Global Economy Bursting?

[Randolph Kinney]

California home prices and sales increase in March

http://www.latimes.com/business/money/la-fi-mo-california-home-prices-sales-20130418,0,4080452.story

Home prices across California jumped 8.3% in March compared to February and 24.7% compared to a year earlier, according to figures released by real estate firm DataQuick on Thursday.

Extremely low inventory has led to sharp price increases, as buyers look to take advantage of historically low interest rates and cash investors snatch up properties to rent or resell.

The sharp increases have concerned some observers who worry about another housing bubble, but many real estate experts believe that the price increases will slow and that the market remains on solid footing. Inventory should loosen as rising prices tempt more homeowners to sell.

 

[Terrel L. Shields]

many real estate experts believe that the price increases will slow and that the market remains on solid footing

great leap of faith

 

[Restrain]

Looking in our area, seeing big jumps in sale price, 20% or more, and not Investor driven. The excess has been wrung out, and homes selling under 30 days.

 

[Randolph Kinney]

Welcome to California: Electric Power Facing Biggest Test Since Enron

http://www.bloomberg.com/news/2013-...-biggest-test-since-enron-energy-markets.html

California may face the biggest regional power shortages in more than a decade this summer, sending wholesale prices higher, as idled nuclear reactors and low hydroelectric output cut generating capacity.

The California Independent System Operator Corp. said last month that managing the state grid, especially in parts of Southern California, will prove “difficult” because the system will be operating without Edison International (EIX)’s San Onofre nuclear power plant and two natural gas-fired units, while hydroelectric output will be at a three-year low.

Electricity at Southern California’s SP15 hub for July through September rose $1.55, or 2.6 percent, to $61.40 a megawatt-hour yesterday, a five-year seasonal high.

Electricity at the SP15 hub for next-day delivery has averaged $49.70 a megawatt-hour this year through April 18 on the Intercontinental Exchange, the most for the period in five years. Northern California’s NP15 hub has averaged $41.99 this year, the most since 2010.

“It’ll be tight,” said Frank Wolak, an economics professor at Stanford University and former chairman of California ISO’s market surveillance committee for 13 years. “There could be reliability events that crash the system.”

Supply constraints on the grid this summer may point to even bigger shortages in the next decade as state environmental regulations force coastal plants to shut while the intermittent power from renewable sources gains, according to UBS AG and Wood Mackenzie Ltd.

The California ISO, responsible for delivering power to more than 30 million people, currently has about 60,000 megawatts of generating capacity.

 

[nm505]

Update: Federal and State improving Fiscal Situation

Read more at [url]http://www.calculatedriskblog.com/2013/04/update-federal-and-state-improving.html#gHCFcSPY4GUEiK6S.99[/URL]

"From Goldman Sachs economist Alec Phillips: The Federal Budget Deficit: Shrinking Faster.

The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years.
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There are still longer term issues, but the deficit is shrinking fairly quickly.

The Controller of California has a website showing daily income tax collections compared to last year. The California budget expects personal income taxes of $51.4 billion as if April 30th. Right now, as of Thursday April 18th, net income taxes are at $53.3 billion - ahead of plan with more collections to come."
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[Randolph Kinney]

Danes Rethink a Welfare State

http://www.nytimes.com/2013/04/21/w...?nl=todaysheadlines&emc=edit_th_20130421&_r=0

COPENHAGEN — It began as a stunt intended to prove that hardship and poverty still existed in this small, wealthy country, but it backfired badly. Visit a single mother of two on welfare, a liberal member of Parliament goaded a skeptical political opponent, see for yourself how hard it is.

It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16.

With little fuss or political protest — or notice abroad — Denmark has been at work overhauling entitlements, trying to prod Danes into working more or longer or both. While much of southern Europe has been racked by strikes and protests as its creditors force austerity measures, Denmark still has a coveted AAA bond rating.

But Denmark’s long-term outlook is troubling. The population is aging, and in many regions of the country people without jobs now outnumber those with them.

 

[Randolph Kinney]

Solar-powered plane completes California test flight

http://www.3news.co.nz/Solar-powere...ight/tabid/1160/articleID/295023/Default.aspx

 

[Randolph Kinney]

Update: Federal and State improving Fiscal Situation

Read more at [url]http://www.calculatedriskblog.com/2013/04/update-federal-and-state-improving.html#gHCFcSPY4GUEiK6S.99[/URL]

"From Goldman Sachs economist Alec Phillips: The Federal Budget Deficit: Shrinking Faster.

