Wednesday, December 31, 2008


That's the latest fantasy budget proposal. it is getting hard to keep track. This one from the Governors office. Facing a deficit of $45b he is proposing $15.4 billion in spending cuts. The rest? well there's this idea that the citizens will vote for a 1.5% increase in the sales tax and other increases. Oh and that sales tax on goods? Well apparently they found a lawyer who imagines that aplies to goods AND SERVICES. Good luck with that as well.

Saturday, December 27, 2008

Mien Gott I Am a Misean!

Over on the Calculated Risk Blog Counterpointer read my comment:
Not to worry. i plan on owning and operating a for profit chain of reeducation camps. State funded and to big to fail of course. And at graduation rather than robes, everyone wears a tarp.

For mustard seeds this one is a doozy. Here's where he went with that bit of inspiration:

Rob Dawg's Misean Institute Local 401.

Core curriculum : Term One

1. Household Balance Sheets : An Introduction to Penury

2. How Wall St Ate Your Retirement

3. How to Spot Financial Advisory Fraud : The Mouth Moves

4. Mid-term Debate : Keynes, Friedman And how to Hose the Future

5. Rethinking Grandchildren : Basic Costings

6. Survival Mandarin, Part 1

7. Zen and the Art of Hummer Maintenance

8. Fieldtrip to the Fed : BYO Small Arms

9. Why Dark Pool Trading is Not Your Friend

10. Countdown to a COMEX Bust : Probabilistic Modeling and You

11. U6 and the New Leisure Society

12. End of Term Asssignment : Where did the TARP Funds Go?

Term 2 : Applied Course TBA

Rob Dawg's Misean Institute Local 401:

Semester II : Applied Curriculum - Building on the Lessons of Semester I

1. Do You Look Good In Orange? A Wall Streeter's Guide to Gitmo

2. Living With Gruel : An Update

3. Introduction to the New Nutrition : Squirrels And Their Many Uses

4. Super UNsize Me : Homilies on CDSs

5. Tort Refresher : The Value of the Paper It's Written On

6. Mid-term Roundtable : Squashing the Long Bond Yield, a Discussion with Guest Experts Dryfly, Bondgirl, and Jansen.

7. Applied Baltic Dry Studies : Term Paper The Long Trail from the ASX to US Manufacturing

8. Poverty in Context : Comparing North Carolina and Sierra Leone After the Rebellions

9. And Not a Drop to Pump : Oil Supply Distortions and the Case of Georgia

10. We are All Iceland Now : Historical Perspectives on Iceland, the Pound, and the Swiss Collapse of 2009

11. The Fundamentals of the Bailout Are Strong : TARPs, TALFs and Why Five-letter Acronyms are an Excellent Short Position

12. Final Paper : It Could Never Happen Here. Discuss.

Semester 3 : Working Professionals' Core Course, tba.

Rob Dawg's Misean Institute Local 401

Semester Three : Applying All We Have Learned

1. Do You Look Good In Orange II? Rectal Care and Maintenance in Challenging Environments

2. Guest VC Commentator : Neutron Bernie from the US Virgin Islands on Booking and Busting $50b, "You have to start from zero to get back to zero".

3. Headline Writers Are Morons : Bloomberg Edition. Discuss.

4. The IMF Is Back In Business : Streamlined Conditionality and the New Endocolonialism, with Brad Setser

5. The Anglos do the Slavs, Again : The Eastern European Bust of 2008

6. Mid-term Debate : The Austrian School and the Psychopathology Of Market Fundamentalism, Deflation Case Studies

7. To Build a Better Oligarchy, an American View

8. State Failure: When the State Is Your State, A Presentation from the Center for Budget and Policy Priorities, with Q&A and vodka cash-bar

9. Introductory Air Movements and Convoy Behavior : Looking Out For Ourselves And Applied Tinfoil Techniques

10. Tamade! Ni Shuo Shenme!?? Further Guidance on Cross-cultural Negotiation Tactics.

11. Spontaneously Arising Leadership : So the Syndicalists Had a Point?

12. Term paper : How It Will Never Happen Again. Open Discussion.

The Curriculum Board makes no undertakings that course Participants will either learn or activate the learning imparted. Past returns are no guarantee of future results.

