Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

An Investment Lesson from Puerto Rico

Stock-Markets / Investing 2019 Jan 08, 2019 - 05:08 PM GMT

By: Rodney_Johnson

Stock-Markets It takes two and a half hours to fly from Miami to San Juan, Puerto Rico, but the island might as well be on the other side of the planet.

Even though it’s a U.S. territory and it’s a shorter flight from Miami to San Juan than to L.A. or even Washington, the place is the epitome of out-of-sight, out-of-mind.

When’s the last time you considered the tough conditions on the island?

Hurricane Maria flattened the place more than a year ago, and quickened the pace of migration from the island to Florida, leaving behind the vulnerable population.


It took months to restore electricity, and thousands of structures remain in shambles.

FEMA desperately wants to disperse funds and get out of Dodge, but they can’t prove who owns what. Either land has been passed down through generations, or homes were built illegally without documentation.

And good luck finding building supplies.

The Island Has a Bigger Problem

But in some ways, the hurricane devastation isn’t Puerto Rico’s main concern…

The island has huge financial issues that are getting worse.

Way back when, in another universe during the Obama administration, the Puerto Rican government wanted to go bankrupt, but couldn’t. There’s no provision in U.S. law for territories or states to use the bankruptcy code. The Puerto Rican government came knocking on Congress’ door for help, which is ironic.

In the 1980s, Puerto Rico demanded fiscal freedom. The commonwealth told the U.S. Congress that it should be able to chart its course without federal interference.

Congress agreed, but only after noting that Puerto Rico should be fiscally conservative so as not to find itself in trouble, because the U.S. government would come to its aid. But hey, that was more than 30 years ago, so who remembers such things?

To prove they were serious, the Puerto Ricans noted in the first line of their constitution that debt payments, both principal and interest, would come before any other expense, period. Obviously, that didn’t hold, either.

Where It Is Now

Now Puerto Rico is $74 billion in the hole, before counting its $50 billion pension liability (with no pension assets), and it showed up to Congress demanding help.

Our representatives agreed to assist, giving Puerto Rico a way to access bankruptcy proceedings in exchange for relinquishing financial oversight, which now rests with the Financial Oversight and Management Board for Puerto Rico that includes seven members appointed by the U.S. president and one by the Governor of Puerto Rico.

After two years and a lot of wrangling, the commonwealth government has settled its first negotiation with bondholders.

Those holding the $4 billion of bonds issued by the Government Development Bank will receive $0.55 on the dollar, which will reduce Puerto Rico’s outstanding debt from $74 billion to about $70 billion, but also adds $2.6 billion of new debt. The new bonds will pay 7.5% and mature in 2040.

But that’s only if the Puerto Rican government pays the principal and interest.

The island has been mired in a recession for 12 years. Of the roughly 900,000 workers in Puerto Rico, almost one-third work for the government, and they receive two months of paid time off every year.

With so many people leaving the island and so much property in shambles, it’s hard to see who will pay taxes in the years to come.

Pay Attention to Where This Leads

Hurricane Maria didn’t make this mess, but it laid bare the issues, and we’d be wise to pay more attention to where this leads.

Puerto Rico has a people problem. The government owes too much money to retirees and workers, as well as to investors, that it cannot pay. When things get ugly, the government will take care of the people, completely disregarding anything written in the constitution or other law, or anything promised by previous administrations.

If the choice is between a worker or retiree and an investor, the investor loses every time.

Detroit proved this in 2013, and will prove it again when the city must begin making pension payments again in 2023.

Puerto Rico proved it when the commonwealth defaulted in 2016. The state of Illinois and city of Chicago aren’t far behind.

Their governments will make speeches and big promises, and they might even believe them. But in the end, creditors will eat all of the pain.

If you don’t feel hungry for a loss, do yourself a favor. Check your investments and make sure that you’re not exposed to cities, counties, or states with questionable finances.

We might not be paying attention to Puerto Rico, but it stands like a lighthouse, warning us not to come near. It’s our job to see it.

Rodney Johnson

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2019 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules