Explaining Southern California's economy

Standard & Poor's upgrades California's bonds...but state is still in the bottom two

Gov. Jerry Brown

Sharon McNary/KPCC

California Gov. Jerry Brown speaks in support of Prop. 30 at a rally of UCLA students on campus, Oct. 16, 2012. The passage of the ballor measure in combination with fiscal discipline has led ratings agencies to re-examine California's debt.

Hot on the heels of lowering Illinois' general obligation (GO) bond debt one notch, from "A" to "A-", Standard & Poor's raised California's GO debt to "A" from "A-".

So California is now the second lowest rating U.S. state, among those whose debt S&P rates.

It was S&P's first upgrade for the state since before the financial crisis.

I talked to California Treasurer Bill Lockyer after the announcement, and he credited the combination of Prop 30 — the ballot measure passed last November that raised sales taxes and income taxes on wealthy Californians — along with improved fiscal discipline for prompting the upgrade.

Another agency, Fitch Ratings, is also keeping an eye on California's improving finances. Doug Offerman, an analyst I spoke with last year, wouldn't put a timetable on a possible upgrade, but he did indicate that Fitch likes the math Prop 30 delivers:

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Your best investment for 2012? It might have been...Apple!

The markets have put 2012 behind them. It was an exciting year. It was a crazy year. It was a maddening year. And if you invested in stocks, you probably made money.

Apple did briefly slip the surly bonds of Earth and touch the face of financial gods in 2012, busting through $700 a share and coming within striking distance of a $1 trillion market capitalization. It closed out 2012 on a strong note, up almost four and half percent, to $532.17.

If you'd bought a single share at the beginning of the year, you'd have seen a better-than-31-percent return on your investment.

That was more than double the S&P 500's return, a very respectable 13-plus percent, and much better than what the Dow managed, a mere 7.25 percent (which, it should be noted, is still more than three times the rate of inflation, currently running at about 2 percent). 

Now, if you wanted that Apple return, you'd have been forced to endure some knee-knocking volatility — and you might be cursing yourself for not selling when the stock was trading at its yearly high.

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France gets credit rating downgraded, joins USA

World Leaders Gather In Cannes For The G20 Summit

Dan Kitwood/Getty Images

CANNES, FRANCE - NOVEMBER 03: US President Barack Obama is welcomed by the French President Nicolas Sarkozy to the G20 Summit on November 3, 2011 in Cannes, France. World's top economic leaders are attending the G20 summit in Cannes on November 3rd and 4th, and are expected to debate current issues surrounding the global financial system in the hope of fending off a global recession and finding an answer to the Eurozone crisis. (Photo by Dan Kitwood/Getty Images)

The world's ninth largest economy is now joining the first largest in the unhappy doghouse of Standard & Poor's downgrades. Just as the U.S. was busted down from AAA (S&P's highest rating) to AA+, so, too will France see its "credit score" fall.

This is from Bloomberg:

A downgrade by S&P signals that the latest pledges by European leaders to clamp down on deficits and step up cooperation won’t be enough to end the region’s debt crisis and curtail the rise in France’s borrowing costs. The country’s benchmark 10-year bonds now yield 130 basis points more than debt of AAA rated Germany.

A downgrade of France may further complicate Europe’s efforts to stem the crisis by threatening the rating of the region’s bailout fund. The European Financial Stability Facility, which is funding rescue packages for Greece, Ireland and Portugal partially with bond sales, owes its AAA rating to guarantees from the euro region top-rated nations. A French downgrade may prompt investors to demand higher rates on the fund’s debt.

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