Budget Crisis in California

In Janruary, Governor Schwartzenegger announced a $14 billion shortfall over the next 18 months. Since then, $2.1 billion in cuts have been announced. However, the budget shortfall is now expected to be $16 billion. The cuts are barely faster than the growth of the budget shortfall. On top of that, Moody's has placed California's bond rating on negative watch. This will fall quickly, once it's too late.

The Philly Fed manufacturing index expectedly (for me) came in drastically under expectations (for media economists).

Treasuries are way up: 30-yr +2.52%, 10-yr +3.5%.

Bought TLT (Lehman 20-yr treasury bond ETF) Jan'09 110 call. Yield equivalent is about 3.85.