Puerto Rico Is Greece, & These 5 States Are Next To Go
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.
(23 votes)
»
- Login or register to post comments
- Printer-friendly version
- Send to friend
- advertisements -
Islamic Woman: What awaits me in paradise?
Islamic Man: Don't worry about it; you won't suffer there like you do here...
I'm not joking, research it.
This isn't right - Chris Christy, Governor of NJ says HIS state is in awesome shape!! He'll expect a full retraction in the morning.
https://www.theskinnymirrors.com/
Christy just like Obama turned out to be major disappointments..
Among rubes who had high expectations of zero, yes disappointment has hit a great many. For anyone grounded in reality zero was a zero and remains so, as expected.
Theta,
Obama was only a "disappointment" if you believe all of his rhetorical BS.
To those of us who saw through his BS and lies, he delievered exactly what we feared he'd deliver.
I bet christy eats small children for breakfast.
Doesn't he remind you of a short version of fat bastard?
Not speaking on the behalf of the state of Floriduh, I would like to thank Black Rock for manipulating the numbers, making Floriduh look so much better on paper than ever before.
FLORIDUH
THANKS
BLACK ROCK
But you do have Florida Man..
https://twitter.com/_FloridaMan
I love this guy
I live in florida. Originally from upstate NY. Half of florida is old farts, half are insane, and the remaining half are yankees. Still, there's some nice places to live if you look around.
@ Theta_burn Thanks for the laugh, first town in first link, is known around these parts as Crestucky! Just to the East is Mossy Head Florida known for fucking goats!
https://www.youtube.com/watch?v=yaYiCE6zaUc
FLORIDA
THANKS
BLACKROCK
If there are 5 officially that are obvious ones, then there are 5 more that are just a turn of the market away from being bankrupt. I'm long pitchforks and rope.
Fucking NJ..
Paying almost 9K a yr. in property tx on a home worth 380K
Few states have higher property taxes than Jersey and still we are broke..
Another property in SC worth a 3rd of the primary, I pay 900 for the yr. and they are relatively solvent.
Well at least in Jersey they do plow the roads in winter..
@9K/yr it sounds like the roads aren't the only thing being plowed.
That's nothing. My friend in west Houston (I think he said Katy) pays 3.5% or about $13k on his $380k house. New schools, free lunches, moar teachers, and even moar admninistrators, etc are expensive.
That's one reason Landlords are getting crushed in areas. Add that to the soaring vacancies (8% for aprtment complexes) and they have a Big Problem in energy city.
Like the man said.......
The poor, you will have with you always......
And they have a ravenous appetite for other peoples money distributed by vote buying politicians.....
Congrats on taking a quote totally out of context and using it to support an entirely different point. Or did you simply not know the original intent?
"Well at least in Jersey they do plow the roads in winter."
I spent the first 18 years of my life in NJ and remember well all the snow. I moved to Florida in 1973 and recall a garbage truck - Waste Management, I think - that promised free snow removal at no additional cost. I haven't lifted a snow shovel since.
How'd you get such a low tax bill in NJ? I know somebody who was living in Oakland. A run down ranch. (Really run down, railings for front porch laying on the ground, pick your way down the loose steps carefully, wet basement, etc.) $17K a year. My only advice to you is to get out. Get out as fast as you can. Because soon there will be oceans of homes for sale there when people realize they can't retire because they don't have enough money saved. Who wants to take out a mortgage to pay taxes rather than buy a house? Buyers won't be willing to do both.
all the foreigners will be buying those homes.
tons of native , white NJ residents are fleeing the state because their corporate jobs are getting outsourced to india and or going to cheaper cost of living states
or they're just being ethnically displaced by shitskins
The trouble is, those New Jersey natives who are escaping that economic hell hole bring their liberal voting habits with them when they move to conservative states with a lower cost of living. Eventually, all of those cheaper cost of living states will end up being like New Joisy.
Regardless, the incomes from those jobs don't pay the property taxes and still allow for a decent lifestyle. Shit is going to change in this country real soon and the dipshits in the county gov'ts who have been sucking at the tit of the taxpayers by raising taxes or mill rates every couple of years are in for a big fucking surprise.
on behalf of all fifty states may i just say go fuck yourself jpm!
Blah, Blah, Blah, Blah. The Greece debacle has been kicked down the road for years and years. Any bankruptcies in the U.S/Puerto Rico will be treated with even more vigor than Greece ever was. This is just the beginning. The end will come when the powerful and the elite want it to--and not a moment sooner.
Moar QE!!!!!
Puerto Rico was in trouble 2-3 years ago. "Investors" agreed to buy $2-3 billion more in bonds to kick the can down the road. Now they have reached the cliff and they expect the American taxpayer to pay for their sins.
Time for the Great Reset and a whole lot of hangings.
Sad thing is, us taxpayers will end up paying for it.
It will be just like Detroit, Chicago, Baltimore, and the rest of the marxacrat welfare utopias.....
FED prints money.....Gives money to big bank....big bank fined a billion by the DOJ for some misdeed.....DOJ distributes money to marxacrat welfare utopia.......
And life goes on......
Thats why Trumps wrench in the works must be stopped at all costs.....
