Swoons
A key piece of information was released yesterday that passed completely without notice by the cognoscenti, who would much rather focus on bogus Ministry of Truth “data” and the utterances of the apparatchiks. March tax receipts in California completely bombed, coming up 7.4% short of forecast. Personal income tax collections were unusually poor, and sales tax collection seems to be confirming the ShopperTrak trends. Year over year personal income, sales & use, and corporate taxes were 5,031 to 5,366, down 6.3%. In February it was 4,100 to 4,276, down 3.9%. Corporation taxes paid remain healthy. The swoon in state revenues is not really new news, but now it appears to be accelerating. This now brings California’s November-March tax tally in at $1.9 billion below forecast.
We will get a good look at One Trick Pony Federal tax receipts next week.
California several years ago passed Proposition 57, which raised $15 billion in Rob Peter to Pay Paul debt to keep the state functioning. As described here, this bond is serviced via sales tax receipts, and during the housing Bubble years of 2005-early 2006, the state hit the jackpot. Now with sales taxes slipping, the state will face a shortfall and real challenge on this big debt financing. Wonder how long it will take the rating agencies to act on this one. Meanwhile, California is going to market with a massive $40 billion infrastructure issuance (very good video here).
Total rail activity shows a similar downturn is underway and year over year is showing a pronounced drop. Incredibly the rail stocks are trading at highs on various buyout rumors and Lord knows what else.
Steel production has also gone into a steep swoon. From February 10 to April 7, steel production was 15,929 thousand tons, versus 16,731 year over year, a 4.8% drop off. Once again steel stocks are in parabolic mode.
I am using mid February as the beginning of this economic swoon. That would also correspond with the peak in real estate lending which hit 3.3864 trillion on Feb. 21st. On April 4 the adjusted for notes figure (-17.8 billion for FASB rule change this week), and -66.4 for footnotes of March 14 equaled $3.380.4 trillion, suggesting a complete stall in Ponzi real estate lending is underway.
The foreclosure cycle:
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