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Seven months after Hurricane Katrina ripped holes in the Superdome’s roof in 2005, Louisiana State Bond Commission members made what they were told would be “the best of a bad situation” in financing the stadium’s renovation.
Acting against the recommendation of their staff, the commissioners voted for a Merrill Lynch & Co. plan to use debt and interest-rate swaps to pay for the job. While the deal helped keep the National Football League’s New Orleans Saints from leaving town -- and the arena got new scoreboards while 12,000 seats were converted to luxury class -- taxpayers became the losers for supporting a winning team.
The cost of financing the work has reached $42 million, almost a quarter of the $187 million spent on Katrina-related repairs and enhancements and three times as much as expected. The deal became so expensive that the state repurchased the debt sold by the New York investment bank to stop the bleeding.
“It was a flawed idea out of the gate,” said Robert Brooks, who teaches financial management at the University of Alabama in Tuscaloosa.
Scores of public officials, including Michael Bennet, now a U.S. senator from Colorado, and Jon Corzine, the former governor of New Jersey, bought the same Wall Street pitch: So-called auction-rate bonds would lower financing costs by allowing them to pay short-term rates, and interest-rate swaps would protect them if markets moved in the wrong direction.
Move Defended
Corzine didn’t respond to a request for comment. A spokesman for Bennet, Adam Bozzi, defended the move made when the senator was superintendent of the Denver public schools, saying that the financing put the district “in much better financial shape.”
29 comments:
Hi, I came across your site and wasn’t able to get an email address to contact you. Would you please consider adding a link to my website on your page. Please email me back.
Thanks!
Harry
harry.roger10@gmail.com
Harry - what is your website? Post the link!
Don't e-mail him, in case he is just a spammer, see if he comes back and posts the link.
The comment sounds like a generic link fisher type, but maybe I am being too harsh.
I clicked on his avatar photo, and from the Blogger profile, found:
http://ithinkaboutmoneyallday.blogspot.com/
Aaaah, I see... he is likely located in Asia.
Harry is promoting his "How To Make Money Online" website, he probably came here from searching Blogger sites for comments and posts about "working from home" and "making money online" etc
OTOH he doesn't seem to be actually selling anything there that I can see at first glance.
From the horse's mouth (not the other end of the horse):
http://www.zerohedge.com/news/real-dark-horse-sps-mass-downgrade-faq-may-have-just-hobbled-european-sovereign-debt-market
"All your questions about the historic European downgrade should be answered after reading the following FAQ. Or so S&P believes. Ironically, it does an admirable job, because the following presentation successfully manages to negate years of endless lies and propaganda by Europe's incompetent and corrupt klepocrarts, and lays out the true terrifying perspective currently splayed out before the eurozone better than most analyses we have seen to date. Namely that the failed experiment is coming to an end."
S&P lay out the case very well, though rather polite, compared to most Blogs etc.
The biggest danger now is the follow on downgrades that will be coming in the wake of this one.
S&P will move on to European Banks and large corporates, and more downgrades there (already have been some recently), like pillars of the shadow Bankster system like A&G (weird karma there, with a name so close to AIG and a business so similar as well!), will cause credit to crunch further tighter in Europe.
I read many or most large Euro area corporations are carrying large US $ denominated loans on their books, which will be much more costly to repay in devalued Euros, even without any further downgrade actions.
But the other ratings Agencies won't be waiting around either, Moody's and Fitch will have to do similar.
And that will have effect - downgrade by another Agency will render many Bonds no longer ownable by many Funds (like pernsion Funds) who have rules about "investment grade assets". They very often have cluases like "rated AAA by at least 2 ratings agencies", which will no longer be the case.
If a main playa like A&G gets downgraded by 2 Agencies, assets will have to be sold off by many holders.
So there is much more drama still to come, soon, on the European ratings file. Which I think many traders and small investors do not realize, yet. The big hedge Funds etc are well aware of all this, I'm sure.
So the general trend for the Euro should be lower vs US $, like to par or below, in the near future.
All just IMHO of course.
http://www.reuters.com/article/2012/01/14/us-eurozone-sp-merkel-idUSTRE80D0G720120114
"Europe must move quickly after downgrades: Merkel"
"(Reuters) - Ratings downgrades in the euro zone by S&P underline why Europe must seal a pact to tighten fiscal rules quickly and get its permanent bailout fund up and running as soon as possible, German Chancellor Angela Merkel said on Saturday.
"We are now challenged to implement the fiscal compact even quicker ... and to do it resolutely, not to try to soften it," she said at a meeting of conservatives in the northern city of Kiel..."
yes, Angela, because what you have been doing so far has been working sooooo well...
LOL
GAW I will not write back as he can post his link. I did the same thing you did, but I didn't see any real content that the readers would be interested in. Thanks for all the updates I have a service man coming so I cannot read much.
if my counting is correct, there are now 13 AAA-rated sovereigns left in the world. See if you cab guess them and then check at:
http://www.standardandpoors.com/ratings/sovereigns/ratings-list/en/us/?subSectorCode=39&start=50&range=50
Once you've checked, an easy question: Which AAA rating is an absolute joke?
