Excellent Interactive Map via The Economist : "US Equivalents: Which Countries Match The GDP And Population Of America´s States"

I think in the context of the ongoing & worsening budget crises the chart provides a good perspective when sooner or later the MUNI topic will dominate headlines... At the latest when they need another reason to justify "QE 3.0".... ;-)

Denke die Übersicht ist besonders hilfreich wenn es wohl eher früher als später um den desaströsen Zustand der öffentlichen Haushalte in den einzelnen Bundesstaaten und Gemeinden geht ( Stichwort MUNIcipal bonds ).... Würde mich nicht überraschen wenn zukünftig die Begriffe "QE 3.0 & MUNIS" in demselben Zusammenhang genannt werden.....

US equivalents......Which countries match the GDP and population of America's states?

IT HAS long been true that California on its own would rank as one of the biggest economies of the world. These days, it would rank eighth, falling between Italy and Brazil on a nominal exchange-rate basis. But how do other American states compare with other countries? Taking the nearest equivalent country from 2009 data reveals some surprises. Who would have thought that, despite years of auto-industry hardship, the economy of Michigan is still the same size as Taiwan's?

The Daily Chart via The Economist has much more to offer... Check it out....

Empfehle jedem regelmäßig dem Daily Chart via The Economist einen Besuch abzustatten... Lohnt sich.....

I think the example of Illinois ( equivalent of Turkey ) & the clip with Meredith Whitney makes it cristal clear that this won´t be a minor issue down the road....

Wer noch Zweifel daran hat das der Begriff "MUNIS" in absehbarer Zeit auch in der deutschen Presse häufiger zu hören sein wird sollte sich das Beispiel Illinois ( lt. interactiver Karte auf "Augenhöhe" mit der Türkei ) vor Augen führen und das Video von Meredith Whitney ansehen... .....

Illinois Governor Wants to Borrow $15 Billion to "Balance" the Budget; Illinois Total Unfunded Liabilities Exceed $200 Billion Already Mish

Illinois Seeks To Issue $8.75 Billion Bond To Pay Overdue Bills As Muni Issuance Market On Verge Of Shutdown




To put Whitney comments into perspective i suggest to read the more balanced rebuttal from Self-Evident & Whitney Municipal-Bond Apocalypse Is Short on Default Specifics via Blommberg.... Personally i think it´s only a matter a time until a "Black Swan" arrives in the MUNI complex..... Like in Europe ( Greece & Ireland ) it will be interesting to see how the politicians will be able or willing to "balance" the pain among voters via austerity, tax hikes, cuts in entitlements etc. & bondholders via haircuts.... Either way this won´t be GDP & market positive.....

Für alle die Whitneys Aussagen für übetrieben halten bietet sich die kritische "Gegenschrift" von Self- Evident & Whitney Municipal-Bond Apocalypse Is Short on Default Specifics via Bloomberg an..... Ich persönlich bin der Meinung das es einzig und alleine eine Frage des Zeitpunkts ist, wann ( und nicht ob ) auch der MUNI Markt Besuch vom "Black Swan" bekommt..... Ähnlich wie in Europa ( Griechenland & Irland ) wird es sehr interessant zu sehen sein inwieweit die Politiker Willens & in der Lage sind die notwendigen Einschnitte zwischen den Wählern ( Kürzungen, Steuererhöhungen, drastische Einschnitte in Pensionsplänen usw )und Anleihebesitzern "auszubalancieren".... Keine der möglichen Lösungen dürfte "marktpositive" Wirkung entfallten.... In Realtime ist dies in Irland & Griechenland zu beobachten....

State Budgets: Year Ahead Looms As Toughest Yet HuPo

If 2011 is hinting at a national recovery, there is little sign of it in statehouses across the country.

States that already have raided their reserve funds, relied on borrowing or accounting gimmicks, and imposed deep cuts on schools, parks and public transit systems no longer can protect key services in the face of another round of multibillion dollar deficits.

