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New York State's Toxic Spiral: Preparing For The Moody's Axe, As Cash Flow "Crunch" Accelerates
And somehow declaring that a bankrupt state is, gasp, bankrupt is expected to be surprising? At least that is the read of Bloomberg's piece highlighting that the idiots over at Moody's may cut New York's Aa3 rating. What next: a $10 trillion deficit financed exclusively with new debt may force an upgrade of America's AAA rating? Quote Moody's: "The next three months will be critical to the state's credit rating. The rating
and outlook reflect the state's current-year projected gap of approximately $3
billion and the deteriorating liquidity in the state's General Fund, and also
reflects our expectation that legislature will enact solutions to the budget gap
and that revenue collections based on bonus payouts will exceed the state's
conservative projections. If there is no action taken by the state to close the
gap, or if action is taken but is largely-one-time in nature
(therefore increasing the structural imbalance in the outyears), and
revenue collections in January are close to or below state projections, the
state's situation at that time would likely not be consistent with a Aa3 rating
and stable outlook." Which is why NY State comptroller's earlier released report "New York State’s Cash Flow Crunch" will likely do little to improve Moody's skepticism that New York can escape the fiscal abyss so well shown by Arnold to be inescapable. "[B]borrowing to address the State’s deficit would be irresponsible, incurring additional costs and adding to the State’s already high debt burden. As more time goes by without meaningful effort to address the State’s budget problem, the cost of inaction will grow and the consequences will be significantly more severe." So sooner or later New York will also likely end up bankrupt, but at least Goldman et al. have massive NOL carryforwards that will prevent them from paying any state taxes for a considerable amount of time. That and one-way private jet tickets to any non-extradition venue of their choosing.
Full Moody's report:
And an even more dire warning from the comptroller of the state:
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Not to worry - as each negative news item gets published tonight, somebody (any guesses who?) just keeps jacking up the S & P futures - now up 40 and levitating...
and the dollar... well the dollar just keeps unlevitating...
S&P Futures Up 40? You must mean Dow.
I may be missing something here, but everyone is ragging on the dollar, and Wall St seems intent on engineering what appears to be its demise, but wonder if a different game is being played?
The dollar is caught in a lock step shot-gun marriage with the renminbi, which makes it safe as houses, well in a manner of speaking. My feeling is this is actually an attack on all the other world currencies, not a sabotage against our fiat foolishness. It seems to me that it is the Euro and the Yen who are really in the most danger.
Just how expensive can that Toyota/Sony/BMW/Porsche get before it craters their export economy?
Seen the cars at the China Motor Show? They start to look pretty good at around $8000 for the same kind of thing that is $15,000 from GM/Ford or $35,000 from BMW/VAG/MB.
The quality will get there too, if Kia & Hyundai can do it, you better believe China Inc can. I talk in cars because we all know how the Japanese killed the over complacent US & UK auto and motorcycle industries. Well, the next tsunami is coming, riding in on a wave of depression era value, much as the Model T Ford did, and it will be valued in the new Renminbi-Dollar world currency.
So my suggestion is that all this driving the dollar down is a strategic play to keep us as the =#1 world currency, and it certainly doesn't hurt our #1 creditor. So should we be afraid of a devalued dollar when it its unholy wedlock guarantees it will remain the most powerful monetary unit around?
With oil over $80 a barrel, the car industry does not look to have a particularly bright future no matter what happens.
I may be missing something here, but everyone is ragging on the dollar, and Wall St seems intent on engineering what appears to be its demise, but wonder if a different game is being played?
The dollar is caught in a lock step shot-gun marriage with the renminbi, which makes it safe as houses, well in a manner of speaking. My feeling is this is actually an attack on all the other world currencies, not a sabotage against our fiat foolishness. It seems to me that it is the Euro and the Yen who are really in the most danger.
Just how expensive can that Toyota/Sony/BMW/Porsche get before it craters their export economy?
Seen the cars at the China Motor Show? They start to look pretty good at around $8000 for the same kind of thing that is $15,000 from GM/Ford or $35,000 from BMW/VAG/MB.
The quality will get there too, if Kia & Hyundai can do it, you better believe China Inc can. I talk in cars because we all know how the Japanese killed the over complacent US & UK auto and motorcycle industries. Well, the next tsunami is coming, riding in on a wave of depression era value, much as the Model T Ford did, and it will be valued in the new Renminbi-Dollar world currency.
So my suggestion is that all this driving the dollar down is a strategic play to keep us as the =#1 world currency, and it certainly doesn't hurt our #1 creditor. So should we be afraid of a devalued dollar when it its unholy wedlock guarantees it will remain the most powerful monetary unit around?
Dow futs up 86 in late asian trade, all european indices up a buck-sixty. Crank and shank on the way...
I'd get snarky about this, but I live in California.
Misery loves company. Besides making fun of others misfortunes is game-on here.
So then ... If they are broke ... Does that mean they are broke?
I'm sure somebody will push through a version of Ch11 for states. Goldman could end up owning NY and the Fed would pay for it. Something like that.
Very astute, and funny. Nice post Keyser.
The real crime here is that Moody's employees continue to get paid for producing this drivel.
Just Jump! already
Mauritania lacks any extradition treaty with the US, and has solid (gold) reserves.
Back in 1975, NY was going bankrupt and Gerald Ford told NY to drop dead. Those folks that subsequently invested in ConEd made a killing.
What do California and New York have in common?
//?
Yeah. Why hasn't NY started issuing IOUs?
CA and NY are States # 1 and # 2 in several U.S. economic categories. Effective Buying Income, contribution to Fed tax revenue and GDP generators most notably.
These States are also dead even in producing whack job corrupted legislators who have totally sold out to public sector unions.
http://www.youtube.com/watch?v=PaviHMk7Ck8
There will be no double dip Recession. FHA approved loans "signs" all over Chicagoland areas. The new normal in housing (FHA) thanks to Barney!!!
The Moody's report makes a very brief mention of $4 billion of derivatives. These are described as floating to fixed swaps, and I suspect that even if they are plain vanilla, the mtm could be several hundred million. If they did something "clever" this could be far worse.
Derivatives with Munis always seems to combine the most complex of products with the dumbest of counterparties.... the fact that they are not required to mark to market these transactions is a scandal, but then, that's a much longer story..
the movie Blindness is a bit poetic and i dare say Prophetic
+1, haven't seen the movie yet, but read the book. yes, it is eerily prescient. what's even more eerie was that the nat'l federation of the blind came out in fierce criticism of the book. they obviously didn't see the metaphor.
the blind leading the blind leading the blind leading...
What happens to the Muni Bonds? Are these insured?
NYPOST article floating Dimon riding to the rescue at treasury. Sad, just totally sad. Dimon's brand is as tainted as anyone but the MSM will fawn all over him as a key Dem insider.
The upside is Jaime hates Vampire Squid...
OK...so let me get this straight....MOODY's will not take action until AFTER NY either defaults or fixes itself. Isn;t Moody's supposed to predict such actions and then rate accordingly? Just fucking cut their ratings already and get it over with. That is the right thing to do. If they fix the problem (hahahahaha) then upgrade them!