California: Wall Street hands state a stunner
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res0m ...@NOSPAMverizon.net (Captain Compassion)
California: Wall Street hands state a stunner - -
The Orange County Register ^ | Thursday, January 16, 2003 | JONATHAN LANSNER The Orange County Register California came to Wall Street with a tin cup Wednesday, looking to fill a small hole in its fast-leaking fiscal bucket. Traders demanded a fat ransom for a minor patch.
The state sold $3 billion of some peculiar bonds at interest rates that look a lot like the interest rates lenders charge failing enterprises these days.
Forget debates over how big the state's budget deficit is. Whatever, it's huge.
Forget policy arguments over the merits of cutbacks vs. taxes.
Billions are needed. Probably of both.
Forget finger-pointing, too.
Just remember that reality hit your wallet Wednesday. That's when California - with all its warts - first came to Wall Street as a beggar. The reception was ice cold.
Traditionally, savers soak up municipal bonds for their track record of safety and their modest but tax-free income. But yields on California bonds have gotten so high - so out of whack - that even folks who typically play taxable bonds have been lured into California issues.
Like Wednesday. The state with the lowest credit rating in the nation
- California - was charged as much as 7 percent for the bonds running as long as 40 years. Remember, that yield is tax-free. For a high-income taxpayer, that translates to a 12 percent bond. Or a yield typically reserved for corporations flirting with bankruptcy.
For comparison's sake, long-term Treasuries - bonds with interest that's taxable - trade just under 5 percent.
Certainly these California bonds that were sold Wednesday were a tad odd. Their repayment is backed by some of the state's future collections from the infamous tobacco litigation. What could be better? Fill a budget hole without taxing or firing a soul.
Of course, fixing budget crises wasn't what the suits against cigarette makers were about, but then traders don't care about promises to smoking victims.
They like to get repaid.
They acted Wednesday a lot like a group that's not sure if California can pay all its bills.
By some estimates, the state paid up to a half-percentage-point premium to sell the tobacco bonds.
On $3 billion, that's maybe a $15 million-a-year penalty. Or roughly a 50-cents-a-head extra annual tax per Californian - and that's just the premium for bonds that barely scratch the true problem.
It's no small headache for Gov. Gray Davis, who's planning other state bond sales - fund-raisers for public-works projects seen as boosting this state's ailing economy.
To be fair, the tobacco bonds were a bit unusual. The issue was so big
- roughly one-quarter the total of all previous tobacco bonds - that there simply weren't enough buyers. California isn't the only state mortgaging this future litigation bounty to help ease today's budget crevices.
California officials had hinted that an additional $2 billion in tobacco bonds could be sold this spring. After Wednesday, governors across the land may be rethinking this tack.
"It's not the easy fix it seemed," says Mark McCray, head of muni-bond trading at Pimco in Newport Beach.
If investors continue to treat California like junk, curing the budget crater will be extra taxing to the citizenry.
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The liberal is the child. All things are new, all things are possible. All is kindness and lovable little puppies. The Conservative is the father who whispers in the childs ear that most things have been tried, possibilities have problems, kindness is expensive and lovable little puppies may turn into mean ugly dogs.
-- Captain Comp***ion 2001 "...observe that in all the propaganda of the ecologists amidst all their appeals to nature and pleas for 'harmony with nature' there is no discussion of man's needs and the requirements of his survival.
Man is treated as if he were an unnatural phenomenon. Man cannot survive in the kind of state of nature that the ecologists envision i.e., on the level of sea urchins or polar bears..." - AYN RAND "In the end they will lay their freedom at our feet and say to us, 'Make us your slaves, but feed us.'" -- Dosteovsky Joseph R. Darancette res0m...@NOSPAMverizon.net
"Tarver Engineering" jtar...@sti.net
Democrats were so stupid in re-electing Davis; now it is all their fault.
California's deficit is huge and growing with every report.
I like the way Davis will raise taxes and encourage business.
What a hoot!!
Oh my, that is not happening.
California's treasurer is already blaming Bush's tax cut.
It may be the smell of Davis.
It is all the result of Davis gamming the system to get Gore elected in 2000. In order to keep the servers turning, Davis sold electricity at below cost.
