muck Posted January 29, 2010 Share Posted January 29, 2010 From his 12/31/09 letter to the partners: “…in 2010 certainly there will be lots of payment defaults, but if they do not include a European union sovereign credit, sizeable US municipal general obligation or an above averaged sized financial institution, then the system can accommodate the default without the occurrence of a systemic problem.” “Short term rates are not rising until monetary authorities have seen liquidity / solvency issues dealt with in the universe of European Union sovereign credits and large US municipalities. Moreover, longer maturity treasuries are likely to rally when (notice no “if”) liquidity / solvency issues emerge as part of a flight to quality as the market awaits the “solution”. Basically, if Greece has a payment default, Italy, Portugal, Spain, everywhere east of Germany and the UK will begin to lose capital market access, impairing their respective ability to both roll liabilities and fund themselves. This would be far, far worse that anything that happened in 2008. By the same token if California (insert about forty other US muni issuers) experiences a payment default it will set in motion a contagion that can only end with loss of market access for all other municipal issuers and an inevitable, catastrophic capital market meltdown. It is sometimes fascinating how easily a short description of the final end of civilization flows out of the keyboard.” “So how on earth might this situation be dealt with without Germany providing a blanket guarantee of Greece’s debt or the US government providing de facto guarantees of the obligations of sizeable municipal issuers? Well, if it were Mexico or Brazil or Indonesia or Thailand or South Korea or the Ukraine or Russia, etc. etc. the International Monetary Fund would arrive on the scene and in exchange for a liquidity facility would present the issuer with a list of conditions that would require some combination of tax increase and spending cuts necessary to reconcile cash receipts and disbursements. When interfering with someone’s sovereignty it is a tried and true method. The solvent fund, the IMF, who in turn delivers the bad news of spending cuts and tax increases to the elected representatives of the insolvent sovereign entity. The capital markets see (a) aversion to payment default and ( decisive corrective action and calm down.” …he then goes into a long discussion of how this impacts his portfolio and his views on how to make money in the midst of this uncertainty… Quote Link to comment Share on other sites More sharing options...
yo mama Posted January 29, 2010 Share Posted January 29, 2010 That made a lot of sense. I almost forgot the guy in your avatar was black. Quote Link to comment Share on other sites More sharing options...
driveby Posted January 29, 2010 Share Posted January 29, 2010 If I print it either a really cool airplane or a hat. Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted January 29, 2010 Share Posted January 29, 2010 We are all going to end up paying for the Peoples Republic of Kalifornia's stupid spending and restrictions on business one way or another. Quote Link to comment Share on other sites More sharing options...
DMD Posted January 29, 2010 Share Posted January 29, 2010 The problem is that California got a taste for spending back in the boom days of the internet when the 1990's saw 3 trillion dollars in play that never really existed. When the revenue started disappearing in the early 2000's, they could never ratchet back their spending habits. Quote Link to comment Share on other sites More sharing options...
Pope Flick Posted January 29, 2010 Share Posted January 29, 2010 We are all going to end up paying for the Peoples Republic of Kalifornia's stupid spending and restrictions on business one way or another. Except us Californians. I'll finally be able to get a house. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted January 29, 2010 Share Posted January 29, 2010 we are skrewd Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted January 29, 2010 Share Posted January 29, 2010 This would be far, far worse that anything that happened in 2008. By the same token if California (insert about forty other US muni issuers) experiences a payment default it will set in motion a contagion that can only end with loss of market access for all other municipal issuers and an inevitable, catastrophic capital market meltdown. It is sometimes fascinating how easily a short description of the final end of civilization flows out of the keyboard.” …he then goes into a long discussion of how this impacts his portfolio and his views on how to make money in the midst of this uncertainty… the 1st quote basically cancels out the need for the second quote Quote Link to comment Share on other sites More sharing options...
yo mama Posted January 29, 2010 Share Posted January 29, 2010 We are all going to end up paying for the Peoples Republic of Kalifornia's stupid spending and restrictions on business one way or another. some of us more than others. Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted January 29, 2010 Share Posted January 29, 2010 Except us Californians. I'll finally be able to get a house. Housing seems pretty affordable in SoCal - a big change from even 18 months ago. Quote Link to comment Share on other sites More sharing options...
Pope Flick Posted January 29, 2010 Share Posted January 29, 2010 Housing seems pretty affordable in SoCal - a big change from even 18 months ago. So much so if you'd had told me then I would have thought you were CRAZY - and it's bound to get cheaper... Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted January 30, 2010 Share Posted January 30, 2010 So much so if you'd had told me then I would have thought you were CRAZY - and it's bound to get cheaper... Any idea on northern Cal? Wondering if I should buy or rent... Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 30, 2010 Share Posted January 30, 2010 (edited) Any idea on northern Cal? Wondering if I should buy or rent... Buy unless it's very temporary - check homesteading laws. If you've got a decent down, you'll get a great deal. Edited January 30, 2010 by Ursa Majoris Quote Link to comment Share on other sites More sharing options...
ABearWithFurniture Posted January 30, 2010 Share Posted January 30, 2010 Any idea on northern Cal? Wondering if I should buy or rent... One of my best friends just purchased 2 acres with a house on it in Sonoma for $350K...that's about a million dollars off from where it was 3 years ago. Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted January 30, 2010 Share Posted January 30, 2010 the problem with buying in these distressed markets is that you will be stuck for a few years, maybe more. if something happens and you need to move, kiss the dp gone. too much inventory. Quote Link to comment Share on other sites More sharing options...
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