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Budget Emergency – dump your Cal paper NOW!!

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32

July 01, 2009 – Comments (10) | RELATED TICKERS: VCAIX

I knew I shouldn’ta done it: I went to the guv’s budget website to find what is up, and was flabbergasted at what I saw www.ebudget.ca.gov. What does this have to do with investing? Everything. If you have a mutual fund that is Calif tax exempt bond fund, Cal paper, or anything remotely similar, dump it now at whatever price you can get. California government is headed for financial Armageddon, and there ain’t a dang thing anyone can do ‘bout it.

I did some cocktail napkin calculations, but first a few numbers (rounded off, so I won’t have to find my 99¢ calculator).

income = $70B, spending =$110B, deficit = $40B.

how it is spent: $50B education, $30B welfare, $10B jails, $20B everything else.

cocktail napkin #1

How ‘bout a straight across 33% cut in all spending? Do you really think you can get a 1/3 cut in CHP, school hot lunch program, and prisons? OK, let’s try again.

cocktail napkin #2

This time, take politicians at their word. Guv and R’s say no tax increase, and D’s we ain’t gonna balance the budget on the backs of the poor and elderly. OK, that takes, $30B in welfare spending off the table. So, $40B shortfall and $80B to take it from, so all non-welfare spending is cut 50%. Do you really think you will be allowed to close half of all UC and Cal-State campuses? Try again.

cocktail napkin #3

Try to be a bit more realistic. You raise taxes $10B or about 15% (hey, let’s have another Prop 13 tax revolt), and cut welfare by 10% (horror, horror: starving children and old folks who cannot get their meds, appearing daily on the nightly TV news about the draconian effects of budget cuts). That leaves “only” $25B left to cut, so everything not welfare is cut 30%. OK, do you think you will be able to cut Medical-B and Cal Grants and Cal Worksfs by 30%? Get serious.

cocktail napkin #4

OK, there is no #4. If you have one, please let me know. Oh, and by the way, do not forget to CC the guv and the state legislators.

10 Comments – Post Your Own

#1) On July 01, 2009 at 9:58 PM, NoMoeMoney (< 20) wrote:

Cocktail Napkin #5   Sell California to the Chinese, they have lots of money.

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#2) On July 01, 2009 at 10:19 PM, biotechmgr (36.50) wrote:

Muni bonds will be in trouble in the coming depression.

Many will have to sell assets to raise cash. I wonder what Uncle Sam will part with when its time comes?

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#3) On July 01, 2009 at 11:37 PM, ChrisGraley (30.25) wrote:

Cocktail Napkin #5   Sell California to the Chinese, they have lots of money.

That is probably my funniest post ever and it only got 6 recs.

That is an injustice!

Please rec that post unless your against humor.

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#4) On July 02, 2009 at 12:10 AM, NOTvuffett (< 20) wrote:

napkin #6, export welfare recipients, only worth a dime a bushel, but that could add up to real money, lol.

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#5) On July 02, 2009 at 12:59 AM, herztical (28.31) wrote:

I would be willing to buy Cali paper once they hit low...gov will step in as always

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#6) On July 02, 2009 at 2:43 AM, kushme (20.65) wrote:

 The only napkin that make sense.  

stop paying and giving services to illegal immigrants and thier children. It affects all aspects: welfare, education, prisons, police, medicare, etc, etc, etc.....

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#7) On July 02, 2009 at 10:33 AM, Retired31B5M (< 20) wrote:

In California private schools provide a better education for roughly half the per-student cost.  Implementing a voucher system should save a significant amount of that education money.

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#8) On July 02, 2009 at 1:39 PM, TDRH (99.76) wrote:

Retired31B5M - Quanitify/qualify this statement.  

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#9) On July 02, 2009 at 2:49 PM, bostoncelitcs (59.34) wrote:

Throw your "cocktail napkin" calculations out the window.  The "underground" marijuana economy is a "high" growth industry in CA

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#10) On July 02, 2009 at 8:23 PM, uclayoda87 (29.51) wrote:

I agree with NoMoeMoney and ChrisGraley

What was that Sherlock Holmes motto:  When all other possibilities have been excluded, whatever remains, however improbable, must be true.

Confiscate San Francisco and Sacramento (which was done before in world war II) and sign a long term lease (50 to 100 years) with China, providing California a steady stream of yuans, which will likely be this centuries new reserve currency.  It would give the state time to get its finances back under control or at least give them time to learn to speak Mandrin.

San Francisco/Sacramento will become the US version of Hong Kong.

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