Page 4 of 4 CREDIT BUBBLE BULLETIN Temporarily immune from reality
Market watch by Doug Noland
$1.47 billion state budget deficit, but not the entire shortfall. State
economists Friday issued a new forecast that reduced their revenue estimate for
the current budget year by $1.8 billion…"
August 20 - Wall Street Journal (Tom Herman): "And to think they used to call
it 'Taxachusetts.' On Election Day, Massachusetts will vote on whether to
eliminate its state income tax. Advocates hope victory in a place long thought
of as a free-spending liberal bastion will pave the way for similar initiatives
in other states over the next few years. Critics insist a yes vote would lead
to fiscal disaster. While Americans are focusing on the presidential and
congressional races, voters in Massachusetts and other states
will decide the fate of dozens of state and local tax and spending issues."
California Watch
August 19 - Wall Street Journal (Justin Scheck): "California's months-long
budget standoff hit a low Sunday night when an emergency State Assembly meeting
failed to produce a compromise between Democrats and Republicans over how to
compensate for a shortfall exceeding $15 billion. At issue is the Democrats'
proposal to make up for the deficit largely by increasing taxes on California's
wealthiest residents -- a plan that Republicans oppose. In a vote Sunday, not a
single Assembly Republican voted for the plan to raise $6.7 billion in revenue
largely through income-tax increases. Republicans account for 32 of the
assembly's 80 seats, but California requires that two-thirds of the legislature
approve the budget. 'We're fundamentally saying 'no tax increases,' said Mike
Villines, the Assembly Republican leader. If the tax standoff continues,
California state workers could have their pay reduced to minimum wage, and the
state could be forced to take out high-interest loans to fund ongoing
operations."
August 19 - DataQuick: "The number of Southern California homes sold last month
edged up to its highest level in more than a year as bargain hunters swept up
foreclosure properties in affordable neighborhoods... 'What we're looking at is
a fire sale of properties in newer affordable neighborhoods that were bought or
refinanced near the price peak with lousy mortgages. What we're still not
seeing is this level of distress spreading to more expensive or established
neighborhoods,' said John Walsh, MDA DataQuick president. The median price paid
for a Southland home was $348,000 last month, down 2.0% from $355,000 in June
and down 31.1% from $505,000 for July 2007. That peak of $505,000 was reached
in March, April, May and July of last year."
August 20 - DataQuick: "Bay Area home sales eked out their first year-over-year
gain since early 2005 last month... Sales of distressed properties played a
major role in most areas logging annual sales gains last month. Foreclosure
resales... made up 33% of all resales. That was up from 29.9% in June and 4.2%
in July 2007. Foreclosure resales ranged from 4.6% of the resale market in San
Francisco to 65.9% in Solano County."
August 19 - Bloomberg (Dan Levy): "San Francisco Bay Area home sales rose in
July for the first time since 2005 and the median price fell... 29.3% to
$470,000, the lowest since March 2005."
New York Watch
August 19 - Bloomberg (Henry Goldman and Michael Quint): "New York's
Legislature will meet today at Governor David Paterson's request to consider a
menu of spending cuts totaling $1 billion aimed at narrowing a $6.4 billion
budget gap anticipated next fiscal year. While the Democratic-controlled
Assembly favors higher income taxes for millionaires, Republicans who control
the Senate say they are against any increase and oppose cutting health care,
education or the workforce. Paterson has asked lawmakers to trim expenditures
in the $121.3 billion budget before weighing higher taxes. 'What we're going to
find out in the very near future is that we may have to do all of these
things,' Paterson said... The state's fiscal situation is 'more dire' than at
any time since the Great Depression of the 1930s, he said."
August 20 - Bloomberg (Michael Quint and Henry Goldman): "New York Governor
David Paterson and leaders of the state legislature agreed late last night on a
plan to cut spending by $1.14 billion next fiscal year and help shrink a
projected $6.4 billion budget deficit…. Declining tax collections from banks
and securities firms have created what Paterson called New York's most serious
financial crisis since the 1970s."
Crude Liquidity Watch
August 19 - Bloomberg (Alex Nicholson): "Russia's federal budget took in almost
40% more money from taxes through July as the world's biggest crude oil and
natural gas producer benefited from high export prices. The budget received 2.7
trillion rubles ($110 billion) in taxes in the first seven months of the year,
a 39.6% increase compared with the same period in 2007…"
August 19 - Bloomberg (Maria Levitov): "Gulf Cooperation Council states must
work to bring down inflation if they are to complete monetary union by 2010,
said Nasser Saidi, chief economist at the Dubai International Financial
Centre... 'Inflation should be the priority item on the agenda,' Saidi said...
Once monetary union is achieved the Gulf central bank should adopt inflation
targeting and create the monetary tools to achieve its goals, he said."
August 21 - Bloomberg (Matthew Brown): "The Middle East had the highest hotel
occupancy and average room rates in the world in the first half of the year,
Deloitte & Touche LLP said. Occupancy was 75.3% in the first half compared
with 68.7% in the previous six months... The average room rate rose 14.1% to
$180."
Doug Noland is a market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2008 David W Tice & Associates. All rights reserved.)
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