Newsom’s Fiscal Inferno! California’s Budget Crisis Worse Than Newsom Projected (State Watchdog Warns Deficit Could Reach Record $73B!)

Newsom’s Fiscal Inferno!

When Arnold Schwarzenegger was Governor California, his budget chief, a former high school pal of mine, called me to look at California’s budget. He sent me his spreadsheets with forecasts and asked me what I thought. Even back then, I called back and said “California is on an unsustainable fiscal path and seems to be committing suicide.” He agreed, but noted that Schwarzenegger would not like that conclusion. I told him to blame me for the report, as an unpaid consultant to The Golden State. But even back then, I could foresee the absolute mess that the California State legislature would make, particularly if they elected a Democrat governor.

Fast forward to today. Another “glamorous” governor (Newsom does have a great smile and great hair), but even a far worse fiscal path. California’s budget deficit could reach a record $73 billion!

California’s budget deficits look a lot like Biden’s (call him Newsom’s elderly intellectual grandpa) budget deficits where Biden and Congress went on a spending spree from “the honey pot” (US Treasury) and borrowed funds.

California’s budget crisis is projected to expand more than previously thought and could hit a record deficit of $73 billion, according to a new report from the state’s nonpartisan Legislative Analyst’s Office (LAO).Her

The LAO laid out the grim forecast in a Tuesday report that cautions that a $24 billion “erosion in revenues” corresponds to a $15 billion increase in the state’s budget problem. Due to this, the budget deficit, which last month was estimated to hit $58 billion, could now go as high as $73 billion.

“The actual increase in the state’s budget problem will depend on a number of factors, including formula-driven spending changes, most notably Proposition 98 spending requirements for schools and community colleges,” the report said.

H.D. Palmer, the deputy director of the California Department of Finance and Newom’s spokesperson on budget matters, responded to the new LAO report by telling Fox News Digital that their budget shortfall differs from the $38 million they estimate.

“From now through April, more than $51 billion in income and corporate tax receipts are forecast to come in,” Palmer said. “No one can say today with certainty how those numbers may change the budget estimate of a $38 billion shortfall.”

“A responsible step would be for the Legislature to act now on the early action budget measures needed for $8 billion in solutions to help close this gap,” he added.

The projected bad news comes as Newsom has worked to increase his profile nationwide. It also occurred as California experienced a mass exodus.

California saw its first-ever population decline in 2020 when the state imposed rigid lockdowns during the COVID-19 pandemic. From January 2020 to July 2022, the state lost well over half a million people, with the number of residents leaving surpassing those moving in by almost 700,000.

Census data has shown that Texas is the most popular destination for residents fleeing the state, followed by Arizona, Florida, and Washington. (Of course, Arizona where I used to live has flipped from a Red state to a Blue state with immigration and Democrats are working hard to flip Texas to a Blue state. Washington, has already flipped Blue. Florida remains a Red state under Ron DeSantis).

Here is Biden’s budget deficit chart under the hilariously termed “Bidenomics.” Ah, so maybe Governor Newsom is a perfect fit for the wild spenders in Washington DC.

Lest we forget, Biden/Congress can borrow endless funds and stick the bill to Gen Zers and the unborn.

And remember, US politicians have promised $213 TRILLION in unfunded payments that will require cuts (LOL!) or a massive increase in Federal debt.

Biden and Newsom could sing “Fiscal inferno” together! “Here is my demented, doddering grandfather!”

That’s Bidenomics! US Leading Indicators Decline For 22nd Straight Month, Back To March 2006 Levels

That’s Bidenomics for you!

The Conference Board’s Leading Economic Indicators (LEI) continued its decline in January, dropping 0.4% MoM (notably worse than the -0.1% MoM expectations), and December’s 0.1% declin e was revised down to a 0.2% decline.

The biggest positive contributor to the leading index was stock prices (again) at +0.10
The biggest negative contributor was average workweek at -0.18

This is the 22nd straight MoM decline in the LEI (and 23rd month of 25) – equaling the longest streak of declines since ‘Lehman’ (22 straight months of declines from June 2007 to April 2008)

“The U.S. LEI fell further in January, as weekly hours worked in manufacturing continued to decline and the yield spread remained negative,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.