You have been duly warned...
Enjoy. Leave praise in the comments.

Thursday, December 25, 2008

The Original Meaning

The scribes have confirmed this joyous occasion. The days are no longer getting shorter. The Earth will indeed be reborn and not slip into that dark night.

Wishing everyone a solemn Alban Arthan as we honor the souls of the trees we sacrifice then deify in our living rooms. Hang the revered kerm-oak, drink the blessed wassail. "Yule" feel so much better. The Norse had the right idea taking 12 days for Jole.

Oh and for all you recent religion adoptees a translation: Christmas, Christmas Trees, holly, sacramental wine and the 12 days of Christmas.

Changing the name makes little difference; Merry Christmas.

Al Gore has a special message for you.

Monday, December 22, 2008


Just a quick post while I get the ever growing MAXfest organized.

California Municipal bonds are getting slammed. Here's a new one:
Rio Elementary
So what? A poorly performing school district needs money. Well look at the details.
Maturity 9/1/2028
Coupon 5.120%
Yield 11.000%
Price $53.07
Call date 9/1/2012
Call Price $102.00

The reason they need the money? They built a shiny new poly-million dollar school and administrative complex to support Riverpark. Gee, ya think this is gonna end well? And as a side note; 11% double tax free is a more than 19% taxable equivalent.

Friday, December 19, 2008

The New Zero Down

Hat tip Akubi.

Remember how well 0% down worked for housing? Let's try it again this time with public works.

From McClatchy:
States, for instance, usually must provide a 20 percent match to receive federal money for transportation projects. Now, though, state officials and others are trying to get the requirement waived for a stimulus bill. And with more than 40 states projecting budget deficits in the next two years, that request is finding sympathy on Capitol Hill.

Any guesses which types of "transportation" projects will get pushed with 100% funding. Yup, the least justified, otherwise known as transit boondoggles. Just ask Boulder about their light rail. Their Regional Transportation District announced the cost to build the system by its 2017 deadline would be $7.9 billion -- up from $4.7 billion. Skyrocketing prices for materials and declining revenue from RTD's 1 cent sales tax were blamed. Don't you love it? Declining revenues blamed for cost over runs.

Thursday, December 18, 2008

$41.8 Billion and Counting

Unfreakin' believable. This is how Prop 13 was first passed.
The Democrats circumvented Republicans through a number of novel maneuvers that take advantage of the legal difference difference between taxes and fees and skirt the need for a two-thirds vote of the Legislature, which is normally required for tax hikes. A two-thirds vote would require some Republican support, but GOP lawmakers have vowed not to raise taxes. On the floors of the Senate and Assembly, Republicans said the Democrats showed contempt for voters and an unprecedented subversion of California's Constitution.

LATimes has the rest.

Let me tell you what's going to happen. Within two weeks an initiative will be circulating that amends the Constitution to reclassify "fees" as taxes and it will pass with 85% approval. That's an ungovernable situation but that won't matter bu then.

Tuesday, December 16, 2008

Falling knives.

Ventura County:
2007: 516 $521,250
2008: 729 $355,000 -31.90%

31.90% year over year. Who in their right mind bought in Nov 2006? We know the people who couldn't afford $630,000 a year previous. DQNews has the details.

$166,250 over 12 months. Worse, the median home is smaller. $13,000 per month is more than $400 per day in lost equity in addition to payments of at least $200 per day. Just what does $600/day buy you? The world renowned Ojai Valley Spa is only $300/night.

Falling knives.

Ventura 516 729 41.30% $521,250 $355,000 -31.90%

Smoking Gun

NEW YORK, Dec 16 (Reuters) - Maurice "Hank" Greenberg, former American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) boss, has questioned whether the troubled insurance company sold securities to the Federal Reserve Bank of New York fund at a higher price than they were marked on the insurer's books.

