Adem Tumerkan Blog | Illinois Headed For Junk Rating And Its Just Beginning | Talkmarkets - Page 2
Editor-In-Chief at Palisade Research
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My name is Adem Tumerkan and I am the Editor-in-Chief of Palisade Research. 

I'm 26 years old. Born contrarian and skeptic. I like the mining sector but I'm really a contrarian/value investor that ... more

Illinois Headed For Junk Rating And Its Just Beginning

Date: Wednesday, June 14, 2017 11:08 PM EDT

This would be the first time a state in America will have a junk rating. 

And it is the fifth largest state in the country. . .

How did things get this awful?

Illinois has a Republican governor (surprise), Mr. Rauner, that is at deep odds with the Democrat House Speaker, Mike Madigan, and his Democrat backed legislature. Two huge egos that can't agree on anything fundamentally. 

The story is always the same. . .

In 2014 Rauner was elected governor of Illinois. He promised some 'right to work' ideas, cutting taxes, and adjusting public pension compensations. You know, the usual Republican agenda. 

But the Democrats hate these notions. They took it as an attack on the working citizens, which are their voters. They vow to defend the over-powering unions, demanding higher taxation, and to protect pensioners. You know, the usual Democrat agenda. 

Fast forward to present day, and the state of Illinois is in peril. The state is spiraling into uncharted territory. Yet neither side will backdown. It is the war to end all political wars.

Worst of all, they don't realize that if the states bond market bellies up and goes junk, they won't have access to money. This is because most mutual funds and pensions and insurance companies can only buy investment grade bonds, not junk rated. That would be a large source of capital the state can't access. And if they do get any loans, it will have higher interest rates, making the borrowing costs much greater. 

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