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California RAN Update: Risk Of Far Less Revenue "Anticipation" Explains Why Bond Only 59% Presold
As we reported earlier, today's $10 billion (lack of) Revenue Anticipation Notes to be issued by California has been delayed. It turns out there is more than meets the eye: namely a lawsuit, which has been disclosed only post-facto. From Dow Jones: "Lockyer issued a notice for the deal's preliminary official statement on Wednesday that said a taxpayer lawsuit was filed in state court on Tuesday seeking to block the sale of 11 state building. If the sale is not completed by June 30, fiscal year 2011 state revenue would be reduced by $1.2 billion, the notice said." In other words, there will be much less revenue to be "anticipated." As for the actual auction, unlike GM which according to Government Motors star employee of the millennium Phil Lebeau is oversubscribed so many times one needs an abacus to figure it out, only 59% of the Cali RAN was presold. In the meantime, the muni mauling continues with extra vigor and finding bid pockets has become tougher than discovering an honest banker.
Retail investors snapped up $5.89 billion, or nearly 59 percent of the offering, during a two-day presale period on Monday and Tuesday, the state treasurer's office said late on Tuesday.
"We launched this sale in some pretty rough waters," Tom Dresslar, spokesman for California Treasurer Bill Lockyer, said in a statement. "Given the market conditions, we're pleased with the retail demand."
What market conditions? The S&P is near 2010 highs. Just how much higher does Brian Sack need to get the S&P before bankrupt states can finally stop using the "Fed market manipulation is ineffective" cop out?
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Like I just said in the last post, Matt Taibbi was correct. The buildings are probably being sold to Middle Eastern sovereign wealth funds via a conduit like Morgan Stanley or Bank of America. This way, they can get money for a year and then PAY to lease them back. The Arabs are buying up our infrastructure because they know how desperate states and municipalities are for money.
God help us all.
Who in the world would buy real estate in the US, even from the US government, considering foreclosure gate?
Forget the sale-lease back transactions - all dryed up like death valley!
And with real-estate sales slowing there will be less tax revenue as well.
California is shitting all over itself.
If he thinks this market of record high bond prices is, "some pretty rough waters," wait until he sees what is just around the corner.
Ireland and Portugal spreads have dropped a little further today; however, Greece spreads remain at their peak, and Spain spreads are getting wider again today. The big fear is Spain. Keep an eye on that Spain spread over the rest of this week. Further widening will put huge pressure on Ireland to get their bailout done asap.
right now we have a bullish pennant formation developing in the S&P between yesterday and today. if the trend channel continues to converge, then a break out to the upside would be expected very soon. looks like it will occur into the close and possibly be continued into the open tomorrow. we really need to see a partial gap fill into the 1190s in S&P in order to re-assert short positions.
i think we can reasonably expect that Europe spreads will all be wider tomorrow and Friday as the market puts pressure on Ireland to request a bailout.
Sheez.....how long have those state buildings been on the market.....6 months ?? I wonder if potential buyers are suspicious of the State's non-binding commitment to lease back at a long term cost greater than the selling prices. Or asking prices are way too high. Or both.
No matter....the Cali budget has more water in it than Lake Mead anyway.
Taxes in California aren't high enough?
BRAWHAWHAWHAWHAWHAWHAW
I wouldn't buy them if they promised to pay me 20%
Bernanke: Bonds Schmonds.. As long as Apple and Amazon stocks are up , Its all good.
The muni-mauling is being studiously ignored by the MSM. Ben and Timmy must be shitting bricks. I don't think they have answer for this one.
These criminals have been advertising these bonds on the radio to the general public for weeks. KABC and KFI are filled with their ads, "Get in now before the big institutional investors..." blah blah blah. I just laugh. Hopefully the little old ladies in Pasadena aren't taking the bait either.
But what is important is GRAVITY! And I got to remind you, Sully: This is my weak arm!
Will somebody more technically astute than I please post a 3-month chart of the municipal bond (MUB) blood bath?
And how about a scathing article on the best financial blog on the planet, ZERO HEDGE, piling on the following article on GoldSeek:
http://news.goldseek.com/GoldSeek/1289922503.php
http://tinyurl.com/394448t
That chart isn't done going down, imo. I got caught in high yield closed end, and they started dumping those about 2 weeks ago, today was a deadcat bounce, some think they're geniuses picking bottoms. The tech damage is huge. The 10-yr is pushing 2.9 again. Most closed end went ex-div on the 10th, the next months could be waterfall.
When the muni mauling triggers more downgrades the derivatives (swap) house of cards starts to come down, the death spiral tightens for the issuer--see Jefferson County. Tax-exempt issuers, including many airports and hospitals, who bit that fat juicy worm, will be popping up in the news in the coming months.
Also, Max Baucus has tied the renewal of Build America bonds to the permanent tax cuts I read.
dup
"We launched this sale in some pretty rough waters," Tom Dresslar, spokesman for California Treasurer Bill Lockyer, said in a statement.
The rough waters were created by you thrashing around as you drown.
Is this something I could short?
Only if the Fed will loan you some.
not really a muni short etf.
In the meantime, the muni mauling continues with extra vigor and finding bid pockets has become tougher than discovering an honest banker.
Classic!
I caught Lockyer on CNBC today, his response to their questions about CA's ability to pay "we have new leadership".
I presume he was referring to CA's new gov elect and current AG Jerry Brown, who has a lifetime record of fiscal incompetence, or perhaps he was referring to the new speaker from of the assembly, homosexual Communist representative from the city of Bell CA, John Perez (Perez is also a cousin of LA's mayor Villar)
Ya baby new leftist spendthrift union leadership is going to fix everything.
Google "City of Bell bonds"
I caught Lockyer on CNBC today, his response to their questions about CA's ability to pay "we have new leadership".
I presume he was referring to CA's new gov elect and current AG Jerry Brown, who has a lifetime record of fiscal incompetence, or perhaps he was referring to the new speaker from of the assembly, homosexual Communist representative from the city of Bell CA, John Perez (Perez is also a cousin of LA's mayor Villar)
Ya baby new leftist spendthrift union leadership is going to fix everything.
Google "City of Bell bonds"
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