So yes, at the cancer center again today. Stu gets his 8th transfusion on Monday. Woo. Donate blood!
2017 was the year Stu was diagnosed with cancer, so perhaps my beating up on Chicago slowed down after that… or perhaps it revved up! It always cheers me up so much!
Ratings agencies don’t move quickly, for what it’s worth. Often, their moves lag information becoming known. It’s not from anything nefarious – it’s just that analysis takes time.
Here’s another thing you may not know: ratings agencies are usually given private information by the companies/entities being rated. They are explicitly excluded from certain SEC rules involving private information and securities.
But here’s a question: while I understand that even publicly-traded companies don’t have to share all their financial information to the investment world, why would there be any private numbers for a governmental entity like Chicago?
Do they have a spy force whose budget they have to keep mum?
Rahm Emanuel chose Fitch and Kroll to rate the bonds. There’s a whole perverse incentive structure in muni bond ratings — the issuer pays rating agencies, and have the ability to share private info with those agencies.
But, because of the First Amendment, credit rating agencies can issue their opinions about any bond issue they want. Rahm can bitch at Moody’s for its ratings, but they can’t do a damn thing about it. They already decided not to pay Moody’s in 2013, so there’s not much in the way of levers.
The credit rating agencies pretty much only have their reputations going for them (though they get some regulatory boosts), and some of the agencies decided post-credit meltdown of 2008 that they needed to work on their credibility.
Crumpling over political threats doesn’t do much in the way of building one’s reputation.
Because Moody’s was not the official rater on the general obligation bonds, they didn’t need to butter up the issuer… so they could be honest on their estimation of the credit risk inherent in the Chicago bonds.
Remember general obligation bonds from a government entity is based on the “full faith and credit” yadda yadda, and the default on these tend to be low. Chicago is unlikely to default outright on any of these… however…. there is political risk, if nothing else.
FWIW, given the current funded ratio with even optimistic assumptions around about 33% in fiscal year 2015, and 20% according to the screenshot above, I can see them [MEABF] running out of cash by 2025 or before.
WHAT HAPPENS WHEN THE PENSION FUND RUNS DRY?
When the pension fund runs out, that does not necessarily mean pension benefits will stop being paid.
I’ve been saying that Chicago will be the next Detroit for years, and on Thursday, syndicated talk radio show host–and former Tea Party congressman–Joe Walsh, was making the same prediction on his program.
…..
Here’s what I base my Chicago dystopia projection on. Defenders of the status quo place blind faith into their hope that Chicago can somehow hang on until enough pensioners die, which probably won’t be until the middle of the century. They offer no credible solutions. Nothing. They’re as delusional as Gerald O’Hara meticulously counting out his Confederate bonds in Gone With The Wind–“All we have left”–after General Robert E. Lee surrendered.
There’s a way out–changing state law so municipalities and government agencies can declare bankruptcy, which is something Bruce Rauner, Illinois’ reform governor, favors. But the Democrats and the public-sector unions will never agree to that.
Because Chicago pensions have NEVER been given full contributions — one thing that the Detroit pensions did not suffer from. They didn’t stiff the pensions… officially.
However, unofficially, Detroit pensions suffered from the same over-optimistic valuation assumptions that most public pensions in the U.S. suffer from, and it turned out that the supposed 90%+ funded pensions weren’t as funded as that. So current retirees got their benefits whacked, in addition to those currently working and prospective new employees.
So you may be wondering why I’m not agreeing with Ruberry.
I’m not agreeing with Ruberry because Chicago fiscal collapse will be much worse that Detroit’s.
Their hole is so much bigger.
Because Chicago MEABF was so vulnerable to running out of money, I made a spreadsheet model:
So, that was a deathless week according to the Chicago Sun-Times, but not according to Hey Jackass! (my authoritative source). They were claiming the week ending with March 5, 2017 had no gun homicides, but Hey Jackass! recorded one.
In general, when it’s cold as hell, Chicago doesn’t have a lot of gun homicides.
Note the low gun extracurricular activity during high snow.
But I wanted to point something out:
WHAT KILLS PEOPLE IN CHICAGO?
Heart disease and cancer.
That’s what kills most people in all of the U.S., and it’s true in Chicago as well.
Also, the data set is far from complete or unique. Ugh. They have cancer (all sites) and colorectal cancer? Obviously one is a subset of the other. Yes, heart disease and cancer are the top two, though.
Then there’s: Assault (homicide) Firearm-related Suicide (intentional self-harm)
Not all homicides are firearm-related (nor are all suicides) but COME ON! Give me some exclusive death causes so I can compare! Heck, I can’t even get the total number of deaths to total to their full Chicago entry.
Do you even audit your death data, bro?
Not everybody has a passion for data quality.
The overall rate for Chicago: 2.3% of deaths were due to homicides. Contrast that to 23% of deaths being due to cancer and 17% of deaths being due to heart disease. Heck, accidental deaths were 4% of the deaths, more than homicides.
I’m not saying that homicides in Chicago are unimportant as a problem, by the way — I think many people can see why it’s a problem, especially since while murders were 2.3% of deaths in Chicago in 2006-2010 (when homicides were at historical lows for Chicago), in 2010, there were about 13,000 people who died of homicide compared to 2.5 million who died in 2010. That’s 0.52% of deaths. There was a disproportionate amount of homicides in Chicago, even before their recent increase.
“The problem is real: 762 people were murdered in Chicago last year, a stunning 58 percent jump in homicides from 2015. So large was the sharp, sudden increase in homicides in one of America’s largest cities that it tangibly raised the entire nation’s homicide rate higher for 2016. But nobody really knows why it’s happening.”
Well, that’s helpful.
Some of the hypotheses are stupid — educational spending?! COME ON. No, it wasn’t weather. No, guns didn’t become easier to get.
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