“While the declining LEI continues to signal headwinds to economic activity, for the first time in the past two years, six out of its ten components were positive contributors over the past six-month period (ending in January 2024).

As a result, the leading index currently does not signal recession ahead.

While no longer forecasting a recession in 2024, we do expect real GDP growth to slow to near zero percent over Q2 and Q3.”

While the Conference Board seems optimistic, we are struggling to see any signs of hope! tumbling back below the peak in March 2006…

And on a year-over-year basis, the LEI is down 7.0% (down YoY for 19 straight months) – still close to its biggest YoY drop since 2008 (Lehman) outside of the COVID lockdown-enforced collapse (but starting to inflect)…

The annual growth rate of the LEI remains deeply negative and decoupled from Real GDP…..

Finally, the massive easing of financial conditions in the last few months suggests a turn in LEI is imminent…

And hence the ‘soft landing’ mission is accomplished… so no need for rate-cuts? (Except for the banking crisis that looms in March).

Here is the roadmap for Bidenomics.

The Sisyphus Economy! Top 1% Of Earners Gaining Wealth Relative To Middle Class Thanks To The Federal Reserve And Federal Government Policies (Top 1% Have More Wealth Than The Middle Class)

According to mythology, Hades made King Sisyphus roll a huge boulder endlessly up a steep hill in Tartarus. Unfortunately, the modern day version of Sisyphus is the middle class pushing a boulder endlessly up a steep hill while the top 1% (the elite class) horde more and more wealth.

An example of the Sisyphus economy? The top 1% of earners (blue line) have seen an incredible increase in net worth, particularly after Fed Chair Alan Greenspan’s big rate cuts (green line) from 2000 to 2004. Each subsequent rate cuts under Bernanke (2007-2008) and Yellen (who just kept rates too low for too long). The end result? In the red box, the top 1% made out like bandits.

The end result? The top 1% of earners now have more wealth the the middle class.

Of course, asinine Federal government policies (like open borders and making donors wealthy with green energy spending) and the lack of a serious approach to corruption have complicated matters.

So the working class, middle class and low wage workers, are the ones pushing the boulder up a hill while government insiders like Biden make millions through influence peddling. So, unlike the Sisyphus legend, the middle class and low wage workers are being punished by simply existing.

The Fed’s balance sheet has had a similar effect, particularly since the financial crisis of 2007-2008 when The Fed truly became unhinged under Janet Yellen. So of course, Yellen was made Secretary of Treasury, the largest honey pot in the world, so she could continue growing the elites power while minimizing the wealth of all others.

Should we end The Fed? Of course! But we can’t even have a rational discussion on why we are funding a war in Ukraine (to protect their border?) while we leave our borders open to invasion?

Here is one of the 1% who made a fortune by simply having a big mouth and being in politics.

Back In The Saddle Again! Why The Fed Will RAISE Rates (Home Price Growth Reaccelerating, SuperCore Inflation Is Rising, Mass Immigration)

The Federal Reserve (aka, The Keep) is back in the saddle again. The Fed has been unable to control inflation since Federal government spending was so fast and furious after Covid that little thought was given to the long-term ramifications of insane spending. Not to mention The Fed’s overreaction to Covid.

Example?

Home price growth is rising again. Home prices in traditional “bubble cities” out west were cooling, but are reaccelerating. Even Detroit and Cleveland are seeing rapid home price acceleration.

Yes, housing inflation is sticky.