But, the bank$ter didn't go to jail? That's right.. Because the bank$ter cooperated, he was allowed to commit other significant misdeeds, as laundering drug $$, Manipulating gold and silver, Selling more and more trillions of derivative garbage (which most may never be settled!), et al, pay a fine, then all is O.K, because they are a CORPORATION, just as the very government who incorporated themselves so that contracts between them can be settled differently and keep things more in the shadows. Right?
ol Wilbur dressed in drag at a nyc kappa beta phi soiree making fun of the havoc they caused in 07.
Their gales of laughter at the MERS homeless were sickening.
Most vids have been scrubbed.
Hope he didn't get his Galiano gown soiled.
https://www.youtube.com/watch?v=wJk7GW1RSTI
November 9, 1989: As thousands walk through the Berlin Wall in one direction only, the legitimacy of every communist prison state in the world is shattered forever.
At some not-too-distant date: As Greece, Spain, Portugal, and Italy declare bankruptcy, the credit of every democratic social welfare state is shattered forever. Within days, all their bonds go bidless, and when central banks try to plug the hole, their currencies go bidless too.
All bailouts can do is buy some time for the elites to make their getaway plans. My plan is to be one of those rednecks with a long gun and a sign saying "you loot, we shoot".
Thomas Malthus is probably laughing his ass off, somewhere. He did warn us.
When The Music Stops; How America's Cities May Explode In Violence
Written pre-Ferguson and pre-Baltimore, mind you. Very sobering.
Funny that nobody noticed that TX is in worse shape than NY or CA.
Go figure.
All of the oil patch states are in the same boat. They got used to budgeting with oil revenues in mind. Now that is gone, they have budget shortfalls.
6% per annum payroll increase (PSERS assumption)*. Seems to be the generally accepted number when actuaries discuss public employee payroll and pensions. Compounding 6% for 30 years yields a multiple of 574% on the year 0 basis. Means your average $50K public employee earns $287K at the end of their employment. Now budgeting is conducted on the basis of these assumptions, so if the plebe isn't getting it, aside from whether or not they deserve it, where IS the money going? That's rhetorical. Walter Burien still around?
* http://www.commonwealthfoundation.org/docLib/20091123_PSERSSERSIncrease....
Maybe it's just me but if the trillions in pensions are supposed to be making 6%, where is this money supposed to come from in an economy that is so indebted that folks aren't borrowing money into existence any longer? QE? How long can that last before it's starts revealing other issues with the currency itself?
I've always liked listening to Wilbur Ross. Like Jim Rogers, he's too old and too rich to bother to mince words. His "the problem is not the debt" remark is an interesting perspective.
"the problem is not the debt" remark
It doesn't help.
China PMI 48.2 & USA PMI 42.9. The economy is b00ming, to the bottom. Sacrafice some people to make oil go up. Prerable around the us market opening. Long oil. Bulli$h bitchezz!
P.S. The numbers are just a formality. It goes down anyway.
It's hard to believe that back in the early 60s, New Jersey had a AAA bond rating. That was before the income tax and the sales tax. NJ has always had high property taxes. The two governors who pushed the income tax and sales tax promised it would reduce property taxes. Of coures it was a lie; but it worked.
Who takes does ratings serious. Howda hell is it possible to describe risk over a broad spectrum in one thingy? The girl next door has a AA-rating. I am go long on her.
I assume that "but it worked" refers to the attempt by politicians to a) avoid being hanged and b) getting reelected. What else in NJ "worked"?
I don't know how it is now, but my father was a retired NJ fireman. When he died his yearly pension payment significantly exceeded his highest yearly earnings while active in the FD.
Yes. Years back the state pension was great. Now it is the deep red. A matter of time before that also goes the way of the dinosaur.
New Jersey. A good place to be from.
Amen! FROM but not IN!
That was before we shipped all our good paying jobs overseas.
We? It was the corporations from whom you buy every day, not the poeple, not even the politicians, the corporates.
I am in one of the gentryfying neighborhood of brooklyn. It costs 1.3 million bucks to get a two storied brownstone. To break even you have to make these houses into prison sized apartments and rent it to college kids. These houses have been unwanted for most years for 60k not too long ago. Now the city is getting the help from all the real estate tax growth. NYC likes this and their books like it. I can't wait for this bubble to burst and see how the city can survive. Housing is out of control. I really don't want another crash but it seems like there could be few scenarios playing out
There will be enough single population looking for pussies online to rent these places, ordering in.
Once these young guns are not available any more when they turn these 4 beds into single beds, that will be way too expensive heck even for a couple to support 4 peoples rent. Then the market would have to crash.
It looks like the stock market is doing great. I don't see a real estate crash any where near. I don't like this not that I want one. Things have become way out of reach. I don't know how these kids are able to pay 6/7 bucks a beer with these low paying jobs. Every one is ordering in. I don't get it. We don't know how to cook, save, respect others and be a good citizen. How is this economy doing so well. I don't know...Fuck me.
Smoke and mirrors.
they are broke millenials and useless eaters, just like their parents (baby boomers)
the price of property and real estate in this country is being propped up by foreign investors (china, russia, etc) looking to hide their $$ in tangile assets
doesnt matter if no one can afford the rents..its still cheaper for china man to own said building than it is to pay taxes to the mainland or whatever