See the Reuters article.
The money is gone.

Sunday, December 14, 2008

$40 bu-bu-bu-billion

And it turns out it wasn't only people who have been caught naked as the tide goes out. The next 18 months are now looking at a $40b deficit. That's now officially in my likely default territory. I wasn't expecting these dire 2009-2010 numbers until May when the tax receipts are counted. Not that this bad news has had the slightest impact on our dear leaders in Sacramento.
"But the cuts would be so deep as to be politically lethal even for (lawmakers) who think they are in districts that are safe."

This from SFGate story:
Budget crisis may lead to $40 billion deficit
Matthew Yi, Chronicle Sacramento Bureau
Sunday, December 14, 2008
(12-14) 04:00 PST Sacramento --

California is bleeding so much money that without a sweeping fix, the state's budget deficit will reach an unprecedented $40 billion in the next 18 months, a huge gap that many officials agree can't be bridged without increasing tax revenue.

But Republican state lawmakers, ...
But what? Do I have to spell it out? The Republicans don't want to accept any new taxes until the cuts are made first. This because they know that any new money would go where the Democrats want not to balancing the budget.

And belated congratulations to Tony Strickland for earning the local State Senate seat. The repercussions will be national.

$40 billion is more than $1100 per person and we know that by the time we exempt the children and the poor and the illegals there won't be many left to bleed.

Wednesday, December 10, 2008


California November revenue $1.3 billion below estimate
Wed Dec 10, 2008 9:22am EST
By Jim Christie

SAN FRANCISCO (Reuters) - California's general fund revenues in November were $1.3 billion, or 18.5 percent, below expectations, suggesting the government of the most populous U.S. state could run out of money as early as February, State Controller John Chiang said on Tuesday.

The government of California, the world's eighth-largest economy, must contend with a $28 billion combined shortfall for the remainder of its current fiscal year and its next fiscal year, which runs from July.

Read the rest of the obituary at Reuters.

Understand this is an unexpected revenue shortfall below the already downward revised projections that were leading to a $28 billion deficit. Wait until they see what a -30% stock market will do to their income tax coffers.

Blog note: there's nothing wrong with your screen. The snow is my global warming indicator in anticipation of a massive coldfront sweeping down on SoCal. We could get snow.

Tuesday, December 09, 2008

The Gnome of Berkeley

Long time readers know I have little tolerance for ivory tower liberals. Actually I have little tolerance for ivory tower conservatives as well but they at least have kept their numbers under control. However in the spirit of the blind squirrel credit is due Robert Reich for his comments on Populist Backlash. Normally Reich spends his days bemoaning inequality and suggesting ways for government to impose equality of the lowest common denominator. Handicapper General, Diana Moon Glampers would blanche at some of his ideas for imposing equality. He then spends the rest of his time attempting to rewrite the history of the Clinton Administration with emphasis on his influence on their tremendous economic successes. Despite the obvious intellectual burden of these pursuits he has managed to find the time to either plagarize from the archives of EN or stumble upon the now blindingly obvious:
These Americans aren't revolutionaries. To the contrary, they're deeply conservative. They've worked hard, but their hard work hasn't paid off. Some have tried to save, only to see their savings disappear. They're worried about the future and about their kids' futures. They never expected anything like this.

This is the angry soil in which populist backlashes can take root.

Indeed. Of course he has it all backwards with respect to solutions; more government and more debt but at least he admits that the more debt and more government to date has been ineffective. That brings up the thing that bugs me most about Keynesians. No matter the size of the failure they will always fall back on the excuse that no matter what was done if only a little more had been attempted then it would have succeeded. And that is my prediction for these bailouts.

Monday, December 08, 2008

Signs of Winter

Mountain High is a SoCal ski area about 90 minutes from Los Angeles. In years past these season tickets would sell out in hours. That was then.

