Adem Tumerkan Blog | Illinois Headed For Junk Rating And Its Just Beginning | Talkmarkets - Page 3
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

With Illinois' political and fiscal problems showing no sign of abating, investors on Thursday demanded fat yields for the low-rated state's $1.3 billion of general obligation refunding bonds - wrote Reuters in October 2016. 

Illinois economy and pension funds can't afford to be kept out of the credit markets or pay higher interest rates long term. They're barely getting by as is, even though their liabilities and deficits are spiraling. In the decade of Fed induced liquidity and easing, debtors were able to binge on cheap financing from yield starved investors.

But things are changing . . .

The Fed is tightening and the economy is weakening, investors will become more choosy of where their capital goes. 

Similar reasons are what eventually unfolded Greece in 2010. They couldn't finance their crazy deficits and generous public pensions. And as their economy weakened, so did their bond ratings. Eventually they couldn't borrow affordable money and creditors cut them off.

In January 2010, the Greek Ministry of Finance published Stability and Growth Program 2010.[16] The report listed five main causes, poor GDP growth, government debt and deficits, budget compliance and data compatibility. Causes found by others included excess government spending, current account deficits and tax avoidance.

Illinois is heading down the way of Greece. 

And if the United States economy slumps into recession, which it is coming dangerously close to, Illinois will finally break. 

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