Important News - Dec. 09

• 1) Sovereign debt fears weighing on world markets (”global debt crisis”)

“Sentiment in the market has been knocked in the last couple of days by worries about a global debt crisis. Moody’s Investor Services said the United States and Britain must get a grip on their public finances to avoid threats to their top triple-A credit ratings and Fitch downgraded its rating on Greece.

“Greece’s debt downgrade will still be adding to worries about the exposure of European banks,” said Arifa Sheikh-Usmani, equity trader at Spreadex.

Later Wednesday, the British finance minister Alistair Darling delivers his latest projections about the country’s debt — Darling has all but admitted that his most recent forecasts were way too optimistic as the recession proved to be longer and deeper than anticipated.”

………………1A) Emerging-Market Stocks Fall on Dubai, Greece, Spain Concern

• 2) U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak (Bloomberg)

“U.S. homeowners have lost about $5.9 trillion in value since the housing market’s peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com.

Almost half a trillion dollars was wiped out this year through November as housing headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement.

“A phenomenal amount of wealth has been erased since the housing bust,” Stan Humphries, chief economist for Seattle- based Zillow, said yesterday in an interview. “For many households, most of their wealth is tied up in real estate.” ”

• 3) Congress readies huge year-end spending bill (AP News)

“WASHINGTON — Congressional negotiators sealed agreement Tuesday night on sweeping spending legislation that boosts housing and heating subsidies but curbs President Barack Obama’s requests for aid to Afghanistan and Pakistan.

The move comes as lawmakers wrapped the budgets of nine Cabinet agencies into a $1.1 trillion spending bill they hope to complete before a stopgap measure expires Dec. 18.

The measure would combine six of the dozen routine annual appropriations bills for the budget year that began Oct. 1. It combines a huge increase in foreign aid with an 18 percent cut to a program that helps states with the cost of incarcerating criminal illegal immigrants.”

• 4) Lawmakers agree on $447 billion to fund government

“WASHINGTON (Reuters) - Lawmakers agreed on Tuesday on a $447 billion spending bill that would fund large parts of the U.S. government for the fiscal year that began more than two months ago.

Agencies from the Justice Department to the Treasury are operating on temporary extensions of last year’s budget because Congress did not finish its work on spending bills before the fiscal year began on October 1.”

• 5) China ready to invest $50 billion for Nigeria oil

“China is ready to invest USD50 billion to acquire 6 billion barrels of Nigerian oil reserves in a proposal made in June, a sum which could help the OPEC member fund its joint ventures with oil majors, a top adviser said.

Several state-run Chinese oil firms, including CNOOC, are in talks with Nigeria about Beijing’s search for proven oil reserves, which include incursions into some oil blocks held by Royal Dutch Shell, ExxonMobil and Chevron.”

• 6) Saddleback district may not meet financial obligations

“MISSION VIEJO – Faced with an anticipated $26 million deficit, Saddleback Valley Unified trustees on Tuesday approved a preliminary 2010-11spending plan that indicates the district may not be able to meet its financial obligations.”

• 7) Double digit unemployment in California until 2012

“SAN FRANCISCO (Reuters) - Double-digit unemployment in California will peak this quarter and grip the state until 2012, slowing its economic recovery and threatening the state government’s already fragile budget, a UCLA Anderson Forecast report said Wednesday”

• 8) California Prison Educator Numbers May Be Cut 65% (900 workers)

“Question: There was a rally this morning about hundreds that say that they’re going to get laid off next month from the department, training, vocational teachers that rehabilitate prisoners and they’re going to be laid off next month, 900 out of 1,400. How do you expect our streets to be safe if our criminals are not going to be educated and have nothing to do on the outside?

Governor Schwarzenegger: Well, the question is, when you have a limited amount of money then you can only go and pay out the money you have. And so when you have all of a sudden $60 billion less money, you cannot pay out the same amount to prisons, you cannot pay out the same amount to education, to higher education, to in-home services, to any of those things. So everyone has to be cut back.”

• 9) Schools Brace for Second Round of Decreased State Funding (Michigan…up to $600 per student)

“LANSING, Mich. - While most Michigan public school students will be home for their holiday breaks and anticipating gifts, the school districts are preparing for what some expect will seem more like getting lumps of coal in their Christmas stockings.

On December 21, the second allocation of state money is being sent to schools. The first payment decreased funding per student by about $165, and another cut is expected this time, too. Michigan Education Association spokesman Doug Pratt predicts it will be as much as $600 less per student for some schools.”

• 10) Christina Romer Says Spending Our Way Out of Recession Is “Sensible Policy”

“Where will the money come from?

Christina Romer, chair of the White House Council of Economic Advisers, says some of it could come from the $200 billion the government plans to get back in TARP funds. ”

“Only in Washington could someone get away with this kind of fuzzy math. Let’s not forget that $200 billion she refers to isn’t a gain we booked on our TARP investment, it’s simply $200 billion we didn’t lose. It’s like spending $2000 on a PC, returning the PC and then calling the refunded money a profit. ”

• 11) U.S. State Revenue Fell 16% in Fiscal 2008, Census Bureau Says

“Dec. 9 (Bloomberg) — U.S. state government collections fell 16 percent to almost $1.7 trillion in fiscal 2008 from a year earlier, while spending increased 6.2 percent, according to the U.S. Census Bureau.

The biggest drop came in so-called insurance trust revenue, which slid $377.7 billion, or 73 percent, the federal agency reported today. Such funds include public employee retirement systems, unemployment compensation and worker compensation funds, many financed with payroll taxes and other worker contributions, according to the bureau.

Spending exceeded $1.7 trillion for the combined states, according to the report.”

• 12) Officials: Tough economic forecast ahead for Conn.

“Connecticut sits fifth nationally on the list of per-capita state tax burden, at $3,681 for every man, woman and child in the state in fiscal year 2007. The state’s tax burden is almost 48 percent higher than the national average, according to the report.

When including county and local taxes, and adjusting for personal income, Connecticut (11.1 percent) ranks third in the nation, behind New Jersey (11.8) and New York (11.7).

It also sits atop the national rankings in state, county and local tax burden on a per-capita basis, at $7,007. That figure is 63.6 percent higher than the national average of $4,283.”

• 13) Local governments may have to report billions in extra debt (Pension debt)

“A federal board that sets accounting standards for local governments is leaning toward requiring that cities and counties report their pension debts in a way that could damage their ability to obtain credit.

Staff for the Governmental Accounting Standards Board is eyeing a plan to make municipalities report their pensions’ unfunded liabilities on their balance sheets — which are used by lenders to determine an agency’s financial health. Currently, the unfunded liabialities are listed as footnotes.

The change, already required of private financial firms, would add millions of dollars - in some cases billions – in reported debt to cities and counties.

For the city of Orange, that would mean about $60 million.

For the county of Orange, that would mean about $2.5 billion.

“What you’re doing is taking the hay out of the loft and putting it on the floor where everybody can see it,” said Orange County Supervisor John Moorlach, an outspoken pension reformer. “If GASB issues that (decree), it’s going to be a mind-blower.””

• 14) EU Ready to Bailout Greece; Debt Downgrades in Baltic States; Can Euroland Even Survive? (Mish)

“I doubt the EU dissolves, but it clearly is not the safe haven have many think it is. Loans made to the Baltic states are in trouble, Greece itself is in serious trouble, and Spain is in serious trouble as is Ireland.

Most in the United States are too U.S. centric, not understanding any of the economic problems or currency problems elsewhere. Currency and fiscal problems are everywhere one looks.”