Saturday, December 06, 2008

Obamster Gives Us the News

more animals

Putting Out Fires With Gasoline

A little weekend Rock Blogging:

See these arrows so green
I can sell off a thousand points
Colder than the pits
It's been so long

And we've been putting out fire
With gasoline

See these arrows so red
Red like jungle burning bright
Those who feel me near
Pull the blinds and change their minds
It's been so long

Still this pulsing market
A plague I call a heartbeat
Just be still with me
You wouldn't believe what I've been thru
You've been so long
Well it's been so long

And we've been putting out the fire with gasoline
Putting out the fire
With gasoline

See these tears so blue
A busted short that can never mend
These tears can never dry
A judgement made can never bend

Friday, December 05, 2008

Bonds, Gamed Bonds

Nice chart courtesy

Hopefully by now readers know bubble when they see one. This one however is going to be particularly damaging when it pops. It isn't so much that long bond holders are going to get screwed, no the real problem is that the US won't be able to borrow long for generations.

And who do we know that needs to borrow? California, New Jersey Mionnesota and oh yes,.. home buyers.

Tuesday, December 02, 2008

Tesla v. Tesla

Nikola Tesla versus Tesla Motors that is.

The sordid details of Tesla Motors hat in hand is at the NYTimes.
The company is requesting $400 million in low-interest federal loans as part of the $25 billion loan package for the auto industry passed by Congress last year.
The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?
I just imagine their namesake rolling in his grave at the idea of becoming a vassal of the government.

Monday, December 01, 2008


Governor: The powers given to the governor include the coordination of the state emergency plan and programs to mitigate the effects of an emergency, and authority to suspend statutes, commandeer private property and personnel, and cooperate with federal agencies (Cal. Gov’t Code §8565 et seq.). The governor has
complete authority over agencies and the right to exercise police power (Cal. Gov’t Code §8627 et seq.). Also, the governor may make expenditures “from any fund legally available” to deal with emergencies and accept services, equipment, and
supplies (Cal. Gov’t Code §8645 et seq.). Additional powers of the governor in a state of emergency are enumerated in the statute (Cal. Gov’t Code §8654). During state of war emergency the governor exercises complete authority over all agencies and the right to designate all police powers in designated areas. (Cal. Gov’t Code §8620)

Schwarzenegger declares emergency
SACRAMENTO, Calif. (AP) -- Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called lawmakers into a special session to address California's $11.2 billion deficit.

The state's revenue gap is expected to hit $28 billion over the next 19 months without bold action. The emergency declaration authorizes the governor and lawmakers to change the existing budget within 45 days.

The state is likely to run out of cash in February.

Got that? Some weird new power called "fiscal emergency." That's covered by Prop 58:
...the Governor may issue a proclamation declaring a fiscal emergency and shall thereupon cause the Legislature to assemble in special session for this purpose. The proclamation shall identify the nature of the fiscal emergency and shall be submitted by the Governor to the Legislature, accompanied by proposed legislation to address the fiscal emergency.
(2) If the Legislature fails to pass and send to the Governor a bill or bills to address the fiscal emergency by the 45th day following the issuance of the proclamation, the Legislature may not act on any other bill, nor may the Legislature adjourn for a joint recess, until that bill or those bills have been passed and sent to the Governor.
(3) A bill addressing the fiscal emergency declared pursuant to this section shall contain a statement to that effect.

Okay, so they can't pass any extra stuff. BFD. Here's where it gets interesting:

...the Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that, when combined with all appropriations from
the General Fund for that fiscal year made as of the date of the budget bill's passage, and the amount of any General Fund moneys transferred to the Budget Stabilization Account for that fiscal year pursuant to Section 20 of Article XVI, exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill's passage. That estimate of General Fund revenues shall be set forth in the budget bill passed by the Legislature.

Any bets that part gets ignored? Really. Now that the Governor has declared a fiscal emergency; no more bills that cost money. Yeah, right. Silly Constitutional stuff is for other people not our fine Legislature.