In retrospect, this wholesale dovish euphoria may have been rather short sighted, because after several strong economist reports hit the tape (with the Nov 2024 election growing closer by the day, that should hardly have been a surprise), March rate cut odds collapsed from over 100% in late December, to just 12% currently…

… as first the January CPI printed red blazing hot – with core coming in at 3.9% far higher than the 3.7% expected, with the 3-month annualized rate jumping to 4% from 3.3% and the 6-month annualized rate spiking to 3.7% vs 3.2%, but the biggest highlight was SuperCore CPI (i.e., core CPI services ex-Shelter) which soared 0.7% MoM, the biggest jump since Sept 2022…

… and then the January PPI print come in even hotter, with a core component surging in January by 0.5%, smashing expectations and beating estimates by the most since Jan 2021.

The result: not only has the market rapidly priced out what if formerly saw as many as 6 rate cuts in 2024, but growing speculation that a rate cut may not come at all unless the Fed tightens some more first (and with the S&P500 now over 5000, it is pretty clear that the market has already priced in virtually all rate cuts and has cornered the Fed).

Of course, the mass migration across the Mexican border (who knows? could be up to 11 million under Biden’s Reign of Error). While Paul Krugman, the resident lunatic economist for the New York Times, extols the virtues of mass immigration for driving up GDP, fails to recognize that mass migration is helping drive up prices. This is inflation that The Fed can’t control. And Biden/Mayorkas want even MORE mass immigration.

Maybe Fed Chair Powell should watch the film “The Keep” for lessons on how to control inflation. in the face of government sanctioned mass ILLEGAL immigration from Latin America, China, Africa and The Middle East.

White House Plans Downshift In Electric Vehicle Transition As Demand Slides (A Tesla 4-module Battery Pack Costs $20,000 To $28,000 BEFORE Labor!)

Burn on, Bidenomics!

The Biden administration is reportedly considering easing tailpipe emissions regulations, a move that was designed to force Americans from gas and diesel-powered vehicles to electric vehicles, according to The New York Times, citing three people familiar with the plan. This potential policy adjustment is in response to concerns from major automakers and labor unions and comes amid sliding EV demand, recently prompting companies such as Ford Motor Company to reduce EV production and lay off workers.

“Instead of essentially requiring automakers to rapidly ramp up sales of electric vehicles over the next few years, the administration would give car manufacturers more time, with a sharp increase in sales not required until after 2030,” the people said.

This policy change comes after 3,900 auto dealers penned a letter to President Biden at the end of 2023, warning the president to reconsider the pace of EV mandates, citing a severe decline in demand for these vehicles.

“Currently, there are many excellent battery electric vehicles available for consumers to purchase. These vehicles are ideal for many people, and we believe their appeal will grow over time. The reality, however, is that electric vehicle demand today is not keeping up with the large influx of BEVs arriving at our dealerships prompted by the current regulations. BEVs are stacking up on our lots,” the dealers said.

They warned: “Already, electric vehicles are stacking up on our lots which is our best indicator of customer demand in the marketplace.”

Last month, Ford Motor’s electric vehicle sales ran out of juice as the automaker was forced to slash production of its all-electric F-150 Lightning to April “to achieve the optimal balance of production, sales growth and profitability.”

A recent note by RBC analyst Tom Narayan said the EV slowdown is far from over:

“Key takeaways thus far from earnings season are that the EV slowdown is not showing any evidence of an inflection, Level 4 autonomy headwinds continue to persist, and fears over supplier inventory overbuild are likely overblown.”

Analyst Adam Jonas at Morgan Stanley suggested consolidation is coming to the industry:

The EV bubble is no match for elevated interest rates, and no fiscally conservative American is trying to survive the era of failed Bidenomics with a +$1,000 EV car payment.

Plus, Toyota’s chairman and former CEO, Akio Toyoda, will likely be proven right: EV cars will never dominate the global market, adding hybrids are the future.

If the alleged climate crisis is as urgent as portrayed by radicals in the White House and woke corporate media, then why does the Biden administration feel the need to move the transition goalposts if banning gas cars saves the planet?

Biden would likely sound more sincere if he dumped his gasoline-powered Corvette for a lousy electric car. On a personal note, I own at Volvo XC-60 hybrid and HATE the damn thing!!!

