• Gold Money
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    Here’s a question that might have you pondering: Is gold a commodity? More importantly, are we doing a disservice to the gold industry by calling gold a commodity? These may sound like silly...

Puerto Rico Is Greece, & These 5 States Are Next To Go

Tyler Durden's picture


As Wilbur Ross so eloquently noted, for Puerto Rico "it's the end of the beginning... and the beginning of the end," as he explained "Puerto Rico is the US version of Greece." However, as JPMorgan explains, for some states the pain is really just beginning as Municipal bond risk will only become more important over time, as assets of some severely underfunded plans are gradually depleted.

Wilbur Ross discusses Puerto Rico's debt struggles and where it goes from here...


But, as JPMorgan details, Muni risk is on the rise for US states, but broad generalizations do not apply (in other words, these five states are 'screwed')...

The direct indebtedness of US states (excluding revenue bonds) is $500 billion.  However, bonds are just one part of the picture: states have another trillion in future obligations related to pension and retiree healthcare.  In the summer of 2014, we conducted a deep-dive analysis of US states, incorporating bonds, pension obligations and retiree healthcare obligations.  After reviewing over 300 Comprehensive Annual Financial Reports from different states, we pulled together an assessment of each state’s total debt service relative to its tax collections, incorporating the need to pay down underfunded pension and retiree healthcare obligations. 

While there are five states with significant challenges (Illinois, Connecticut, Hawaii, New Jersey, and Kentucky) , the majority of states have debt service-to-revenue ratios that are more manageable.

As a brief summary, we computed the ratio of debt, pension and retiree healthcare payments to state revenues.  The blue bars show what states are currently paying.  The orange bars show this ratio assuming that states pay what they owe on a full-accrual basis, assuming a 30-year term for amortizing unfunded pension and retiree healthcare obligations, and assuming a 6% return on pension plan assets.  States below the green bar are spending less than 15% of total revenues on debt, which seems manageable from an economic and political perspective.  When this ratio rises above 15%, harder discussions in the state legislature about difficult choices begin.  



It would take a long time for underfunded pension plans (e.g., 60% funded) to run out of cash, given the long duration of plan liabilities.  But as investors learned in Puerto Rico and Greece, bond markets can drift along unconcerned with mounting fundamental problems, only to experience a rapid repricing at times that cannot be predicted.  As a reminder, this analysis applies to states and not to city, county and other in-state issuers.

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Sun, 01/03/2016 - 20:32 | 6992610 MFL8240
MFL8240's picture

Thought we were in a recovery?  

Sun, 01/03/2016 - 20:41 | 6992653 Money Boo Boo
Money Boo Boo's picture

we need to print moar cowbells

Sun, 01/03/2016 - 20:52 | 6992716 Scooby Dooby Doo
Scooby Dooby Doo's picture

Ah well, I hope the people of PR are safe. If not I hope that we all open our homes to them here in the Homeland and allow them to live freely and safely.

Sun, 01/03/2016 - 20:54 | 6992725 CheapBastard
CheapBastard's picture
New York's homeless population at all-time high of 60,000




I think it's the Robustest Recovery on record also.

Sun, 01/03/2016 - 21:10 | 6992798 Tasty Sandwich
Tasty Sandwich's picture

60,000 / 8.4 million seems pretty insignificant really.

Sun, 01/03/2016 - 21:35 | 6992906 I Will Explain All
I Will Explain All's picture

watch that number fly when the welfare state goes bankrupt.

Sun, 01/03/2016 - 21:54 | 6992987 Tasty Sandwich
Tasty Sandwich's picture

The number reporters will be more concerned with survival at that point.

Mon, 01/04/2016 - 03:36 | 6994128 xythras
xythras's picture

They will survive, alright.

I'm thinking about starting a soup kitchen for libtards. More details here:



Mon, 01/04/2016 - 09:46 | 6994681 kralizec
kralizec's picture

The freak show has more play left in it.  While it would be proper and entertaining to see these mostly progressive shitholes go down the drain...we all know the Fedcoats will bail them out...so there will be more circling of the drain, more bread & circus...more delay in the inevitable...ensuring the inevitable will be as brutal as it can be.

Mon, 01/04/2016 - 07:22 | 6994310 lunaticfringe
lunaticfringe's picture

Watch that number go supernova when the people funding the welfare state go bankrupt.

Sun, 01/03/2016 - 21:55 | 6992995 Aeneid
Aeneid's picture

60,000 / 8.4 million seems pretty insignificant really.


