Important News - Jan. 05

• 1) Yards face closure as orders collapse

“The shipbuilding industry looks set for a rash of insolvencies as one of the sharpest-ever collapses in order levels combines with banks’ reluctance to finance ship construction to starve many yards of cash.

Only 28.8m deadweight tonnes (dwt) of ships were ordered between January and November in 2009, according to London-based Clarkson shipbrokers, against 272m dwt for the whole of 2007, the peak of the shipping boom. ”

• 2) Tips: Gold May Hit $1,375, Dollar Going Down (CNBC)

“Spot gold prices could hit $1,375 in 2010, predicts John Licata, chief investment strategist at Blue Phoenix.

“I think there’re plenty of catalysts that have not been talked about related to gold,” Licata said.

The fear of sovereign debt default could continue to drive investors into gold, according to Licata. And California’s budget deficit could well join the likes of Greece and Ireland on the watch list for default, he added. ”

• 3) US public pensions ‘facing $2,000bn shortfall’ (Financial Times)

“The US public pension system faces a higher-than-expected shortfall of more than $2,000bn that will increase pressure on many states’ strained finances and crimp economic growth, according to the chairman of New Jersey’s pension fund.

The estimate by Orin Kramer, chairman of New Jersey’s investment council, will fuel investors’ concerns over the deteriorating financial health of US states following the credit crisis and the recession.

“State and local governments are correctly perceived to be in serious difficulty,” Mr Kramer told the Financial Times. “If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”

Estimates of the aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn.”

• 4) Europe 2010 Debt Sales to Reach $1.3 Trillion, Citigroup Says (Bloomberg)

“Euro-region governments may offer as much as 912 billion euros ($1.3 trillion) of securities this year to plug budget deficits, with 60 percent of sales in the first half of the year, according to Citigroup Inc.

The estimate was revised higher from the 869 billion euros projected in September, and compares with the 830 billion euros issued in 2009, the bank said. ”

• 5) Pension boost seen giving $180 billion to U.S. companies

“Mercer, a leading pension advice firm, said U.S. pension funds were 85 percent funded at the end of December compared with 75 percent a year earlier.

But it also warned that such funds are becoming increasingly reliant on equity markets, and thus are vulnerable to volatility.

In total, Mercer found that U.S. pension funds run by S&P 1500 companies had a deficit of $229 billion at the end of 2009 compared with their liabilities over 10 years. It was $409 billion at end-2008.”

• 6) States braced to tighten 2010 belts amid $14.8B in shortfalls (USA Today)

“States across the nation begin the year facing grim budget shortfalls that could mean a repeat of the service cuts, layoffs or furloughs and higher fees imposed in 2009, a USA TODAY survey shows.

States passed fiscal 2010 general-fund budgets totaling $627.9 billion, 5.4% less than a year earlier, says a study released last month by the National Association of State Budget Officers and National Governors Association.

Despite cuts, shortfalls for the 2010 fiscal year, which in most states began July 1, are $14.8 billion, the study says. The gap in 2011: $21.9 billion.”

• 7) Borrowed more than $26.03 billion to fund their respective unemployment benefit programs

“At the end of 2009, the U.S. Department of Labor reported that the 25 states and one territory had borrowed more than $26.03 billion to fund their respective unemployment benefit programs. California borrowed $5.914 billion in 2009, the most of any other state.

Mike Miller, with the U.S. Department of Labor division of fiscal and actuarial services, recently reported that payments from state unemployment trust funds will exceed revenues and interest income by $41 billion in fiscal year 2009 and $55.8 billion in fiscal year 2010.”

• 8) CMBS Delinquencies May Grow 58% in the Next Six Months, Realpoint Says

“The delinquent unpaid balance for commercial mortgage-backed securities (CMBS) rose “substantially” in November – more than 16% – to $37.93bn from the previous month, and the rate of growth looks likely to continue, according to monthly research by credit-rating agency Realpoint. The news comes as investment firm Grubb & Ellis (GBE: 1.36 0.00%), predicts a slow commercial real estate market in 2010.”

• 9) New York state “is broke,” should cut $30 bln-study (Reuters)

“NEW YORK, Jan 4 (Reuters) - New York state “is broke” and should cut $30 billion of spending over three years in actions ranging from freezing state workers’ pay and benefits to axing aid for special education, a new study said Monday.”

• 10) Bakk: State faces deep budget crisis (Minnesota)

“Taxes can’t be raised high enough or state spending cut enough to take the state out of its looming deficit, says Sen. Tom Bakk.

