14 February 2014

The "Who Cares?" Investor Weighs In

Found this on a blog called WikiRating.

If you want the short version, skip the italics to My conclusion.

Puerto Rico Rating Downgrades: Enron Redux?
Posted on February 12, 2014  by Marc Joffe  

 On November 28, 2001 Enron lost its investment grade credit rating. Four days later, the company filed for bankruptcy. Those awaiting a similar collapse after Puerto Rico’s descent into junk bond territory last week will have to wait a lot longer to see the Commonwealth’s financial denouement.
 The relatively slow motion nature of Puerto Rico’s fiscal collapse – if, in fact, one is occurring – underscores the differences between various classes of public sector and private sector debt. It also speaks to changes in market conditions.

 As with the 2011 S&P downgrade of the US, rating agency actions had little impact on Commonwealth yields. The New York Times reported last Wednesday that the investors had shrugged off the S&P action. On Friday, the Wall Street Journal reported that Puerto Rico General Obligation debt traded at a lower yield after the Moody’s follow-on downgrade than it had earlier in the week.

 The limited impact of the ratings downgrades might be attributed to market discounting – since the rating agency actions were widely anticipated. It could also speak to the greatly reduced reputation rating agencies enjoy in the aftermath of the Enron/Worldcom scandals of the early “aughts” and the subprime fiasco of 2008.

 Unlike Enron, Puerto Rico can operate for some time without capital markets access. The Commonwealth can get by without financing because its fiscal deficits are relatively low and its debt is predominantly long term. It thus does not need that much new cash to finance ongoing operations or to roll over previous bond issues.

 But, sooner or later, Puerto Rico will have to bring new issues to market, and many doubt whether investors will be around when it does. Commonwealth-related debt accounts for about 2% of overall US municipal bonds outstanding and its fall from investment grade leaves many traditional investors out of the running. So it would appear that there is a lot of debt and not much appetite.

 In my view, this analysis misses some key institutional developments. Hedge funds and certain other classes of investors can traverse multiple markets. Further, Asian investors have accumulated billions of savings and remain on the lookout for alternatives to low yielding US Treasuries. So the constituency for Puerto Rico debt is not merely the $3.7 trillion municipal market, but a much larger audience especially if the price is right.

 Puerto Rico debt is now trading at yields much higher than that of Italy, Spain and Portugal – and is roughly on a par with Greece. In contrast to Greece, Puerto Rico is not a serial defaulter. In fact, it is part of an asset class – US state and territorial bonds – that has not seen a default in over 80 years. Further, the last default – of Arkansas in 1933 – ended in a full recovery for investors. So, from an international perspective, Puerto Rico bonds appear to offer good relative value.

 Thus if new Puerto Rico bonds are offered at 8% or 9%, I expect that they will find a bid. While coupons at that level are not fiscally sustainable, the fact that most Puerto Rico government debt is long dated means that Commonwealth interest expenses as a proportion of revenue will remain low relative to previous default cases.

 Unlike Enron or another private company, a US sub sovereign like Puerto Rico has secure revenue sources in the form of taxes and federal assistance. As Detroit has shown, insolvency is ultimately possible, but the path to ruin for a public sector debt issuer is usually a long one.

Okay, here's the skinny: it doesn't matter a farthing that Puerto Rico's debt makes it an economic example of "fiscal crisis." What really matters is that you can keep buying Our fucking bonds and make money!

The reality of Our situation is a stagnant economy racing to a collapse. But for wikiboy and his ilk, it's a profit-making bonanza!

So the solution is--obviously--switch sides! Right, wikiboy?

My valentine to y'all: Switch sides, Brethren!

After all, We got the "Who cares?" part down pat...

The Jenius Has Spoken.

10 February 2014

What Our Indifference Hath Wrought

What were you doing Saturday? Do you remember? Maybe it was fun.

Here's what The New York Times did, a piece titled "Economy and Crime Spur New Puerto Rican Exodus."