Recession In Mid 2024? Bank Credit And Deposit Growth NEGATIVE After The Stimulus Has Worn Out (EU Ordered To Accept 75 Million More Migrants)

This headline from Zero Hedge makes me so glad I have eaten heart-healthy Quaker Oats and Cheerios every morning for the last 20 years! Study Finds 80% Of Americans Exposed To Fertility-Lowering Chemicals In Cheerios, Quaker Oats. The chemical (chlormequat chloride) was detected in “92 percent of oat-based foods purchased in May 2023, including Quaker Oats and Cheerios.” But that was nothing compared to this Zero Hedge headline: EU “Suicide Pact” Threatens To Flood Continent With 75 Million More Migrants. Makes me wonder if Biden/Mayorkas are under orders from the UN/WEF/Soros to let immigrants pour across our southern border (including 20,000+ Chinese military age males). But back to the economy.

Both bank credit growth year-over-year (YoY) and bank deposit growth (YoY) are NEGATIVE. Covid resulted in massive Federal government stimulus spending (and Federal Reserve hyper stimulus) in 2020, but as the stimulus wears out, so does bank lending and deposits.

Having seen The Fed’s QT appear to stall in February, as Reverse Repo liquidity withdrawal accelerates, all eyes are once again back on the situation on bank’s balance sheets and how deposits are standing up (‘adjusted’ by The Fed’s magical seasonals).

And after the prior week’s miraculous surge in deposits (again, according to The Fed), last week saw total bank deposits (seasonally-adjusted) drop $57BN – the biggest weekly drop since October…

This data is from the week when Regional bank shares shit the bed thanks to NYCB…

Interestingly, on a non-seasonally-adjusted basis, total bank deposits declined about the same as SA -$58BN (and are down $180BN YTD)…

And, excluding foreign banks, domestic deposits dropped $52BN SA (Large Banks -$40BN, Small Banks -$12BN), and tumbled $65BN NSA (Large Banks -$57BN, Small Banks -$$8BN)

As the chart above shows, on an NSA basis, domestic banks have only seen one week of inflows in 2024.

As one might expect, loan volumes shrank during that week by just over $9BN (Large banks -$4.6BN, Small banks -$4.4BN)…

And finally, as a reminder – despite the rebound off the lows again this week in regional bank shares, which must mean everything is awesome, right? – the regional bank crisis is still very much alive as evidenced by the red line below (without The Fed’s imminently expiring BTFP facility)…

…what else are big banks (green line) going to do with all that cash burning a hole in their pockets?

The bottom line is – this looks a lot like a ‘Small Bank’ crisis. The last time this happened, the crisis sparked a sudden $300BN ‘run’ in small bank deposits…

Is The Fed ‘hoping’ for a controlled bank-run this time – so as many small bank deposits are drained voluntarily, before they are drained all at once in a panic (and the Reverse Repo facility is empty, unable to provide any cushion)?

It is looking like a recession in mid-2024 as Covid Stimulypto has run its course. Is the US economy so lame that is requires constant Federal government and Federal Reserve manipulation??

Joe Biden (President of the top 1% of Americans) and his likely replacement “Greasy Gavin” Newsom, wrecker of the California economy. Two economy wreckers on the same stage.

Remember when Democrats were the party of the working man and Republicans (like George HW Bush) were called “Country Club Republicans”? Now Biden and Democrats represent the elitist top 1% of wealth and Trump/Republicans (that Biden snidely calls “Maga Republicans”) represent the bottom 99%. Who woulda thunk??

BTW. Congrats to Iowa’s Caitlin Clark who set the all-time NCAA women’s scoring record with a PERFECT shot.

Climate Interruptus? Financial Giants JPMorgan Chase And State Street Pull Assets From ESG Group (ESG Is A Losing Game!)

ESG (Environmental, social, and corporate governance is a losing game.

Two of the world’s largest financial institutions cut ties Thursday with Climate Action 100+, delivering the latest setback to the world’s biggest coalition of investors pressuring corporations to ditch fossil fuel assets.

