Budget Deficit

Cavanaugh-Gasparino Rematch Like Chuck Wepner vs. JGerry Cooney

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Here's my second dustup with Fox Business financial journalist Charlie "Rocky Balboa" Gasparino:

 

For further reading, here's the December 19 Wall Street Journal article I referenced (behind a paid firewall, unfortunately). Here is Da Joinal again, reporting on the Jefferson County derivatives bet Gasparino referenced. Here is our earlier appearance wherein I hipped Gasparino to the Jefferson County story. Here is a good report on the Hercules, California situation by Dan Oney at Public CEO. Here is my previous report on Gasparino's pursuit of the banking analyst Meredith Whitney. Here is a Fox Biz chart failing to show that comments by Whitney caused the municipal bond market to plummet. 

We need to increase property tax rates to make up for this shortfall.

And here is another reason to be concerned about local governments' ability to keep paying their obligations. Property tax assessments lag the real estate market by as much as three years, and 2010 was the first year property tax collections around the country actually started to fall. The fourth quarter saw the largest drop since the real estate bubble popped. But while that may mean most of that drop will take place in 2011, it won't end this year, because the real estate collapse didn't stop in 2008. As of right now, real estate prices, like Gasparino in a debate, are taking a dive

I'm glad this particular discussion is widening to include more of this information. I have yet to find any evidence of Gasparino mentioning the blessed death of the Build America Bonds swindle, but I'd be happy to update this post if he can provide some. The post-election consensus that BAB – which had been providing artificial support for munis – would not be continued tracks the decline in muni performance much more closely than do Whitney's comments. 

Again, this is not a prediction that any or many municipalities or municipal utility districts will default. But Patrick Courrielche is highlighting a wrinkle from history: When Jerry Ford bailed out New York in the 1970s, the city never technically defaulted, but bondholders did take a bath thanks to Ford's unconstitutional moratorium on paying bond debt. Maybe that couldn't happen again, but we all know what a stickler for the Constitution Barack Obama is. In any event, a journalist aiming to serve muni investors should be paying attention to dangers like this rather than to trying to get the House of Representatives to subpoena a banking analyst. I'm not sure why we're still talking about Meredith Whitney or why I've been drafted as her champion, but I'm here for you, Meredith. (Call me! :-c) 

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  1. Much better tie this time around Tim.

  2. My advice: don’t wrestle with pigs.

    The pigs like it and you just get dirty.

  3. It depends on how property taxes are assessed. In the East, yes, the amount of taxes collected is directly correlated to assessed values (a fixed percentage of value = tax).

    In Washington however, the taxing district sets the total DOLLARS of tax to collect. Assessed value is used merely to apportion shares of that total to be collected. The value of my home could double, but if every property value doubles, my tax burden (assuming the taxing districts have set the same total dollars of tax to collect is constant) is unchanged.

    This is a far better system (IMHO) than the East coast method. No booms in tax take when property values skyrocket, no crashing when they sink.

  4. I don’t know if this is good news or not in the grand scheme of things, but it seems like you’re slowly winning the host over.

  5. Good job Timmay.

  6. As someone who lives in Hercules (‘The Dynamic City’), I do have one piece of good news to report:
    A few years back, we successfully used eminent domain to keep Wal-Mart from building a store in Hercules. Phew. Crisis averted.

  7. Gasparino has always been a bit of a boob. He’s like a lot of journalists covering markets, he absorbed just enough information to be dangerous.

    1. I can’t watch this at work but will check it later… hope you served him up a warm dish of whoop-ass.

      re: Gasparino’s whole schtick / his ‘dangerousness’ as a journalist =

      Many journalists covering financial markets often have to lick the ass of their sources (analysts, fund managers, bankers) in order to get access to their (often costly) opinions. Obviously this is true regarding all journalism, but i would guess high finance is especially the case for many reasons (1: the exclusivity of sources, 2: discloure risk; 3: risk of being seen as jawboning the markets)…Basically if you start saying unpopular things, or go against the consensus of your sources, your access and career go bye-bye.

      I had some little experience something similar to this myself when writing research reports on industries, and would try and interview executives at companies that figured importantly. Usually one of the hooks offered to prospective sources was that they’d get an opportunity to hear (anonymized) from me what their peers are saying about given topics. If they thought they’d get good PR, come off looking smart / competitive/ innovative, they let you have access. sometimes they’d invite you to visit their firm, take you to lunch, try and feed you stuff they wanted publicized. There was a clear understanding that if you felt particularly negative about something, you probably should keep it to yourself – or at least not ever name specific names. Highlighting risks was never as popular as getting excited about opportunities.