These European downgrades are slightly bad timing for me as one of my euro-zone govt bonds rolls over right now, so I'll probably get an even more crap rate of interest when I buy after these downgrades. I was only buying German, Dutch and Finnish (all still AAA) but have decided to eschew even Dutch in the future as their banks have also got a lot of dogy debt.
latest update no breadth indicator (number of stocks above 150 day ma).
http://stockcharts.com/h-sc/ui?s=$SPXA150&p=W&yr=3&mn=0&dy=0&id=p88155311241
Still looking very positive but not toppy/extrmely bullish (still well below 450).
Mugabe I am going to guess the UK should not be AAA.
Mugabe I don't remember the formula you were using. Can you repost it again? Also FMMF Paladin Funds is doing little so far. It may be one of those horses that is slow coming out of the starting gate. I was bored yesterday and looked up Mish out of curiosity. I didn't read his article, but I did notice his comments are way down. I wonder how Sitka is doing? My miners are gaining ground, but only because gold has turned up.
I think one of the guests on KWN Rob McEwen said it best. He was what got me thinking about US Gold UXG and Minera Andes. He has a ton of money riding on both and says it is common stock not senior debt. I made some decent money last year timing UXG. Since then it has been all downhill with a small uptick now and then. I am concerned with the litigation that Minera is involved in.
I removed the Gainesville Coins banner temporarily until the sales manager calls me back and sends me a check. I will toss in an adsense as I am close again to making it to the next plateau.
QB,
The short-term trading formula -nothing to do with the breadt indicator- was:
Slope of 6 day simple moving average
Slope of slower daily MACD line
MACD set at 6,13,5 (this has been twigged since the last time I posted)
Go long or short when both lines are in agreement. Stand clear when not.
Close your position based on prices near the end of the trading day (if your broker lets you set orders like this)when they've contined to go against you the day after you've got a sell signal on your position.
I'll keep on posting returns monthly.
The breadth indicator is intended as a helpful adjunct to the overall SP 500 chart- not as a substitute for it. It basically tells you about the underlying health and direction of the market, and when it is getting extremely bullish (over 450) or bearish). It hasn't timed the market perfectly since the 2009 low but has been v useful imo.
So what it's telling me at the moment is that medium term you should be long (or at least not short), that the general market direction is positive and not frothy as in a major top. It's not a short-term indicator ie where will the market go next week?
Mugabe, why would your interest rate on a bond get crappier after a downgrade? I thought the sovereign would have to pay higher interest rates if their bonds were lower-rated, because they were judged more risky.
I'll admit that I don't have an instinctive feel for the bond game. Stocks I can glom, at least how they're supposed to work in a mythical free market. Bonds, especially buying them on the secondary market, I don't get so good. I've read about how it all works several times, but there's a mental blind spot with me.
In my paranoid spot, I don't trust the rating companies. These are the same halfwits that couldn't give a bad rating to the shakiest CDO during the housing bubble, because they were bribed to call them A-rated. Another case of regulatory capture, with the "cops on the beat" being paid off by the bond-bundlers they were supposed to police. And now we're supposed to believe they're sharp-eyed on sovereign debt all of a sudden?
Perhaps they're being paid by the banks and bond-owners to rank sovereign debt lower. That would jack the interest rates that bond-buyers could demand, right? For all the talk about the fearsome "bond vigilantes," I haven't seen much action from them. Perhaps widespread downgrades by corrupt, captured ratings agencies are the opening salvo in a vigilante attack. "You pay us rich bond-holders more and shaft the citizenry with more austerity to make up for it."
Maybe I've been hanging out with the paranoid schizophrenics too long. But so often, when I try to imagine the most devious thing I can come up with, I find out that people on the inside have topped that in ways that I didn't know existed.
QB,
Here is a shorter term version of the same indicator based on stocks above the 50 day moving average:
http://stockcharts.com/h-sc/ui?s=$SPXA50&p=W&yr=3&mn=0&dy=0&id=p60921823676
As you can see, it's muh more 'all over the place' but that's inevitable as it's shoter term.
'Mugabe, why would your interest rate on a bond get crappier after a downgrade? I thought the sovereign would have to pay higher interest rates if their bonds were lower-rated, because they were judged more risky.'
Bukko, you're right. The 'problem' is that I only buy 'quality' euro-zone sovereigns (is that an oxymoron?)and their yields will probably go even lower after the downgrade of france et al.
'In my paranoid spot, I don't trust the rating companies. These are the same halfwits that couldn't give a bad rating to the shakiest CDO during the housing bubble, because they were bribed to call them A-rated.'
I think there's a huge difference between when they're paid to rate something (the examples you give), and there's therefore a huge conflcit of interest, and the way they rate the sovereigns.
Having said that, I think they're usually behind the curve even when they're not being corrupt. See the UK rating of AAA!