The asset management arms of JPMorgan Chase and State Street dropped out of Climate Action 100+, home to more than 700 investment firms totaling $68 trillion in assets under management.

BlackRock, the world’s largest asset manager, with more than $10 trillion in assets, distanced its U.S.-based operations from Climate Action 100+ by transferring its membership to BlackRock International.

The coalition, founded in 2017, revealed plans last year to hold members more accountable by encouraging them to disclose more details about their investment decisions. Some high-profile members raised legal concerns about maintaining their fiduciary duties.

State Street said the changes jeopardized the company’s independence. Climate Action 100+ officials say they need the disclosure standards to chart a better course for corporations to reach net-zero emission portfolios by 2050.

“After careful review, State Street Global Advisors has concluded the enhanced Climate Action 100+ Phase 2 requirements for signatories will not be consistent with our independent approach to proxy voting and portfolio company engagement,” State Street spokesman Randall Jensen said. “As a result, we have decided to withdraw from Climate Action 100+.”

JPMorgan suggested that its in-house guidelines for environmental, social and corporate governance, or ESG, investing already exceeded the Climate Action 100+ goals.

Aka, MARXISM.

Ford learned that their ESG Ford F-150 Lightning Electric pick up truck was NOT in demand, so production is being curtailed. Harvard (which should be renamed Harvurd thanks to President Gay’s horrible record of plagiarism) and Biden’s leadership team of unqualified but ESG-friendly faces (“Admiral” Rachel Levine, formerly Richard Levine) symbolizes the failure of ESG.

Biden’s Mortgage Market! Mortgage Demand Down 2.3% From Last Week, Purchase Demand Down -12% From Last Year (Mortgage Rate UP 151% Under Bidenomics)

Wake Joe up before the economy go goes … down any further.

Mortgage applications decreased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 9, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 12 percent lower than the same week one year ago.

The Refinance Index decreased 2 percent from the previous week and was 12 percent higher than the same week one year ago.

Mortgage rates (30Y fixed) are up 151% under Bidenomics.

Gimmie (Cheap) Shelter! Shelter Index CPI Increased 0.6 Percent In January (Largest Factor In Monthly Increase In Index) As Inflation Comes In Hotter Than Expected

Gimme (cheap) shelter!

As soon as Joe Biden started bragging on his low-energy campaign trail about inflation declining I knew it would go up. And it is increasing again.

Shelter cost (aka, housing) is still growing.

Expectations were for a big drop in the YoY consumer price index (from +3.4% to +2.9%) but instead it surprised to the upside (just as we warned) with a +3.1% YoY print for headline CPI (spoiling the sub-3% partiers). Consumer prices rose 0.3% MoM (more than the 0.2% exp) but the headline did decline from +3.4% to +3.1% YoY…

Source: Bloomberg

Core CPI fell below 4.00% YoY for the first time since May 2021, but the +3.86% YoY print was hitter than the 3.7% exp (with prices rising 0.4% MoM – the biggest jump since April 2023)…

Source: Bloomberg

CPI Core: The index for all items less food and energy rose 0.4 percent in January.

The shelter index increased 0.6 percent in January, and was the largest factor in the monthly increase in the index for all items less food and energy.
- The index for owners’ equivalent rent rose 0.6 percent over the month, while the index for rent increased 0.4 percent.
The lodging away from home index increased 1.8 percent in January. The motor vehicle insurance index increased 1.4 percent in January, and the recreation index rose 0.5 percent in January.
Among other indexes that rose in January were communication, personal care, airline fares, and education.
The medical care index rose 0.5 percent in January.
The index for hospital services increased 1.6 percent over the month and the index for physicians’ services increased 0.6 percent.
- The prescription drugs index fell 0.8 percent in January.
The index for used cars and trucks fell 3.4 percent in January.
The index for new vehicles was unchanged in January.
The apparel index also decreased, falling 0.7 percent over the month.