UNLESS you're one of the 60,000!



Sun, 01/03/2016 - 22:04 | 6993041 Tasty Sandwich
Tasty Sandwich's picture

There are plenty of bridges to jump off of.

Sun, 01/03/2016 - 22:17 | 6993108 MANvsMACHINE
MANvsMACHINE's picture

Can we count on you to take in a family or two?

Sun, 01/03/2016 - 22:18 | 6993118 Tasty Sandwich
Tasty Sandwich's picture

Absolutely not.  Let Darwin do his work.

Sun, 01/03/2016 - 23:04 | 6993327 Automatic Choke
Automatic Choke's picture

I thought the bridges were all crumbling infrastructure....

Mon, 01/04/2016 - 01:14 | 6993814 jcdenton
jcdenton's picture

Darwin, that guy who worked for Malthus?

Let Malthus and Darwin complete their work. We are ALL going to die!

That is their mission. (unless you count yourself 1 of 500,000,000)

Inventorying Earth: Haileybury College
and the Roles of Malthus and Darwin

Mon, 01/04/2016 - 07:24 | 6994312 chubbar
chubbar's picture

Anyone see how the ND bar looks different on the chart above than any other state? Does the fact that they have their own state bank factor into that difference? Maybe they are on to something?

Mon, 01/04/2016 - 11:18 | 6995054 Georgiabelle
Georgiabelle's picture

Good catch. I noticed that but did not know what to attribute it to. 

Mon, 01/04/2016 - 01:08 | 6993796 FireBrander
FireBrander's picture

Many reasons for homelessness, but it can't be ignored that some of them WANT TO BE HOMELESS!

I wouldn't like that idea in NY, but So-Cal is appealing. I always wanted to try it; not lice infested homeless, but close...work just enough to eat and take care of myself...nothing more, nothing less. If the FED keeps it up, I may just get to experience it after all...along with a lot of others.

Mon, 01/04/2016 - 02:37 | 6994012 Kirk2NCC1701
Kirk2NCC1701's picture

Just as runners train long before a race, so you too will want to work down to it.

Try weekend training bouts.

Mon, 01/04/2016 - 07:26 | 6994317 lunaticfringe
lunaticfringe's picture

Get a nice tent or rent a storage unit and live alone. no mortgage, no taxes, no utility bills. A lot of shit to like. Plus all the free shit.

Sun, 01/03/2016 - 22:04 | 6993043 remain calm
remain calm's picture

Or being mugged by one of them.

Sun, 01/03/2016 - 22:04 | 6993044 remain calm
remain calm's picture

Or being mugged by one of them.

Sun, 01/03/2016 - 22:37 | 6993195 Chuck Walla
Chuck Walla's picture

Or watching them crap in your alley.


Mon, 01/04/2016 - 02:19 | 6993959 jeff montanye
jeff montanye's picture

the repetition seems less calm.

Mon, 01/04/2016 - 01:44 | 6993879 BlindMonkey
BlindMonkey's picture

NYC has about 60k cops.  So a 1-1 ratio of homeless to police is an interesting number.  

Sun, 01/03/2016 - 21:14 | 6992817 BiPolarFrenchman
BiPolarFrenchman's picture

Link from last winter...

Sun, 01/03/2016 - 21:50 | 6992973 Rabbi Chaim Cohen
Rabbi Chaim Cohen's picture

Pensions are a soft-core pyramid scheme. The fact that they found their way into the public sphere is not surprising but still infuriating.

THERE IS NO GUARANTEED RETURN ON INVESTMENTS, therefore everyone needs to be responsible for their own retirement plans!

We SHOULD support all disabled vets, but how many proud, retired vet double-dipping, federal teat owners do you know? I've known a few and a few just  planning to head off to work for the post office after they finished their 20 in uniform, looking forward drawing two pensions before age 60! 20+ years of cash +medical for 40 years work! THIS SHOULD NEVER BEEN AN OPTION for anyone.

Mon, 01/04/2016 - 02:02 | 6993910 stacking12321
stacking12321's picture

no, "we" should not support disabled vets...they should be supported exclusively by the morons who believed government lies about WMDs and supported a war against countries that never attacked the usa.

Sun, 01/03/2016 - 23:42 | 6993500 earleflorida
earleflorida's picture

freedom isn't free [?]...

but, you can live in the tunnels underground and smell the freedom...

