Government Finances

"Suddently people are punting bonds." - analyst quoted by L.A. Times. The story details the sad reception for California's junk bond sale. Not only did they have to pay more to borrow, but California couldn't even raise the full amount. And they had such high hopes a week ago. But the news is now out that there's a $38 billion shortfall over the next three years. AGAIN???? Oh, wait, who's really surprised? It is the land of fruits, nuts, and useless politicians after all.

Dozens of states face imminent financial crises. Sales taxes are down in the high teens, yet retail sales metrics are improving? One set of numbers is lying... Just thinking contrarianly, maybe the states are exaggerating the shortfall so they can beggar Obama, but then again, maybe the retail sales numbers are being juiced. Either way, it's not good.

As far as the big picture, I don't know what to do right here. The dollar's still sliding, and gold has broken out. Rosenberg says he expects Obama to devalue the dollar as much as he can get away with. But this will hurt consumers with higher energy prices. But as a deficit country, maybe it'll do more good than harm. We can probably guage the level of it working by the bitching from our trade partners. Obama has shown China he's got no qualms about a trade war. What better way to devalue the dollar?

The question is "Can Treasuries hold up?" They held up in Japan, but their debt was always financed internally. And the biggest source of internal funds, the Fed, will stop buying very soon.

And here's Ralph Nader on Obama, "a frightened man." Nader is fearless, brilliant, and I like him here. "And they gave him the peace prize?"

Unfortunately, I am better at identifying unsustainable trends than the timing on when they will break down. So, I've just got to keep the leverage low (like now at 60%) and be patient. Let's see what the bank earnings look like at the end of the week.