Core Service inflation picked up MoM…

..and accelerated YoY

Source: Bloomberg

Under the hood, food and Energy services costs jumped MoM along with transportation services…

Here’s the biggest component upside surprises…

And one step deeper – the so-called SuperCore: Core CPI Services Ex-Shelter index – soared 0.7% MoM (the biggest jump since Sept 2022…

… driving the YoY change up to +4.4% – the hottest since May 2023….

Source: Bloomberg

Finally, as a reminder, lower inflation does not mean lower prices.

Source: Bloomberg

The actual index of consumer prices hit a new record high this month – and is up over 18% since President Biden’s term began (it was up 8% over President Trump’s full four year term).

And it gets worse…

Source: Bloomberg

And on the higher than expected inflation report, we are still seeing bets on Fed Funds rate falling from 5.50% to 4.233% over the coming year.

The re-accleration of inflation means wage growth is back in the red relative to prices.

Why People HATE Politicians! Schumer/McConnell’s Mega $118 BILLION Spending Bill … For Ukraine/Israel And Olly-olly Oxen Free For Illegal Immigrants (Claiming That Is A Border Security Bill With Ukraine Spending 3x US Border Spending)

Well, the anticipated Establishment, and anti-middle class “Boader Security” bill has been released. It is all about military spending for Ukrainse (of course), grudging spending for Israel and peanuts for the border patrol to MONITOR, not stop the illegal immigrant caravans.

The bill is the typical establishment/Democrat pork barrell biil at 370 pages. And loads of exclusions and loopholes so the migrant invasion will never end.

Independent US Senator Kyrsten Sinema told reporters the legislation would secure the US southern border (OMG, that is hilarious!!), including by requiring the Department of Homeland Security to close the border if there are an average of more than 5,000 crossing attempts per day over seven days.

In addition to $20.23 billion for border security, the bill included $60.06 billion to support Ukraine in its war with Russia, $14.1 billion in security assistance for Israel, $2.44 billion to US Central Command and the conflict in the Red Sea, and $4.83 billion to support US partners in the Indo-Pacific facing aggression from China, according to figures from US Senator Patty Murray.

An additional $10 billion would provide humanitarian assistance for civilians in Gaza, the West Bank, and Ukraine.

The US would provide $4.83 billion to support key regional partners in the Indo-Pacific where tensions have risen between Taiwan and China, as well as $2.33 billion for Ukrainians displaced by Russia’s invasion and other refugees fleeing persecution.

Millions for the military to keep Zelensky and his family in mansions while American veterans are homeless. But we expect massive Ukraine funding and the important US border security begins on page 62.

Example: $404,000,000 shall be for Immigration Judge Teams, in16 cluding appropriate attorneys, law clerks, paralegals, court 17 administrators, and other support staff, as well as necessary court and adjudicatory costs, and $36,000,000 shall be for representation for certain incompetent adults pursuant to section 240(e) of the Immigration and Na21 tionality Act (8 U.S.C. 1229a(e)).

What? Homeless vets live on the streets, but Schumer/McConnell want to QUICKLY process illegal immigrants.

Nobody spends other people’s money like Biden and Congress!

$47,500,000 for the procurement and deployment of mobile surveillance capabilities, including mobile video surveillance systems and for obsolete mobile surveillance equipment replacement, counter-UAS, and small unmanned aerial systems;
– $25,000,000 for subterranean detection capabilities;
– $7,500,000 for seamless integrated communications to extend connectivity for Border Patrol agents; and
– $10,000,000 for the acquisition of data from long duration unmanned surface vehicles in
support of maritime border security.

Other than helping the border patrol with surveillance, there are NO FUNDS FOR A WALL and just a lot of gibberish on reporting crossings, but NOTHING TO SLOW THE MIGRANT CROSSINGS.

In other words, it is a BIG DEFENSE SPENDING BILL … for Ukraine and Israel and peanuts for the US border. Child slavery and Fentanyl will continue unabated as will murders by illegal immigrants. Why? Illegals rarely live near Biden, Clintons, Obamas, McConnell, Thune and other frauds in the US House of Lords (aka, Senate).

And you wonder why the US is careening off the debt cliff?