A few fillips from said piece:

* Our debt exploding to over $70 billion (it was under $28 billion in 2008).
* A downgrade of the bond-based debt to junk by Standard & Poor's and Moody's.
* Unemployment listed at 15.4%, which is as accurate as saying I'm 2'8" tall (I'm 5'10").
* Rapidly-rising cost of living, especially in terms of utilities.
* Lousy public schools.
* Rising crime.
* A pathetically-limited workforce. (The article doesn't note that the government accounts for almost 40% of all direct and indirect labor on the Island.)
* Increasing exodus, causing about a 14% population drop in the past decade.
* Increased taxes hitting small and medium-sized businesses hardest.
* A per capita income of $15,200, lower than it was in 2008 and less than half of Mississippi's.

Now if you read--or will read--My previous post, and the whore-mongered piece it is based on, you might see some of the same fillips in that """report""" as in the article. So why was I so negatively harsh on Meacham the Bicho and will be appropriately neutral on Times correspondent Lizette Alvarez?

Because Ms. Alvarez stuck to the facts while Carl El Pendejo Republicano is trying to stick it to Us.

Look, I won't argue the facts. My Island is ears-deep in a shithole and no amount of demagoguery is going to erase that reality. But being stuck in a horrible situation is a far cry from saying that those who seek to remove themselves from it will fuck up another country.

Carl's mom may be Chilean and he may speak fluent Spanish, but that doesn't give Carl Mama-Bicho any special insight to what We are in Puerto Rico, who We are as Puerto Ricans or what We are capable of as individuals or a people looking to make progress. He is entitled to his opinion, but when he acts to make that opinion some sort of policy prediction and hires a spineless troll to try to give it legitimacy, he is wrong, he is an asshole and he is worthy only of Our most blistering contempt.

As for the spineless troll cum economist-for-hire Joaquín Villamil, the sooner he drowns in his own slippery scum, the better.

Beyond that, here's the bottom line: We are in this shithole because We let it happen. I repeat: We. Let. It. Happen. It's Our fault. 

We let the Fools play Us and far too many of Us cheered them on. We let the Fools rob Us of Our present and future and cheered on the ones We saw as being "Our thieves" and voted against those We saw as "their thieves." 

We bought the shit sandwich that government jobs were economic growth and that party politics mean more than economic and social progress. And We allowed a double-handful of blood-sucking parasites to multiply into a veritable army of insatiable leeches gnawing at every level of society.

We let it happen. Our bad.

But that doesn't mean that We are now in the business of being drug-addled criminals, Carlambetranca. As Ms. Alvarez noted in her article, much of Our recent exodus is from the middle-class and with professional occupations. People who take their kids and parents and are moving to the States with what little money they can recover from selling in a true buyer's market. Folks who want to build, to create, to forge a new life for themselves and the next generation. People who simply want the chance to do what they were trained, educated and prepared for. 

Will as many as one million of My Brethren leave Puerto Rico, flooding into states beyond Florida, Texas, New York and New Jersey? It's possible. Not likely, but possible.

And will this influx be a crime wave smacking the U.S. of part of A. shores like a hurricane?


It will be an influx of people focused on making a better life because there's a chance, a decent chance, that things will get better in 10-12 years and coming back to the Island will then become a reasonable option. It happened before: the 1940s-1950s exodus of Puerto Ricans to the States is the example--the only example that matters. The situation is virtually the same, a mass of workers looking to create a stronger and brighter future for themselves. The vast majority of these folks aimed to work and most of them made their mark in a positive fashion. To ignore that historical tendency is to be willfully blind.

Then again, willfully blind is the default ocular stance of Republicans like Carl "Mamao" Meacham.

And sadly, of Us when it comes to making sure the Fools aren't raping what We have and need for a better future.

The Jenius Has Spoken.

