortgage? Ordinarily, we might expect a huge exodus to Nevada, where property values have crashed to levels that down-and-out Californians could afford. Trouble is, the casino jobs that might otherwise lure Californians to Las Vegas and Reno have largely vanished, and the gambling industry remains in its worst funk since Bugsy Siegel took Horace Greeley’s advice to Go West, young man.
Almost as scary as California’s fiscal future is that of New York. Suffice it to say, the state’s financial problems, like those of California, are beyond remedy. We’ll take them up at a later date, but first let us say, R.I.P California.
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Well, with spending having risen nearly 2x vs. inflation + population growth in the past five year, don’t you think we could find something to cut other than teachers? Like maybe some of the school administrators that eat 40 percent of school spending (which is over 50 percent of CA’s spending)? As a native who has watched this spectacle for 57 years, nothing would surprise me at this point. We Californians are a schizophrenic lot. The good news: if we just rolled back spending to 2003 levels and then capped expenditure growth at pop+inflation we could be in surplus in a few years.
Fat chance.
All the leaves are brown and the sky is gray…..on such a winter’s day… well, I got down on my knees and I began to pray…. the lovable, prescient Mamas and Papas!
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Cass never saw it coming… RA
Yea, but where the hell do you go? California sucks, but the problem is, the rest is the country sucks even worse, always has! I have been spending time in Bend, OR. Nice place, skiing etc. but they are dying a slow death in Oregon. Who is buying timber? Fishing is dead. The fact is Rick, the whole world is becoming overpopulated and fast. I have spent many years in Europe in the 80’s. I’m afraid to go back because, like the once great California, it just won’t be what is was even 20 years ago. The real estate boom the just busted was essentially Mexican farm workers who strapped Skil saws on, built homes over perfectly good farmland for…Mexican immigrants! Great sustainable growth plan!
Well sayonara to Sacramento.
60+% No virtually across the board, good for the voters.
At what point can we break the NEA’s power, and that of the other union’s, so that rather than having to lay off, we reduce across the board on pay and benefits?
With 15% of members losing their jobs, one wonders, would they rather work for (much) less, than have no job at all?
Same in NY. Patterson offered to trade a modest no-3%-planned-increase “cut” for 5% of state employees’ retention, but the unions nixed that too.
Once we hit 30-50% lay-offs, mayben then the members will vote to cut, rather than to lay-*off. Thank goodness the states can’t even attempt to print their way out of it (unless they can also get the gov. to take this money on its books). To that last point, the fed. govnment could bail out all 50 states for way less than AIG and a couple of other TARPies, for less and for a few years running. Heck what’s another 500bil p.a. at this point?
Finally Rick, when you write your comments about NY, could you broaden that to include your old home state as well? After all what GS’s alums could do to itself, the financial system, and the federal gov, they’re also doing a great job in the state house!
Thanks for the ever interesting comments.
Rick, I don’t see faz going to $10, sorry as they didn’t perform that well when Citi and Bofa crashed straight down in Q1. I’m a very bright investor and i’ve seen and talked to brighter people that don’t understand these (leveraged short etfs.) I’ve discussed this with Mish when i lost some money in srs in q4 08. I think professionals and bloggers have a social responsibility when it comes to these investments.
Back to bank stocks, the big banks have skimmed some of the $10 trillion of taxpayer funds as well as other likely Goldman/Fed/Treasury manipulations to allow BofA and the like to raise capital and front run trades.
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If you mean run faz starting at $10 under my scenario.
Day 1
index faz
10 10
Day 2 index down 25%
index faz
7.5 17.5
Day 3 index up 33%
index faz
10 0-zero
The spending cuts proposed are typical. Cut the most popular spending first. Make HURT! I can’t believe that they can’t find something else to cut. CA’s bloated government must be filled with people who should be canned, permanently. Maybe some cuts in CARB would be in order with the new “national standards” Obama introduced yesterday.
I hope the taxpayers win on this one. Maybe it is time governments all over the country face up to the fact that spending MUST be cut to sustainable levels.
DOM
If I were there and losing my home or in danger of losing it, the last thing I would want would be a higher tax bill to support an already bloated government. Now they may even have to dip into the state CAFR fund, horrors.
In case you have not picked up on my leanings, it’s about time that all governments get a serious haircut, like say ninety percent, so we the people will have enough left from our labors to take care of ourselves, including getting a real education vs. indoctrination. Let the parasites and those whose votes they buy with my labor be damned.
So, will CA get TARP money now?
To Rob :
About your point with FAZ:
There is actually a very good reason for FAZ not te ever get back to the $50+ levels it had half a year ago. Really these double, and esp, triple leveraged ETF’s are loosers for anything other than ( very) short term trading.
The marketing of these insturments makes them appear as though they were no-strike puts (or calls) having no expiration.
However, one need only look at the full chart of both FAZ and FAS to see that neither fulfills that promise. Just one long downward trend.
If this was not so, one should be able to straddle them, and be in balance either way, which of course does not work. That position would decay also.
I had first thought that this was due to some type of volatility or time-decay loss being carried into the fund’s price from its held derivatives, but it is actually much simpler than that.
A paper by some Barcley’s analysts lays it out, they call this: “micro structure effect”.
Simple put, these leveraged ETFs are fated to loose money, here is why:
Imagine the underlying having high volatility, say a number of suceeding 10% up and down days.
After 4 days of up, down, up, down you would have (start at 100);
110, 99, 108.9, 98.01
You are down 1.99% after 4 days.
At two times leverage though, here is your comparative performance with the ETF:
120, 96, 115.2, 92.16
You are down 7.84% after 4 days.
That is a negative performance difference of almost 6% after only 4 days.
In real life, the vola won’t be that high, and the neg. difference would be much less, but the trend is there. The leverage causes this underperformance by magnification.
Therefore, these leveraged things really stink other than for juiced up (day) trading, and that is not even talking about the fees, which I assume are taken out of these ETFs, just as they are for GLD or SLV. GLD is at 92.16 while spot equivalent this moment is 93.86, a non-negligible -1.8%, prob. due to fee-decay.
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