The state faces a $1.2 billion budget deficit in the current biennium and $5.4 billion in the next two-year budget cycle, a problem that demands immediate attention, says Bakk, DFL-Cook, who is also a Democratic candidate for governor.

But the problem isn’t too much spending nor is it totally solved by raising income taxes, he told the Pioneer on Monday.

“We can’t raise taxes enough to solve this, and we aren’t going to cut spending to solve this,” Bakk said. It will take a mix of options.”

• 11) State Debt At Staggering Level: Leads Nation (Connecticut)

“Connecticut enters the New Year as the most heavily indebted state per capita in the nation, and that debt is growing to alarming levels.

Our state government already carries the highest tax-supported debt in the nation at $4,490 per person. Massachusetts takes second place at $4,323, according to Moody’s Investors Service in July. But that tells only a fraction of the story.

Connecticut was ranked as one of the worst-prepared states in saving the necessary funds for employee pensions by The Pew Charitable Trusts in 2007.

Altogether, state taxpayers are on the hook for an estimated $58.9 billion in unfunded obligations including outstanding debt, state employee pensions, teacher pensions, and retired state employee health and life insurance benefits, according to the state Office of Fiscal Analysis. For every man, woman and child in Connecticut, that means we each owe about $16,800, with no repayment plan in sight.

If that is not enough, state debt is likely to grow as Connecticut faces a five-year budget deficit estimated at $10.1 billion through the 2013-14 budget year, according to the state Office of Fiscal Analysis. Even as the economy recovers, budget gaps in the 2011-12, 2012-13 and 2013-14 budget years forecast at more than $3 billion a year.”

……….11A) More Residents Turning To State For Food And Medical Care

“An increasing number of cash-strapped citizens turned to the state for food and medical care last year, boosting enrollment in state safety-net programs by 18 percent and providing yet another sign of the struggling Connecticut economy.

The number of residents receiving food stamps was up 32 percent from the previous year and 58 percent from five years ago.

In November, nearly 300,000 Connecticut residents were receiving food stamps from the state program, which is fully funded by the federal government. That represents an all-time high and shows a sharp jump from 187,000 in November 2004, said David Dearborn, a spokesman for the state Department of Social Services.”

• 12) Budget deficit to dominate Iowa legislative session

“Iowa’s 2010 legislative session will be cut short, from the usual 100 days to 80, to save money for the cash-strapped state.

During those days, the governor and legislators will be sculpting a cost-cutting budget. A free fall in state tax collections means a spending gap of $400 million to $1 billion.

“It will be a tough, tough budget year. I think this is probably the toughest one that I’ve dealt with,” said Sen. Robert Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee. Dvorsky has been a legislator since 1987.”

• 13) 1.43 million filed for bankruptcy

“The housing crisis and challenging economy forced more than 30,000 Marylanders into bankruptcy in 2009.

Nationwide, 1.43 million filed for bankruptcy, up 32 percent from the year before.

“A lot of people are having a tough time. I hope there is light at the end of the tunnel,” said Lawrence Heffner Jr., a partner in the Frederick firm of Russell & Heffner.”

• 14) More than 1 in 6 Tennesseans on food stamps

“NASHVILLE, Tenn. – More and more Tennesseans are turning to food stamps to make ends meet.

Nearly 1,186,000 Tennesseans, or more than one in six residents, currently receive some kind of food stamp assistance and the number continues to climb.”

• 15) Pending Sales of U.S. Existing Homes Dropped 16%

“The number of contracts to buy previously owned U.S. homes fell more than forecast in November as Americans waited for a first-time buyer tax credit to be extended.”

“The figure shows housing may be at risk of weakening when homebuyer incentives, which were extended in November, expire later this year. Unemployment close to a 26-year high and weaker consumer finances remain hurdles to a sustained acceleration in home sales that would help fuel the economy. ”

• 16) U.S. Budget Deficit May Exceed $1 Trillion for Years, Kos Says

“Jan. 5 (Bloomberg) — The U.S. government will be plagued by record budget deficits for the foreseeable future, said Dino Kos, managing director at Portales Partners LLC in New York.

“It’s hard to see anything happening in Washington,” Kos said today in an interview on Bloomberg Radio. “It seems without a crisis there’s not enough will” to trim the gap.

In fiscal 2009, the budget deficit exceeded $1 trillion for the first time and “the risks are it will remain above $1 trillion for a very long time,” Kos said.”

• 17) Lots of interesting articles and blogs posted today at pension Tsunami.

-Saxplayer00o1