Creamed Corn

We reached price levels just two cents from the recent lows!

Gold Rocket Rising

This surprises me, given that the Dollar is stronger today. Gold is higher eight of the past nine days.

California Public Employee Pension Funds in $500 Billion Hole

California's three major public pension funds are underfunded by more than half a trillion dollars, according to a report released Monday, the San Jose Mercury News reports.
Gov. Arnold Schwarzenegger (R) commissioned the study, which was prepared by graduate students at the Stanford Institute for Economic Policy Research (Theriault, San Jose Mercury News, 4/5).
The study examined:

• The California Public Employees' Retirement System;
• The California State Teachers' Retirement System; and
• The University of California's retirement system (Walters, "Capitol Alert," Sacramento Bee, 4/5).

The three systems serve about 2.6 million retirees (Bussewitz, AP/Ventura County Star, 4/5).

Report Details

The Stanford report estimates that California's shortfall for government pensions and health care benefits is about $535 billion (Anderson, Contra Costa Times, 4/5).
Researchers tallied CalPERS' unfunded liabilities at $239.7 billion and CalSTRS' liabilities at $156.7 billion.
The new figures are significantly higher than previous estimates from the pension funds. In July 2008, CalPERS estimated its unfunded liabilities at $38.6 billion and CalSTRS estimated its liabilities at $16.2 billion (AP/Ventura County Star, 4/5).

Pension Liabilities Could Lead To Health Cuts, Other Changes

The Stanford report suggests that California would need to put $360 billion into its pension and health benefit systems immediately to have an 80% chance of meeting 80% of the obligations within 16 years (Contra Costa Times, 4/5).
Schwarzenegger in a statement said the study "reinforces the immediate need to address our staggering pension debt." He added, "The consequences are clear: increasingly large portions of state funding for programs Californians hold dear such as schools, parks and health care will be diverted to pay for this debt." 
The governor previously has proposed tightening eligibility requirements for retiree health care benefits and other changes to the pension system (AP/Ventura County Star, 4/5).
The new report echoes some of Schwarzenegger's proposals and calls for lawmakers to:

• Reduce benefits for new public employees;
• Raise annual pension contributions; and
• Shift workers into a partial 401k benefit plan (San Jose Mercury News, 4/5).

Interest Rates Strongly Higher on Worries of Treasury Demand

U.S. Treasury prices were sharply lower, weighed down by another round of firm data and the government's sale of $82 billion in debt this week.
Adding to the selling pressure was uncertainty over a Federal Reserve meeting to discuss the discount rate, scheduled for later Monday. While the meeting is a routine one, the timing led some to speculate that another increase in the emergency lending rate could be in the works.

Crude Blasts Through $86

New Credit Bubble Forming

NEW YORK (MarketWatch) -- A fivefold surge in the sale of junk bonds, a drop in borrowing spreads to two-plus-year lows, and heightened buzz about a coming wave of leveraged buyouts are the latest signs that credit markets are getting close to their pre-crisis levels -- and, to some observers, sowing the seeds for a dangerous new borrowing binge. 

Companies sold $54.3 billion in U.S. high-yield debt during the first quarter of the year, according to Dealogic, up from $9.6 billion a year ago, as the sharp drop in interest rates made it cheaper to borrow. Including investment-grade debt, bond sales in March rose to their highest level since May.
Last week, the growing debt issuance turned swap spreads, a metric of how issuers adjust their interest-rate exposure, negative for the first time on record.
And borrowing costs measured by corporate-bond spreads have returned to December 2008 levels, though they are still far higher than they were before the housing bust.
Selling debt has become much cheaper for companies as the credit crisis fades into history and investors lay their hopes on the recovery of the economy.
Plus, there's little allure for investors to lend to some of the most stable borrowers, such as the U.S. government.
The Federal Reserve's 15-month policy of keeping rates near 0% alongside a pledge to keep them low for a "extended period" have pushed 10-year Treasury yields (U.S.:UST10Y) to 3.94%, after falling to record lows from around 5.25% when the Fed started cutting in 2006.
Yields on 1-month CDs have fallen to 0.47%, from 2.5% in 2007, according to Bankrate.com.
For some private-sector analysts, as well as Federal Reserve policy makers, this lengthy period of low benchmark rates and investor appetite for higher returns poses a risk of again pushing the economy to an unsustainable reliance on debt -- not far from the situation that led to the credit crisis just a few years ago.
"We look at this as a replay of what happened in 2007," said Walter Zimmermann, chief technical analyst for United-ICAP.
Midway through the last decade, investors increasingly piled into much riskier assets, including mortgage-backed securities. They were hunting for a slightly higher yield after the Fed's decision to keep interest rates at 1% for one year in 2003-04 helped flatten yields on government debt.
That demand for higher yields pushed borrowing costs for companies to extremely low levels by 2007, when problems with too much leverage started to materialize within the massive and various securitizations distributed around the world, eventually leading to the credit crisis.
"The need for yield was felt to counteract otherwise low interest rates," he said. "That turned out to be one of the most disastrous investments of our age."
Some officials, such as Kansas City Federal Reserve President Thomas Hoenig, have warned that the Fed risks "distortions in the economy" and creating an asset bubble by keeping rates very low for too long.