"I looked as hard as I could at how states could declare bankruptcy."

Here's an interesting chart of manufacturing productivity (output/hour) and real wage per hour since 1890. Starting in the 1960s, labor stopped obtaining any share of its own productivity gains. For this to happen, there would need to be a totally elastic supply of labor. What a coincidence! This coincides with the passage of the Immigration and Nationality Act of 1965. As the Center for Immigration Studies points out, "the 1965 changes unwittingly ushered in a new era of mass immigration."

This is astonishing. The WSJ quotes Michael Genest, director of the California Department of Finance who is stepping down at the end of the year: "I looked as hard as I could at how states could declare bankruptcy. I literally looked at the federal constitution to see if there was a way for states to return to territory status."

Related: "Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California's government and the middle class is constantly being renegotiated to the disadvantage of the middle class."

General Cable (BGC) is a stock I bought when it was inexplicably cheap in late 2008, then sold way too early in the 2009 rally. I have had it on my watch-list since then. They are offering to exchange $925 of new Subordinated Convertible Notes due 2029 for each $1,000 of outstanding 2012 notes. I'm not following the company anymore, but that offer must be hilariously bad, because only $500,000 worth of notes have tendered for the exchange. That's out of $475 million outstanding.

From the Comments Section

Le_Soldat said...

Wondering what your opinion on today's light volume bear market rally? I'm losing big on puts on cof, hig, cat, spg, x, and spy.

Do you think this "rally" has any legs, or do you believe there will be a sell off starting friday?

I made the mistake of buying Jan puts and they are really dropping in value. I just can't understand how we rally with worst consumer confidence and worst home prices.

Good Luck and Happy New Year.

CP said...

I think the rally is a joke. Anytime a decent stock (BGC) vastly underperforms a garbage stock (MPG), to me it is another sign of our broken market. Result: bearish.

That being said, you need to have staying power. Buying front month puts is problematic. I own Jan puts that are deep in the money that I don't want to sell for tax reasons. But I would never buy OTM front month puts just to watch the premium evaporate.

I have no idea when the next selloff will commence. All I believe is that most of my shorts will be zeros a year from now. So I am patient.