California Bailout Talk

California is going broke and their bonds are still trading above the 200d moving average.

WTF ? Something bogus going on here. Ratings are either inflated or bond prices are not reflecting the panic that will soon ensue as investors seek to dump their bonds when they see the prices start to plummet. The prices will soon start to rapidly drop. (My sense)

It is now becoming widely publicized that California is running out of money and has only 6 weeks of cash left. CNBC is carrying the story and the LA Times ran a piece today (below) which explains that the “Terminator” went to the US government and asked for a bailout. The US Government said no.

We’ll see how long they say no. It’s a matter of time. When it really starts to get ugly - The FEDs will step in. This will not be good news for the US Dollar - short term, but should be beneficial for Gold (longer term). It’s interesting but dollar weakness has been translating into equity strength. The weak dollar will cause higher rates as the bond market should weaken - unless of course the equity market sells off and the dollar regains strength as “reserve currency”. This country is in a serious mess and it’s not getting better. California is the largest state and their troubles are coming to the surface - quickly. Other states are not far behind CA.

Perhaps this is an orchestrated exercise to raise interest rates prior to the next big bond offerings which are coming via US Treasury next week Maybe this is a way to throw some fear into the bond market. The fear will help to keep rates high enough so that the Treasury can dump their bonds.

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