Getting back to the topic of the post, I remember back in the early 1990s when I was a reporter covering (among other things) the meetings of the school board in DeSoto County, Florida. This is a rural county about 100 miles south of where Queenbee lives, population around 30,000 then. Even 20 years ago, there were slick-talking financial product pitchers trying to get the school board to put its tax money into complicated swap deals tied to interest rates. We're not talking huge sums, like $50 million or less, as money would flow through from property taxes and the state .gov.
I didn't understand how these things worked, but I was not as astute financially as I am now. However, I still probably could not comprehend how these arcane deals were supposed to help the school finances. And I doubt the school board, which was composed of good ol' boys and gals, led by an oily, slick-talking elected school superintendent who had a Newt Gingrich-y style, know much about these things either. But on the recommendation of the superintendent, the school board voted to put its money into a swap job.
I wonder how that turned out. Was it a little Jefferson County, Alabama in the making? Was the superintendent or others on the board paid off to go for this incomprehensible set-up? From reporting about the Jefferson County fiasco, it didn't take much to buy a politician. A few fancy watches, good restaurant dinners and flattery that these financial whizzes from the big city were courting them was enough to bend those egos. And a small Southern school board doesn't sound like a mega-profitable place to go prospecting for scam-money.
I don't remember the name of the company involved, but I'm reminded of the Matt Taibbi quote about Goldman being a relentless vampire squid jamming its blood funnel wherever there was a pool of money. Maybe that was what was going on way down there in Smalltown USA, even before Bill Clinton was president.
'Also FMMF Paladin Funds is doing little so far. It may be one of those horses that is slow coming out of the starting gate.'
I think you need to give the guy some time. The fund's been gonig only a month! You can check his end of month holdings on the website and at the end of december he was about 70% cash. I said he was conservative and that's why I though CL might want to put a 'bit' his way.
The 'problem' is that I only buy 'quality' euro-zone sovereigns (is that an oxymoron?)and their yields will probably go even lower after the downgrade of france et al.
Ah, that makes sense. When everything thing else is mutton, you'll pay more for lamb.
Wait, that doesn't make sense in this context. My brain is tired. I just got off a midnight shift and I should be going to sleep. It's 9 a.m. here and I had the risk-taking experience of riding my bicycle home through a light snowfall. Whey the hell am I rattling on on a blog when I spent all night doing that at work? (Quiet shift, except for the one young schizophrenic woman who didn't sleep a wink because she was rocking back and forth on her bed chanting "Allah" and "I'm sorry, God" in the throes of her religious mania. And she's a Caucasian Canadian, not a Muslim. So often there's not much difference between religion and insanity...
Anyway, good day and goodnight.
Goodnight! You might be right ... perhps even Finland and germany yields will also up on the news, who knows?
QBm re Mish and Sitka, here are reurns to end October 2010 on what i think is their best and most balanced fund:
http://www.sitkapacific.com/wp-content/uploads/Sitka_Pacific_Capital_Management_Absolute_Return_Portfolio.pdf
Scroll down to see them. They're not bad compared to a lot of what is out there, but obviouysly not spectacular. I left them a while back now, thinking I could do as well as them (remains to be seen!) and wanting to manage my own money.
good philsophical/psychological stuff here:
http://www.ritholtz.com/blog/2012/01/hume-causation-science/
Thanks Mugabe and I wasn't being fair to Paladin as you are right it has only been open a month. I am considering a 10k investment as well in the fund. I like him and he will write back and answer questions. Now to I'm off to read the ritholtz link.
Big call from Tony Caldaro:
Some weeks ago we anticipated the first couple of weeks in January would be the deciding factor for the ongoing bull/bear market inflection point. It certainly has been! The market, as measured by the SPX, has not advanced that much it price. Only up 2.5% for the year. While the market has continued to impulse higher, our long term technicals have greatly improved. In fact, when we review both the fundamental and technical data sets we track they appear to be in the right position for a continuation of a bull market, not a bear market.
Consumer sentiment is beginning to improve after a three decade low. Economic indicators have been rising since October, after flashing a potential recession. And, long term investor sentiment has began to rise after being quite bearish just a month ago. All three fundamental indicators are still in a bearish mode. While the economy is just beginning to improve and investors/consumers are still cautious, stock market technicals are getting quite positive. Our smart money indicator turned positive last week, and continues to improve. Market breath just made a new bull market high this week. The number of stocks above their 200 dma has made a new high, after the October low, and is now over 50%. And, the SPX monthly RSI has broken through neutral and continues to rise. It looks like the market is in the early stages of a resumption of the bull market. Usually, investor sentiment gets extremely bullish and consumers turn quite positive before a bull market starts its topping process. We are currently no where near these kinds of readings. They are both still bearish!
If everything falls into place, as expected, this entire bull market, from March 2009, should challenge the all time high at SPX 1576 before it concludes. But it needs to clear the May11 high at SPX 1371 by more than one percent first. That is the historical maximum level for a bear market rally during a Primary wave II.
From the commet section:
This uptrend is getting a bit toppy.And, next correction could be steep.After that expecting an explosive move.
http://caldaro.wordpress.com/2012/01/13/weekend-update-327/
PS mark at palladin was also saying that he thought the markets looked quite strong now
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