Mon, 01/04/2016 - 09:37 | 6994595 Jeffersonian Liberal
Jeffersonian Liberal's picture


The horse-toothed Seinfeld (recently seen yucking it up with his butt-buddy Obama and who dropped out of a Trump-organized fundraiser for children because Trump dared to demand Obama's birth certificate) and Julia-Louse Dry-face (Elaine, who cut Obama a $28,000 check during his first campaign) should have their wealth taxed at 99.9% in order to clothe and house those homeless in their beloved New Yahk City.

Mon, 01/04/2016 - 02:54 | 6994062 StychoKiller
StychoKiller's picture

What, you got someting against refugees from Agrabah?

Sun, 01/03/2016 - 21:13 | 6992813 rbg81
rbg81's picture

All this unsustainable debt and yet interest rates are near zero--possibly going negative.  Nothing to see here--move on.

Sun, 01/03/2016 - 20:43 | 6992665 Arnold
Arnold's picture

ats wot youse gets fer thinkin.

Sun, 01/03/2016 - 21:21 | 6992850 upWising
upWising's picture

Before it was The PIIGS  (Portugal, Ireland, Italy, Greece, Spain).

NOW WE have The PRICKs (Puerto Rico, Illinois, Connecticut, Kentucky)

Sun, 01/03/2016 - 22:21 | 6993125 HungryPorkChop
HungryPorkChop's picture

@upWising:  Good one!!


Maybe it's the PRICKeD HIMAN.  Don't forget Delaware, Hawaii and MAss and New Jersey.  Sounds like something performed on a chocking person during a porn?  Yeah, disgusting, broken and outright immoral but not sure if we're talking about Illinois or the low budget porn movie?

Mon, 01/04/2016 - 00:21 | 6993649 Zero-Hegemon
Zero-Hegemon's picture

Let the bleeding begin

Mon, 01/04/2016 - 11:21 | 6995068 Georgiabelle
Georgiabelle's picture

Even before reading your post I knew that one of you would go there.

Sun, 01/03/2016 - 23:54 | 6993548 warpigs
warpigs's picture

As an IL kid, originally, that PRICKs comment is rich! That state is the single greatest pile of shit in the entire union.  Cheers!

Mon, 01/04/2016 - 05:04 | 6994217 crazytechnician
crazytechnician's picture

The PRICKS could also be Porto Rico , Italy , Canada , TurKey ?

Sun, 01/03/2016 - 20:44 | 6992672 Bossman1967
Bossman1967's picture

What its only 5 states we need to bail in. No problem we have atleast 30 not fairly indebted so we will take from them and share the greatness. See no problem all fixed it. Now btfd and have a Happy New Year lmao

Sun, 01/03/2016 - 22:10 | 6993079 Hal n back
Hal n back's picture

500 billion is not much--just a littel printing can handle that problem

Mon, 01/04/2016 - 01:12 | 6993805 Yen Cross
Yen Cross's picture


Mon, 01/04/2016 - 04:44 | 6994201 Clowns on Acid
Clowns on Acid's picture


Mon, 01/04/2016 - 10:43 | 6994901 Al Tinfoil
Al Tinfoil's picture

In a recovery?

In the Intensive Care ward.

Sun, 01/03/2016 - 20:40 | 6992648 NoWayJose
NoWayJose's picture

The inevitable result will be higher taxes in those states (it's easier to vote for taxes than cuts), which will stretch the default time out -- but the effect of higher taxes will actually make default inevitable (see Detroit).

Sun, 01/03/2016 - 20:52 | 6992711 imapopulistnow
imapopulistnow's picture

So, retire to North Carolina, Arizona, Nevada or Florida...

Sun, 01/03/2016 - 21:02 | 6992761 Scooby Dooby Doo
Scooby Dooby Doo's picture

Scooby may retire to Florida one day. Play some doggy golf, collect some shells on the beach.

Sun, 01/03/2016 - 21:03 | 6992766 RafterManFMJ
RafterManFMJ's picture

...or Mexico, Panama, Costa Rica, the Philippines, Thailand...

Sun, 01/03/2016 - 21:12 | 6992804 Kirk2NCC1701
Kirk2NCC1701's picture

But not to Euro-stan.  You can scratch those places off your list.

Unless you're in favor or having multiple wives, and they can't drive, vote, sleep around, or drop a fortune on shoes, clothes and make-up.  Hey, when I put it that way, it doesn't sound so bad.  Shame about lack of bacon, ribs and booze though, and all the constant and obsessive-compulsive prasing of some mythical Guy in the Sky.


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