That figure of $120 Billion in "endangered" CA utilities seems a little high to me. Can anyone confirm? A rough look at two of the larger shows only some $25 B in debt in the two largest (PCG and EIX).
As for the market, I still think that the current rally will not extend much beyond the second week in January. Yet, the recent injection of massive liquidity (I am assuming that the last five days reduction in the national debt, is not just shuffling numbers around), and I am talking about the $75 Billions in reduction in the National debt in the last five days, this money which was in various treasuries, must be parked somewhere and find a "home", could act as a little "petard" under the market. The conditions are ripe as well, we had three consecutive days of excessive bearishness with the naz tick hitting -1220 or lower twice, and -1000 on yesterday's afternoon swoon down. If that excess liquidity finds it's way into the market, together with 401 k and Ira contributions in January, could send us very rapidly above 3000 again. Originally I had this rally peaking at 3050 with a max of 3150 (some hesitation at 2850 on the way), but if that bolus of liquidity becomes available to the financial markets, we may go higher, and once we are above 3000 on the naz, I think that the pressure on the Fed's to relax will ease.
If we do indeed have a $120 Billions problem with CA utilities, and these are declared "non performing" or even need to be written off, I think that this might be a "causus belli" for the Fed to intervene. Can anyone confirm what is the real size of the potential problem?
Thanks
Zeev |