I have plastic better than that.
Way under.
Same as the electricity lawsuit would pay California $billions in refunds, but then California had to pay $1.2 billion.
Davis is quite insane, you know.
Perhaps the DNC should have thought of that before they shilled Gray into office.
California needs ten times that much money.
Davis is quite insane, you know.
Sure, but that was always a problem with letting Democrats try to lead.
John P. Tarver, MS/PE
"Tarver Engineering" jtar...@sti.net
It is all relative.
In Carter's economy 1% was insignifigant and 12% unemployment was normal.
John P. Tarver, MS/PE
slimsha ...@yahoo.ie (Slim Shaggy)
One lefty moron from CA in another NG claims Davis problem is he is really a Republican is disguise or not left-wing enough!
The Wall Street Journal showed a study that compared the growth of state employment versus population growth from about 1997 to 2002.
Florida had about 8% pop growth with 5.4% in state employee growth.
CA had about 8% pop growth but had state employment growth of 13.7%!
These are ball park numbers. Other states were also listed but CA's spending growth was the highest.
CA saw tons of money coming in during the dot com scam in SillyCon Valley and Davis & his goons thought the money would keep flowing.
I love how liberal lawyers extorted money from the cig makers with the state attorney generals standing in the background with clubs. The money was supposed to be for no smonking educations etc but the states are looting the "settlement" money. What a scam.
I am glad that Wall Street told CA to essentially. The new liberal dyke governor of Arizona will also turn AZ into another Mexico El Norte to win votes.
"Tarver Engineering" jtar...@sti.net
<>...
The Democrats really need to blame this fiasco on Republicans, but it is all Democrat here in California. It was a huge mistake to allow Democrats an opertunity to lead.
Davis was fulfilling the Democrat dream of high paid Pbulic employees and lots of them.
Davis gamed the system to keep the servers turning in 2000, so Gore could be President. Now Californians are about to get the bill.
It always was.
Smoking reduces Government health care costs, because the smoker does not live as long.
The Hispanics in California say they are White. The Democrats have misjudged the sentements of those seeking opertunity in America. The over reaction to Wilson's stupidity is about to pay off.
John P. Tarver, MS/PE
"George Johnson" matri...@voyager.net
Except of course when Criminal Traitor Ronnie "Rotten" Reagan got in Washington and raised the nation unemployment levels to 10.8% in 1982 and it hovered over 8% unemployment for a whole 27 months.
For those readers unfamiliar with Re-Tarver's constant weak-*** whore lying please visit: U.S. Department of Labor Bureau of Labor Statistics Bureau of Labor Statistics Data http://data.bls.gov/servlet/SurveyOutputServlet?series_id=LFS21000000 And change the listing parameters to suit your whim.
The graph is exceptionally telling if you list 1970 to Dec 2002 I will admit Criminal Traitor Ronnie "Rotten" Reagan did boost employment levels to a bit more past when he entered office, but it was all American Taxpayer deficit spending to spread pork-money around to appear even slightly competent. The most telling info is in comparing Jimmy Carter's term in office to Criminal Traitor George H.W. "Opium/Cocaine/BCCI" Bush's term (otherwise known as "when the bills came due on the Ronnie Rotten employment scam").
Jimmy Carter's numbers go down and then jump back up to almost their starting point. Criminal Traitor George H.W. "Opium/Cocaine/BCCI" Bush's numbers go straight up and stay that way until Bill Clinton is elected. It is a nice way to deflate the obvious lie of "Clinton owes everything to Reagan" lie because anything Reagan left was squandered and stolen by Bush.
Re-Tarver is a particularly stupid, lazy, and dishonest whore so disregard all that he spews as his diarrhea emissions are the only memorable aspect about the whore.
John Starrett jstar...@carbon.cudenver.edu
<snip> For very large values of 5, we can say that 4.974 << 5 ;?)
--
John Starrett
"Tarver Engineering" jtar...@sti.net
It is OK, Hall knows full well that 20s are way under 5% and California paying 7% is even more. The problem is that Andy wants to think the left can lead.
John P. Tarver, MS/PE
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