07 February 2014

Beware Our Cooties

"But the Puerto Rican economy does matter for the United States—and particularly for U.S. security. Given the island’s proximity and ties to the United States—not to mention the perennial (and highly controversial) debate over Puerto Rico’s status as a U.S. commonwealth and the ease of entering the United States once on the island—drug trafficking and violent crime in Puerto Rico have direct implications for U.S. security policy in the region. In the absence of a healthy economy and given the shrinking private sector in Puerto Rico, the growth of informal activities—drug trafficking and organized crime chief among them—is the unfortunate consequence."

That little fillip comes from a recent publication titled "Shit! The 'Ricans Are Comin'!" The actual title of the butt-wiper is "Why Puerto Rico's Economy Matters for U.S. Security," written by local economist José Villamil and with a forward by the above-quoted Carl Meacham.

The report was issued in last week just as the junk-bond bomb of Our overwhelming debt was starting to become a palpable reality to folks who are too dense to absorb news other than from Our gossip-rag media, lamebrain talk radio or the corner bar.

The report itself is a typical Villamil production: up-to-date with data, leaning more on style than substance and the finest expression of the economist-as-whore. When you pay Villamil to write a report for you, he writes the report you want. Satisfying clients is very high on the Villamil short-list of priorities.

As an example of his sloppiness as window tint, here's this quote, from page 5: "Even this complacency came to an abrupt end in 2005, when rating agencies raised an alarm concerning the high level of appropriations debt with no source of repayment. And in May of the following year, the Puerto Rican government had to close for two weeks because of budgetary difficulties."

Notice how the bond debt crisis is juxtaposed directly with the government shutdown, a gross over-simplification of what was undeniably a party politics shitfest between a dickhead governor and a dickhead senate president. (No. No capital letters for these assholes.) Was the debt part of the problem? Yes. But the shutdown was totally unnecessary and caused mainly by an infantile bout of dick-swinging between guys with microcephaly and micropenises.

But of course, what Carl pays for, Carl gets. He wants to paint a picture of Puerto Rico as a rogue narco-estadolibreasociado whose millions of cocaine-infested criminals are poised to swarm the pristine shores of the U.S. of part of A. in a mindless rampage of raping and pillaging. It will come as no surprise to smart folks that Carl is a true-blue Republican. Or as their ilk is known in Jeniusville, a dickwad.

Carlitos, whose mom is Chilean, speaks fluent Spanish, so I can make My point to him in a language We both can enjoy: Cágate en tu madre, cabrón.

Google Translate for the rest of you.

The Jenius Has Spoken. 


05 February 2014

The Sky Fell Long Ago


Puerto Rico bonds are now junk.

But that's just Standard & Poor's opinion, right? The other two bond rating agencies are bound to see it differently, right?


But the U.S. of part of A. is going to step in, right?



Ain't gonna happen.

But We have solutions, right?


Is there any ray of light?

A few. Here's one. Here's another.

But what's going to happen?

Exodus. More of it.

Stagnation. More of it.

Multimillion dollars losses suffered mainly by those who worked most of their lives to build this economy so that hyenas could feast on it, fucking hyenas with names like Rosselló, Pierluisi, Acevedo, Rivera, González, Hernández, Ferré, Burgos, McClintock, Fortuño, Calderón, Cordero, Corrada, Romero, O'Neill, Miranda, Santini, Colorado, Cintrón, Rodríguez, Martínez, Crespo, De Castro, Pérez, Fajardo, Jarabo and many more. Fucking chancre-covered hyenas that idiots amongst Us cheered and slaved for, waved flags and honked horns for, slobbered over when they appeared on TV or in person and for whom We ultimately spread Our cheeks to for the reaming of Our futures.

Now The Ova and his late-to-the-party hyenas are trying not go all Pollito Chico and scream the obvious.


The sky isn't falling.

It fell long ago.

We're just noticing it now.


How stupid We were.

The Jenius Has Spoken.