Fire sales on public property?
Good morning.
States are seeing incomes fall sharply as the economy falters. Some lawmakers in some states are pushing the idea of selling public property to raise cash for revenue shortfalls:Like families pawning the silver to get through a tight spot, states such as Minnesota, New York, Massachusetts and Illinois are thinking of selling or leasing toll roads, parks, lotteries and other assets to raise desperately needed cash.
This appears undisciplined at best, and like Russian-style post-Soviet looting at worst. Given the amount of raw looting of taxpayer dollars that has been ongoing in the financial sector, I tend to expect it'll be the latter. But one does have to ask: who will buy?
Perhaps investors in Japan, and this is the kind of thing Akio Mikuni was talking about. (Bloomberg story here.) But Thomas Friedman notes US infrastructure is, in much of the country, a disaster, calling for the US to get a "reboot." Japan does need somewhere to put money, given that industrial output has fallen so sharply on drops in exports, as can be seen in the back-below-800 Baltic Dry Index of shipping prices/activity.
China is talking about allowing freer trading in Yuan, in response to the increasingly unstable US dollar. The governor of the Chinese central bank thinks that "[t]he US dollar is unlikely to be stable next year and later. And the likelihood of the United States issuing more money in the near future adds to the depreciation risk in US-dollar-denominated assets and trade settlements." Those are words you do not want to hear if you are trying to finance large account deficits. Mish, meanwhile, has a tasty assortment of news items from eastern Asia that you should skim, but doesn't include Minyanville commentary on unemployment unrest in China.
Holiday sales were "dismal," reports CNBC; below forecasts. (Another article here.) There's a nasty little graph here showing drops in various categories. Amazon.com was an unusual bright spot, claiming its best year ever (tho' this guy at Salon thinks it's BS - but these statements by Amazon have held out reasonably well in the past) the entire online sector did much less badly than everyone else, with a relatively small sector drop of only 2%; the less-than-spectcularly-reliable ShopperTrak survey says shopper traffic at brick-and-mortar was down 24%. Karl at Market Ticker thinks the US is fundamentally shoppinged-out, at least for a while.
Bloomberg reports analysits don't think Boxing Day (...or week...) sales are going to make up any lost ground, either. Gift card redemptions won't help either - those were way down on fears about bankruptcy. Not to mention the bad weekly unemployment claims report, showing another jump from the previous week.
The Telegraph seems to finally be on the full-disclosure bandwagon. Karl noticed this, and again posts a longer version with details. Until we see more of that, cash will remain king. Sadly, instead of that - and go look at this, really - we're seeing more changes in accounting standards to allow hiding more losses. I think things are going to have to follow the bond market's forecasts (hello, 1873) before the craziness will stop.
eta: The commercial real estate industry is stepping up for a turn at the taxpayer trough, as well. With risk spreads like these (remember, in these charts, up == bad), I can't say I'm surprised.
States are seeing incomes fall sharply as the economy falters. Some lawmakers in some states are pushing the idea of selling public property to raise cash for revenue shortfalls:Like families pawning the silver to get through a tight spot, states such as Minnesota, New York, Massachusetts and Illinois are thinking of selling or leasing toll roads, parks, lotteries and other assets to raise desperately needed cash.
This appears undisciplined at best, and like Russian-style post-Soviet looting at worst. Given the amount of raw looting of taxpayer dollars that has been ongoing in the financial sector, I tend to expect it'll be the latter. But one does have to ask: who will buy?
Perhaps investors in Japan, and this is the kind of thing Akio Mikuni was talking about. (Bloomberg story here.) But Thomas Friedman notes US infrastructure is, in much of the country, a disaster, calling for the US to get a "reboot." Japan does need somewhere to put money, given that industrial output has fallen so sharply on drops in exports, as can be seen in the back-below-800 Baltic Dry Index of shipping prices/activity.
China is talking about allowing freer trading in Yuan, in response to the increasingly unstable US dollar. The governor of the Chinese central bank thinks that "[t]he US dollar is unlikely to be stable next year and later. And the likelihood of the United States issuing more money in the near future adds to the depreciation risk in US-dollar-denominated assets and trade settlements." Those are words you do not want to hear if you are trying to finance large account deficits. Mish, meanwhile, has a tasty assortment of news items from eastern Asia that you should skim, but doesn't include Minyanville commentary on unemployment unrest in China.
Holiday sales were "dismal," reports CNBC; below forecasts. (Another article here.) There's a nasty little graph here showing drops in various categories. Amazon.com was an unusual bright spot, claiming its best year ever (tho' this guy at Salon thinks it's BS - but these statements by Amazon have held out reasonably well in the past) the entire online sector did much less badly than everyone else, with a relatively small sector drop of only 2%; the less-than-spectcularly-reliable ShopperTrak survey says shopper traffic at brick-and-mortar was down 24%. Karl at Market Ticker thinks the US is fundamentally shoppinged-out, at least for a while.
Bloomberg reports analysits don't think Boxing Day (...or week...) sales are going to make up any lost ground, either. Gift card redemptions won't help either - those were way down on fears about bankruptcy. Not to mention the bad weekly unemployment claims report, showing another jump from the previous week.
The Telegraph seems to finally be on the full-disclosure bandwagon. Karl noticed this, and again posts a longer version with details. Until we see more of that, cash will remain king. Sadly, instead of that - and go look at this, really - we're seeing more changes in accounting standards to allow hiding more losses. I think things are going to have to follow the bond market's forecasts (hello, 1873) before the craziness will stop.
eta: The commercial real estate industry is stepping up for a turn at the taxpayer trough, as well. With risk spreads like these (remember, in these charts, up == bad), I can't say I'm surprised.