Are Mom-n-Pop Investors Freaked Out By Munis? Flow Data Says Yes. MarketBeat WSJ

For the week ended Wednesday, investors pulled more than $4 billion from muni funds, extending the outflow streak to ten consecutive weeks. The $4 billion pullout also represents the largest week of outflows during the run

Maybe it´s time to reread the Special Gold Report "In Gold We Trust" from Erste Group..... ;-)

Kann nicht schaden sich demnächst den Special Gold Report "In Gold We Trust" der Ersten Bank mal wieder vorzunehmen..... ;-)

UPDATE:

NYT Reports States Looking For Ways To File Bankruptcy, Muni Bondholders To Be GMed NYT via ZH

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

American states' pension funds The Economist

Space, time and public pension black holes FT Alphaville

Muni mayhem, charted FT Alphaville

Yes, Investors are Still Dumping Munis. WSJ MarketBeat

The big loser in today’s data is the Municipal fund space which lost -$5.7 bln. This takes total outflows for January 2011 up to -$10.26 bln which is the greatest outflow since our data starts in 2007. Note that even at the height of the Lehman crisis outflows peaked at -$8.36 bln in October 2008.

Moody’s Credit Ratings of States to Factor in Unfunded Pensions NYT

Interaktive Karte US Staaten im Überblick Der Spiegel

US-Bundesstaaten stehen vor der Pleite Der Spiegel

More from the NYT on why QE3.1 - the Muni Edition is just around the corner

The NYT reports that "President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans."

Michigan, for instance, owes the federal government $3.7 billion it borrowed to pay unemployment benefits. Under current law the state would be forced to pay $117 million in interest to the federal government this fall, and the federal tax on employers would automatically step up each year to repay the debt.

"Enron-Esque Accounting" Still Rampant......

"Austerity" New York Style........For more on this topic you should read Payback Time : State Debt Woes Grow Too Big to Camouflage & Seven State Pension Plans Out of Money by 2020 or just visit the Madoff, Ponzi links on Wikipedia..... ;-)

In Sachen Buchführung sehen im Vergleich mit den Amis selbst die Griechen alt aus....Mehr zum Thema entweder Payback Time : State Debt Woes Grow Too Big to Camouflage & Seven State Pension Plans Out of Money by 2020 oder direkt unter Wikipedia nach Madoff oder Ponzi suchen.... ;-)


State Plan Makes Fund Both Borrower and Lender NYT

ALBANY — Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.

And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.

As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.

Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.

No wonder the "In Fiat Money We Do Not Trust Camp" is getting more popular, but when considering the following headline Households Bust $1 Trillion Muni Mark it should be clear that the term "crowded" could be used for other asset classes than GOLD....;-) Thanks to the World Cup posting will be very light during the next few weeks.....

Bei solch absurden Geschichten muß man sich nicht wundern wenn das "In Fiat Money We Do Not Trust Camp" merklich an Popularität gewinnt....Und wenn man sich die nachfolgende Zahl Households Bust $1 Trillion Muni Mark ansieht sollte sich auch die angestiegende Beliebtheit von GOLD relativieren....Da momentan auch bei mir das WM Fieber grassiert wird in Sachen Blog die nächsten Wochen eher wenig passieren...

UPDATE

61% Underfunded Illinois Teachers Pension Fund Goes For Broke, Becomes Next AIG-In-Waiting By Selling Billions In CDS ZH

“If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank.” So begins a story by Alexandra Harris of the Medill Journalism school at Northwestern, which, however, does not focus on some exotic product-specialized hedge fund, or some discount window (taxpayer capital) backed prop desk (hedge fund) at a TBTF bank, but instead at the 61% underfunded, $33.7 billion Illinois Teachers Retirement System (TRS), which just happened to lose $4.4 billion in 2009 (a year when, courtesy of America's conversion from capitalism to socialism, the market rose 60%), and 5% in2008.

Yet underperformance can be explained. What can not, is that the TRS has now become a shadow AIG. As Harris notes "TRS is largely on the risky side of the contracts, selling and writing OTC derivatives, including credit default swaps, insurance-like contracts that guarantee payment in the event of a default, that were blamed in part for the 2008 collapse of Lehman Bros. and bailout of insurance giant American International Group Inc., or AIG."

Suddenly NY pension plan isn´t looking as bad....... ;-)

Plötzlich sieht selbst die NY Pensionskasse ganz passabel aus..... ;-)

Payback Time : State Debt Woes Grow Too Big to Camouflage

Fits perfectly to this post.....