      I can see Gasparino’s frustration with the Chicken Littles out there being something of an extention of trader/fund managers’ consensus: they think Roubini & Whitman etc are out to lunch, and Gasparino is to some degree arguing on behalf of the conventional market view. It’s not particularly value-added or analytical though. Tim, being from Reason, has a certain degree of freedom to be skeptical because his career doesn’t involve being a PR guy for the financial industry. Frankly, I think Gasparino should be THRILLED people like Tim are out there providing different points of view, because it absolves him somewhat of the responsibility of taking a broad, critical view.

      Same with Whitman. Analysts who make big calls and go very negative on their own sector (or segment) are vitally important. When consensus has no outlying views included, its just a bunch of sheep huddling at the Mean/Median… when you have some people making cases for risks others are ignoring, they provide value. Other analysts are forced to address the issues you bring up and explain why you’re wrong (they hate that BTW).

      Frankly, I think the worst way to “get it wrong” as an analyst is to err on the upside-risk. A la Arjun N. Murti @ Goldman, May 2008 = “”Oracle of Oil Predicts $200-a-Barrel Crude””

      He maintained and reiterated this view through August 2008. By October… what was it? $30-something? Dude helped people lose their shirts.

      And least Whitman probably created a boom in swaps & puts for bond funds. Theres always a trade in a bear call. 🙂 Better safe than sorry.

      1. “Tim, being from Reason, has a certain degree of freedom to be skeptical because his career doesn’t involve being a PR guy for the financial industry. Frankly, I think Gasparino should be THRILLED people like Tim are out there providing different points of view, because it absolves him somewhat of the responsibility of taking a broad, critical view.”

        When you see the performance, you’ll come away with the idea that Gasparino thinks he’s too good to have to answer questions.

        He hardly even attempts to answer anything Cavanaugh says–he just attacks Cavanaugh…

        And that’s pretty much all he does!

        Gasparino puts in one blurb about that city in Alabama’s problems having something to do with bad derivatives investments–but that’s apparently something Cavanaugh told Gasparino about!

        Gasparino comes across as an egotistical blow-hard who’s offended that anyone would point out that his weird obsessions conflict with the facts!

        Why so many municipalities are in so much trouble is apparently a personally offensive question to Gasparino!

        Given this performance, Gasparino makes egotistical right wing radio blow-hards look interesting by comparison.

        Cavanaugh was arguing with a suit filled with nothing but egotism and hot air. That’s what I saw anyway.

        After that performance? I wouldn’t take advice from Gasparino about where to open a checking account!

      2. OK, I watched it, and the first fucking line out of that cocksuckers mouth is, “yeah, welcome to business journalism…funny how I dont remember Tim Cavanaugh on my tail when I was breaking all these stories…”

        If this was supposed to be an improvement on the first one, which was mostly, “You don’t matter as much as me so who fucking cares what you’re saying?” – uh, not feeling any changes at this point. God that guy is a prick.

  8. “This is a far better system (IMHO) than the East coast method. No booms in tax take when property values skyrocket, no crashing when they sink.”

    It’s also far better than California. Would have been a much better reform than prop 13.

  9. Picking up the action, Tim. When you’re up against a complete asshole like the gasbag, you sometimes have to get a little ugly.

  10. That round goes to Charlie. I think the first rule of debate is that when you make fun of the other guys clothing you win.

  11. I think you meant ‘Gerry’ Cooney.

    1. Thanks. Fixt — although my Gaspo experience tells me that I should be denouncing you and refusing to admit the error.

  12. That’s one fine looking newsman in the mint tie.

  13. Well the host was at least a bit more even handed this time calling your both jokers.

    Still Fox had to know you guys would argue…playing the innocent that somehow they were not inviting the fight seems a bit disingenuous.

  14. Gasparino arguments are incoherent.

    From what i can tell they are summed up as follows: Whitney is criminally wrong, investors must be coddled through manipulation of the message by the media, and journalists who have not worked in finance as long as him must be dismissed regardless of the truth.

  15. It’s painfully obvious that Gasparino has nothing of substance to say about this. He’s a bunch of hot air in a suit.

    Gasparino’s there to look down his nose at other people for pointing out facts that contradict him. Is that his whole act?

    Cavanuagh points out facts that contradict him, and he says something about Cavanaugh’s suit?

    What a blow-hard Gasparino is!

  16. Charlie Gasparino: still a douche.

    1. That’s the exact word!

      “Douche”: Abusive and brainless.

      Gasparino comes across like the poster-boy for douche-bags.

  17. Nice work tooling Gas-man again, Tim. What a hack! I read his Twitter feed a couple of weeks ago and it is FILLED with vitriol and attacks, no facts of substance though… Keep up the good fight.

  18. Thanks to this information. “bondholders did take a bath thanks to Ford’s unconstitutional moratorium on paying bond debt.” It could not happen again.

    CT Mortgage Rates

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