Is Los Angeles Burning?

Well, if not, it may be soon as 3,500 city jobs go on the chopping block including 61 firefighters in an area that routinely bursts into flames.  Los Angeles County seeks to eliminate an additional 1,400 positions with both the County and the City looking to trim their budgets down from last year.  “The mayor’s budget plan will make it harder to do business here, harder to raise a family and harder to keep neighborhoods safe,” the Coalition of Los Angeles City Unions said on April 16. The group represents 22,000 workers.  The mayor’s proposed budget includes $63 million in savings from forcing some employees to take as many as 26 days off without pay.  

We talked about this last month, Los Angeles, like hundreds of other cities across America, is simply out of money and, unlike the US Government, they can’t go endlessly into debt and pretend it doesn’t matter.  Fitch just cut LA’s bond ratings to A- on the 16th following a similar cut by Moody’s on April 7th.  Spending in LA County, with 9.8M residents, will be reduced by $885M or 3.7% from last year while the city is relying on one-time tricks like selling bonds based on future parking meter collections to avoid drastic cutbacks – this year. 

As we get closer and closer to budget time (fiscal years begin July 1st) for local governments, we’ll get a clearer picture on what this recovery really looks like.  Cities and Counties are collecting less income tax revenues not more, their expenses (inflation) are going up, not down and their taxable land bases and sales tax collections are down, not up.  It’s easy to fudge national numbers as you only have to control a couple of dozen reports written by a hundred Federal employees operating under a strict hierachy – try doing that on a national scale with 50 states, 3,141 counties and 18,000 cities and towns and things tend to fall apart and, from that rubble, you may actually get to the truth! 

I sent out a special Alert to Members this morning titled “Notes on AAPL and Complacency” in which I warned that “I am DEEPLY disturbed by the combination of complacency AND bubble valuations I’m seeing in the markets.”  People are all excited that AAPL earned $3.33 per share yesterday but, as I pointed out: THAT’S PER $250 SHARE!  While AAPL is still my all-time favorite company, they’d damn well better be…
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