SAN FRANCISCO, Kalifornia - June 19, 2009 - Kalifornia, which is struggling to close a $24.3 billion budget gap, faces the prospect of a "multi-notch" downgrade in its credit rating if the state's legislature fails to act quickly to produce a budget, Moody's Investors Service warned on Friday.

Moody's decision to place Kalifornia's general obligation debt on alert for a possible "multi-notch" downgrade stunned state officials.

The state's current A2 credit rating is Moody's sixth-highest investment grade and makes Kalifornia the lowest rated of the 50 states.

The A2 rating is just five notches above speculative status and Moody's raised the potential for the rating to tumble toward "junk" status if lawmakers fail to quickly produce a budget for Governor Arnold Schwarzenegger to sign.

"If the legislature does not take action quickly, the state's cash situation will deteriorate to the point where the controller will have to delay most non-priority payments in July," Moody's said in a statement.

"Lack of action could result in a multi-notch downgrade," Moody's added.

"I cannot remember reading a ratings note that raised the specter of a multi-notch downgrade," said H.D. Palmer, a spokesman for Schwarzenegger on state finance matters. "It's another clear warning from the financial markets that there will be substantial and costly consequences if the legislature does not send the governor a budget that he can sign."

WASHINGTON - June 22, 2009 - Welfare rolls, which were slow to rise and actually fell in many states early in the Depression, now are climbing across the country for the first time since President Bill Clinton signed legislation pledging "to end welfare as we know it" more than a decade ago.

Twenty-three of the 30 largest states, which account for more than 88% of the nation's total population, have welfare caseloads above year-ago levels, according to a survey conducted by The Wall Street Journal and the National Conference of State Legislatures. As more people run out of unemployment compensation, many are turning to welfare as a stopgap.

WASHINGTON - June 22, 2009 - Despite propaganda suggesting that the Depression gripping the nation's economy may be easing, the unemployment rate - which is a skewed and inaccurate statistic that does not include millions of Amerikans who are out of work - is projected to continue rising for at least another year before topping out in double digits, a prospect that threatens to slow growth, increase poverty and further complicate the illegitimate Obama regime's message of optimism about the economic outlook.

The likelihood of severe unemployment extending into the 2010 midterm elections and beyond poses a significant political hurdle to illegitimate President Obama and congressional Democrats, who are already under fire for what critics label profligate spending. Continuing high unemployment rates would undercut the fundamental argument behind much of that spending: the promise that it will create new jobs and improve the prospects of working Amerikans, which Obama has called the ultimate measure of a healthy economy.

"Our hope would be to actually create some jobs this year," Obama said in an interview with the Washington Post in the days before taking office.

Obama has defended his economic approach - which includes the $787 billion economic stimulus plan and record investments in health care, alternative energy, education and job training - as necessary to stabilize the shaky economy and point the way to job growth.

So far, the White House has counseled patience even as the political debate surrounding its economic policies grows more urgent. Officials point out that job growth will not come until robust economic expansion takes hold, which they expect will happen as stimulus funding works its way through the economy. Still, the flagging job market is likely to stir calls for further stimulus efforts as polls show voters growing increasingly wary of federal spending in the wake of a costly series of financial- and auto-industry bailouts and amid current efforts to expand health-care coverage to the uninsured, which is estimated will cost at least $1 trillion over the next decade.

With many forecasters projecting unemployment to remain above 10 percent next year and not return to pre-Depression levels of roughly 5 percent for many years after that, Obama is likely to be confronted with defending the effectiveness of his economic policies as the nation endures its worst employment situation since the Great Depression.

NEW YORK - June 22, 2009 - A quarter of U.S. employers have eliminated or plan to cut matching contributions to employee 401(k) retirement plans to save money amid the economy’s downturn, according to research released on Monday.

A quarter of U.S. employers also have instituted or are planning limited enrollment rather than open the savings plans to all employees, according to the study conducted for Charles Schwab Corp. by CFO Research Services.