The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years.
​

There are still longer term issues, but the deficit is shrinking fairly quickly.

The Controller of California has a website showing daily income tax collections compared to last year. The California budget expects personal income taxes of $51.4 billion as if April 30th. Right now, as of Thursday April 18th, net income taxes are at $53.3 billion - ahead of plan with more collections to come."
​

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The U.S. Economy Will ‘Grow’ 3 Percent By July

Market Value of Public-Sector Pension added to GDP

http://www.ft.com/intl/cms/s/0/63bbbd22-aa95-11e2-bc0d-00144feabdc0.html#axzz2RD8NEbLT

The U.S. economy will be 3 percent larger by July, at least on paper.

That is not because of a shift in its underlying prospects, but because of a comprehensive update to the national accounts by the Bureau of Economic Analysis (BEA) producing the most dramatic change to the way gross domestic product is measured in more than a decade, with preliminary estimates adding about 3 per cent to US GDP.

Pension Accounting

The change with the most counter intuitive results is pension accounting. At the moment, the BEA counts what companies pay into a defined benefit pension as wages, and ignores whether the plan is in deficit or surplus. After the change it will measure what companies have actually promised to pay.

One odd effect will be an increase in GDP, estimated at about $30bn in 2007, because employers promised bigger pensions than they funded. Measured federal government spending will fall, because it has funded its plans better, while state and local government spending will rise because they have promised more than they paid.

“Where we’ll see large effects is in the area of deficit numbers, saving, corporate profits and other measure that are related to those,” said Mr Moulton. “The imputed interest costs that are associated with the unfunded liabilities are really large.”

The total market value of public-sector pension unfunded liabilities as of mid-2008 was $3.04 trillion, a value that dwarfs explicit state government borrowing of $1.01 trillion.

Having a BEA estimate of the size of pension deficits and their cost could prompt an important shift in the political debate over the future of defined benefit plans.

http://www.bea.gov/scb/pdf/2013/03 March/0313_nipa_comprehensive_revision_preview.pdf

 

[Randolph Kinney]

California discovers gold again

http://www.cnn.com/2013/04/22/opinion/castellanos-california-gold/index.html

Today, California owes hundreds of billions: $300 billion alone in pension obligations. Even after Gov. Jerry Brown's effort to pay down $28 billion of immediate debt, California's liabilities for retiree pensions and health care exceed what it spends for all state programs combined.

California's future looks anything but golden. Taxpayers who don't want to be left footing the bills are in exodus. The state's politics is as paralyzing as Washington's. To see our nation's bright future in 20 years, can we still look at California?

Maybe so. Sometimes, the first green shoots emerge in the forest where everything burned.

The lieutenant governor argues that government's biggest problem is not that it is misguided but that it is archaic. Newsom cites open-source software pioneer Tim O'Reilly's analogy for government. "We think of government as a vending machine: You put money in, services come out." When something goes wrong, Newsom points out, we shake the vending machine out of frustration. If we feed it more money, it is to little effect: Vending machines are not particularly innovative or adaptive.

Our government is still built on that model, Newsom reports, the outdated, industrial-age paradigm of the factory, though everything else in our personal lives and our private sector has moved past it. Simultaneously, an explosion of technology, social media and e-commerce has created a more informed and empowered citizenry.

With new tools and technologies, Newsom contends, it is time to redefine "government" to seize the opportunities of a new day. Would we still rather be governed the old way, top down, politically and artificially by plant managers? Or bottom-up, authentically, naturally and organically, through our own decision making and handiwork?

Perhaps this has been the promise of the American experiment in self-government all along, and we have only been waiting for the powerful and democratizing technology of the communications age to seize it.

Once more, when we need it most, maybe California has discovered gold again.

 

[Randolph Kinney]

The Endgame is Forced Liquidation

http://hussmanfunds.com/wmc/wmc130422.htm

With a record 74% of Wall Street strategists now bullish, who is left to embrace further speculation, and how deep will the required losses be to induce the conservative 26% to absorb the overleveraged exposure of the exuberant 74% when forced liquidation becomes necessary?

Rule o’ Thumb: When the cover of a major financial magazine features a cartoon of a bull leaping through the air on a pogo stick, it’s probably about time to cash in the chips.