Passt hervorragend zu diesem Posting.....

State Debt Woes Grow Too Big to Camouflage NYT

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Joshua Rauh, an economist at Northwestern University, and Robert Novy-Marx of the University of Chicago, recently recalculated the value of the 50 states’ pension obligations the way the bond markets value debt. They put the number at $5.17 trillion.

After the $1.94 trillion set aside in state pension funds was subtracted, there was a gap of $3.23 trillion — more than three times the amount the states owe their bondholders.

I highly recommend to read the entire NYT link..... Some pretty sobering details how desperate some states are already acting to mask the shortfalls.....

Empfehle wärmstens den kompletten NYT Link zu lesen..... Einige ziemlich verzweifelte Versuche um die aktuellen Lücken möglichst "kreativ" zu stopfen......

Summary via Mish

• New Hampshire took $110 million from a medical malpractice insurance pool to "balance its budget". The State Supreme Court said put it back.
• Colorado tried to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002.
• Hawaii went to a four-day school week.
• Connecticut tried to issue its own accounting rules.
• California is making companies pay 70 percent of their 2010 taxes by June 15.
• New Jersey and other states make their budgets look balanced by pushing debts into the future. While Greece used a type of foreign-exchange trade to hide debt, the derivatives popular with states and cities have been interest-rate swaps, contracts to hedge against changing rates.

Fitch Downgrades Illinois and Warns of Further Actions as Budget Gap Widens Jesse

Illinois is financially the fifth largest US state with a 2008 GDP of approximately $633 Billion.

To put this in perspective, the 2008 GDP for the nation of Greece was approximately $357 Billion.

The usual political reflex is already underway.... Blame the speculators......

Der übliche politische Reflex ist einmal mehr bereits aktiviert.....Stoppt die Spekulanten....

The CDS inquisition, California edition FT Alphaville

It was only a matter of time. California — following in the footsteps of Ireland and Iceland, Greece, Spain, and politicians of all stripes and nationalities — has called for an examination of credit default swaps sold against its bonds.

California Treasurer Bill Lockyer has sent a letter to six big banks that underwrite the state’s municipal bond sales, asking what the banks’ role may be in also selling credit default swaps on Californian debt

The Muni Market is so far not worried ( surpirse, surprise ) that this house of cards will face any difficulties at least in the near term.........

Wenn man sich den Muni Chart so ansieht hat dieser ( welch Überraschung ) die beste aller Welten eingepreist....

Bespoke

Investing in municipal bonds is a paradox for investors right now. On one hand, they are attractive because of their tax-free status since taxes are expected to rise. On the other hand, with the economy as bad as it is, municipalities could come under duress and be at risk of default.

Based on the performance of the National Muni Bond ETF (MUB) in recent months, it looks like investors are weighing the tax advantage more heavily against default risk. As shown below, MUB is up 14.4% from its lows last year, and it is trading near its all-time highs since the ETF was released in 2007.

The chart above is even more "impressive" when you add the following story to the mix.....

Der Chart ist noch "eindrucksvoller" wenn man die nachfolgende Geschichte miteinbezieht.....

Bond insurer blow-up fallout, Las Vegas Monorail edition FT Alphaville

March 29 (Bloomberg) — Holders of bonds sold by the Las Vegas Monorail Co. likely won’t get their next payment due July 1 because the insurer, Ambac Financial Group Inc., won’t cover them.

The monorail, linking the city’s casinos, seeks to reorganize under Chapter 11 bankruptcy and has minimal funds to cover its next scheduled debt disbursement of $9.6 million in July, Wells Fargo, the trustee for the bonds, said in a March 26 announcement. While Ambac guarantees payments of $1.2 billion for the monorail, its obligation has been transferred by Wisconsin insurance regulators to a segregated account that temporarily can’t honor claims, according to the filing.

The Las Vegas Monorail example highlights what really matters about the dire state of the bond insurance industry – municipalities, and muni bondholders, are going to get hurt.

The halt marks the first time that a regulator has raised the possibility that Ambac, which insures $256 billion of municipal bonds, may be unable to pay current municipal bond insurance policy claims to preserve reserves for future obligations

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