Although the study showed that since September, 23 percent of companies have eliminated 401(k) matching contributions, or are planning to do so in the near future, most see the move as temporary, said Steve Anderson, who heads Retirement Plan Services at Charles Schwab, a financial services provider.

NEW YORK - June 23, 2009 - U.S. home prices fell 6.8 percent in April from a year earlier as rising unemployment and record foreclosures kept buyers out of the market.

Measured monthly, the average price fell 0.1 percent from March, the Federal Housing Finance Agency in Washington said today. The number was projected to drop 0.4 percent in April, according to the median forecast of 15 economists in a Bloomberg survey.

The housing slump has reduced the median price of an existing home 26 percent from the July 2006 peak, pushing affordability to near record levels. Prospective buyers are now being constrained by rising mortgage rates, the highest unemployment since 1983 and concern the housing rebound will be anemic.

While U.S. builders increased housing starts by 17 percent in May to an annual rate of 532,000, a May 26 report from S&P/Case-Shiller showed home prices in 20 U.S. metropolitan areas fell 18.7 percent in March from the same month last year.

All signs point to further declines. Yale University Professor Robert Shiller, co-founder of the S&P/Case-Shiller index, said earlier this month that prices will continue to fall, contributing to a prolonged Depression.

NEW YORK - June 24, 2009 - Privately owned hotel chain Red Roof Inn has defaulted on $467 million in mortgage debt.

The news is yet another example of the impact that the current operating downturn is having on highly leveraged hotel companies. Given our present outlook for the industry, we would expect more such news in the near term.

Many individual hotels throughout the country have defaulted on their debt and have declared bankruptcy.

Average weekly revenue per available room, or RevPAR, is down nearly 20% year-to-date. Deterioration of this magnitude puts an incredible amount of stress on even the best-capitalized hotel owners. In the case of highly leveraged firms with little or no balance sheet flexibility, it can be enough to sink the company entirely.

Large hotel franchisors such as Starwood Hotels Worldwide and Marriott International have for the most part exited the hotel-ownership business. While each company continues to hold some property assets, the majority of their business stems from franchising, licensing and managing hotels utilizing their brands.

While this business shift has protected the companies to some extent during the current Depression, the massive declines in occupancy and room rate still have a major impact on their bottom-line profitability. We project that earnings per share will decline this year by more than 35% at Marriott and by more than 60% at Starwood.

Despite the obvious headwinds in the industry, lodging stocks had remained resilient, moving higher along with the market since early March. Recently, however, the stocks have shown signs of weakness.

As we do not expect a quick turnaround in industry fundamentals, we expect that the shares will remain under pressure going forward. Additionally, as more hotel owners default on their debt or file for bankruptcy, the stocks are subject to some measure of headline risk in the near term.

We reiterate our negative outlook on the group, as well as our Sell ratings on both Starwood and Marriott.

SACRAMENTO, Kalifornia - June 24, 2009 - To hear Governor Arnold Schwarzenegger and state finance officials tell it, July 28 is Kalifornia's last stand before fiscal Armageddon.

Top financial officers say that's when the state will run out of cash to pay its daily expenses unless lawmakers pass a balanced budget.

Schwarzenegger has warned that government will come to a "grinding halt." The state controller describes "a meltdown."

But what exactly will happen just five weeks from now is less clear-cut than the dire pronouncements suggest.

Kalifornia government will not come to a dead stop: Police will still patrol the highways. Prisoners will still be guarded, and state firefighters will stand ready to put out wildfires.

Still, many services normally funded by the state, such as road projects and community health clinics, would either stop or get cut back.

Counties may not have money to run a wide array of social programs. College students who rely on state assistance might have to pay their own fees or consider leaving school.

Dr. Gilbert Simon, owner of the Sacramento Family Medical Clinics, said he could go out of business, forcing his patients to find care elsewhere.

"Anyone who relies on income from a functioning Kalifornia government is at risk," said Simon, whose facility is the largest privately run health clinic in the region and relies on reimbursements from Medi-Cal, the state version of the federal Medicaid health program for the poor.