The Rating Outlook remains Negative.
KEY RATINGS DRIVERS FROM FITCH:
RATING DOWNGRADE: The downgrade to 'A+' of New Jersey's GO bonds incorporates both the scale and belatedness of the recently announced, preliminary fiscal 2014 revenue shortfall and the state's likely use of one-time measures to address the gap due to the maintenance of extremely narrow financial reserves. The downgrade also incorporates the state's ongoing budget strain created by overly optimistic revenue forecasts, a multitude of long-term spending pressures, and the state's repeated reliance on one-time solutions to achieve budgetary balance. The state's liquidity position is expected to remain tenuous.
NEGATIVE OUTLOOK: Maintenance of the Negative Rating Outlook incorporates Fitch's continuing concerns regarding the state's lagging economic performance, which is providing insufficient support to meet the growing demands of the state's high long-term liabilities, as well as the increased challenge in enacting a budget for fiscal 2015 that begins with a substantially lower revenue base than originally projected. Fitch believes these challenges are likely to persist over the next several fiscal years.
LONG-TERM LIABILITIES CONSIDERABLE: Above-average state debt obligations are compounded by significant and growing funding needs for the state's unfunded retirement liabilities. Continued pension funding-level deterioration is projected through the medium term as full actuarial funding of the required contributions is several years off.
WEALTHY ECONOMY AND LAGGING RECOVERY: New Jersey benefits from a wealthy populace and a broad and diverse economy. However, the state's economic performance has lagged the nation in recovery from the recent recession, with improvement in 2013 trailing off at the close of the year, and year over year (yoy) employment losses recorded in March 2014.
BUDGET REMAINS STRUCTURALLY IMBALANCED: The state relies on one-time measures to achieve budgetary balance, including in the current fiscal 2014, even though full funding of annual pension contributions remains several years off.
MINIMAL CASH BALANCES RESULT IN LIMITED OPERATING FLEXIBILITY: Minimal cash balances have been maintained in recent years, providing limited flexibility to absorb unforeseen needs or revenue under-performance.
BROAD EXPENDITURE REDUCTION AUTHORITY: The governor has strong executive powers to implement any necessary expenditure reductions to balance the budget and the state has a consistent history of doing so; however, options have become more limited as the state's fixed cost burden grows.
Of course, if you believe the fat man, he never saw this coming (SEE: If You Dispute Chris Christie's Budget Estimates, He'll Go After You — Even If You're Right)
Something Ain’t Right Out “There”
ReplyDelete2) Since the beginning of March, 452 tonnes of silver were removed from the Shanghai Futures Exchange + the Comex AND the U.S. exported a record amount of gold to Hong Kong in January.
4) What was the emergency and secretive Fed meeting about two days ago? It certainly had no bearing on the policy announcement from the FOMC yesterday because the FOMC policy was basically unchanged, with the standard fraudulent comments about an improving economy and labor market.
6) Unexplainedly, Belgium in the last 5 months has become one of the largest holders/buyers of U.S. Treasury bonds, amassing a quantity that is roughly 3/4′s the size of the country’s GDP. Belgium has been running a current account deficit and a trade deficit. Where are the funds coming from to buy this amount of Treasury paper? Ironically, Belgium’s holdings jumped up significantly right around the time over $100 billion in Treasuries were removed from the Fed’s foreign custodial account (rumored to have been Russia’s bonds).
Please note: Brussels is the headquarter city for both the EU and NATO.
http://investmentresearchdynamics.com/something-aint-right-out-there/
You know what that means, time for some bridge closures in the general proximity of Fitch office buildings.
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