California: Wall Street hands state a stunner - -

The Orange County Register ^ | Thursday, January 16, 2003 | JONATHAN LANSNER The Orange County Register

[Ernest_at_the_Beach]

California came to Wall Street with a tin cup Wednesday, looking to fill a small hole in its fast-leaking fiscal bucket. Traders demanded a fat ransom for a minor patch.

The state sold $3 billion of some peculiar bonds at interest rates that look a lot like the interest rates lenders charge failing enterprises these days.

[Ernest_at_the_Beach]

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[dfwgator]

Wall Street to California, "Drop dead."

[DoughtyOne]

Well the Democrats have had firm control of the state Legislature for decades. California is what Decmocrat leadership will give you. Take that to the bank California, for all it will get you.

[Jim Noble]

Why is this a "stunner"?

California is insolvent and run by incompentent socialist toads. Why should this produce a warm reception down at Broad and Wall?

[RightWhale]

Here's the plan: once California is as bankrupt as Mexico, then it will be transferred to Mexico in exchange for a couple fields of habaneros peppers.

[Publius6961]

BUMP!

[meyer]

The state sold $3 billion of some peculiar bonds at interest rates that look a lot like the interest rates lenders charge failing enterprises these days.

Well, if the shoe fits...

[meyer]

If investors continue to treat California like junk, curing the budget crater will be extra taxing to the citizenry.

Interesting - the story falls just shy of blaming Wall Street Investors for the state's cost-of-capital. Which state would you buy bonds in - California, or Idaho?

[JohnGalt]

This illustrates why Bush's tax cut will not stimulate growth when government debt draws most of the dollars. (40 years at 7% is approaching life insurance returns!)

Without a capital gains tax cut that rewards investment, there is nothing in the short term to spark growth.

[NormsRevenge]

Double Ouch!!!

[demsux]

Without a capital gains tax cut that rewards investment, there is nothing in the short term to spark growth.

Amen, brother...

[gridlock]

Why would anybody invest in a profit making enterprise when he can get 7% tax-free from California? That's money right out of the productive market.

There's no such thing as a free lunch. Eventually, the piper will need to be paid. California can play the shell game for a while, but the tobacco settlement money is a one-shot deal.

BTW, wasn't that money supposed to be going to medical costs or for anti-smoking efforts, and stuff like that?

[Kaisersrsic]

This year's tax cut on dividends is designed to generate capital gains tax revenues by encouraging the sale of growth stocks. Next year's cut in the capital gains tax rate will wring even more unrealized gains out of the market. Once the government is done collecting, a real fix to the capital gains tax may actually happen.

Oh, and on the California, drop dead front . . . guess what state has high State income tax rates and a ton of individuals who are going to get pushed into the Alternative Minimum Tax as a result of the current tax reform proposal. Unintended consequences my *ss, its drop dead time.

[JohnGalt]

I am not familiar with any plans to cut the capital gains tax and, secondly, dividend paying companies tend to be established companies, not growth/start-ups.

While I applaud tax cuts anywhere anytime, a non-pro-growth tax cut coupled with higher yield sales of government debt will mean that little growth impact will be felt.

[RonF]

Why would anybody invest in a profit making enterprise when he can get 7% tax-free from California? That's money right out of the productive market.

Doesn't the article say that the money will go to fund public works? That means that numerous profit-making construction companies, etc., will put employees to work putting up buildings, roads, sewers, etc. It would be preferable for this kind of money to be invested directly in such companies, but then again companies do need infrastructure.

[JohnGalt]

Digging a ditch does not quite do the same thing for an economy like a more powerful microchip or a faster fiber optic.

[cryptical]

The idea is investors sell growth stocks to buy dividend stocks.

[tubebender]

Here's the plan: once California is as bankrupt as Mexico, then it will be transferred to Mexico in exchange for a couple fields of habaneros peppers.

Remember...if Cal bureaucrats parks all their vehicles there will be no market for Alaska crude. :-)