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California Bucked Trend, Voted For Democrats – And Now Will Get A Facefull Of Hell

November 20, 2010

California is in a total meltdown.  But don’t worry.  The state elected a governor formerly known as “Moonbeam” to face reality so the residents wouldn’t have to.  It re-elected the most ideological witch (I’m sorry, SENATOR Witch – she worked so darned hard for that title) in the entire US Senate.  And it actually ADDED to the number of Democrats who already had total control of the state.  Oh, and it passed a proposition that will give Democrats even more total control by making the Republican minority totally irrelevant in the budget process.

Which is another way of staying, it’s time for all the rats to jump overboard and start paddling furiously.  Because the Good Ship Lollipop is about to take a trip to Davy Jones’ Locker.  And she aint no submarine:

Panic in the California Municipal Bonds
November 17th, 2010 1:30 pm MT

There is a fund called the PIMCO California Municipal Income Fund II symbol PCK on the New York stock exchange.

In the last few days the fund has been going vertical down.  Investors can’t get rid of this turkey fast enough. (SEE PICTURE TOP LEFT-DOUBLE CLICK ON CHART TO ENLARGE).

“It might be argued that muni markets are merely reflecting similar declines in Treasuries (TLT). Fair enough. Bond holders, though, are probably are more interested in the fact that their bonds have declined rather than why.

Warren Buffett warned back in June on the muni bond market as local and state municipalities struggle to meet their obligations amid declining tax revenues.

There was a time — before the 2008 crash — when triple AAA rated, insured munis were seen as the safest of safe investments. Times have changed though. Only Assured Guarantee (AGO) still insures municipals, but the company has been recently downgraded from AAA to AA. Ambac (ABK) is in bankruptcy. MBIA (MBI) is entangled in litigation and no longer writes new policies. The financial guarantee business today is but a shadow of its past.

Even though defaults, so far, are rare, the Fed’s zero interest rate policy has thrown a cloud of uncertainty over all bond markets. One can’t help but wonder what happens when ZIRP is withdrawn. Declining tax revenues, rating downgrades, loss of insurance and rumors of bailouts all contribute to the uncertainity and suspicion.

It may be wise to lighten up on all medium to long term bonds at this juncture. Greece, Ireland and Portugal may not be as far removed from New York, Illinois, and California as we might wish.” More…

You have got to love the above quote especially when it says that this precipitous drop is no cause for alarm but at the same time it might be a good idea to lighten up. We prefer to say that there is panic in the California bond markets.

Basically what investors are saying is that they want more interest from these bonds because they are not paying enough. When bonds go down interest on the bond goes up. The problem is that California has no money. The more it raises taxes, the worse the economy does and the less revenue there is. Where is the money going to come from to pay more interest?

The answer is that it will not come from anywhere. The bond market knows this and is getting rid of this investment in search of better performance. It could also be argued that the bond market is also giving the newly elected government Jerry Brown and his union supporters a vote of no confidence. The bond markets know that Brown and Company  will not be able to find the money to pay higher bond yields and therefore the value of the bond is greatly diminished.

At least 80% of states are in this mess and Arizona is no exception. Just yesterday a Hispanic man on Access, Arizona’s welfare healthcare system. was denied a liver transplant because the Obamacare health care reform has heaped an extra $1.2 billion shortfall on the state. There was outrage that this man was not able to get his liver. What does this have to do a a collapsing bond market? People still just expect government to pay and pay and pay and that money is unlimited. This collapse of the bond market signals very clearly that the party is over and the money has dried up even though many people expect differently.

Arizona just does not have the means to pay its existing overhead or to raise money through the bond market. The more states raise taxes the less tax revenue comes in because our economy is shrinking. Arizona’s plight is no different than California’s and the illustration of the PCK bond fund collapse reflects clearly that the markets are signaling they have no faith in the states’ abilities to pay their bills.

Someone is probably going to say, “But Arnold Schwarzenegger was a Republican!”

Because everyone knows that a guy who is pro-gay marriage, pro-abortion, pro-embryonic stem cell research, pro-global warming alarmist, pro-radical environmental agenda, pro-illegal immigrant, pro-bailout, and pro-Obama-stimulus, is clearly a “Republican.”

And California decided to teach RINO pseudo-Republicans a lesson by deciding to pass on the successful billionaire chief executive officer of the incredibly successful company and elect Moonbeam instead!!!  Because I don’t want to look at the hand I just pooped in; I want to look at all the wishes in my other hand instead.

California is facing a MASSIVE $25.4 BILLION deficit.  And unlike Barry Hussein, Governor Moonbeam can’t just print more increasingly worthless dollars.

If that isn’t insane enough, California is facing its black hole of debt by digging faster than ever.  As we speak, California is borrowing $40 million PER DAY 24/7 from the federal government (which can print money and devalue the dollar further and further) to pay for jobless benefits.

Because California’s unemployment rate is 12.4%, and, after two years of bennies, liberals have decided that unemployed workers should get a lifetime of unemployment benefits so they never need to worry about finding a job.