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Janney Montgomery Scott municipal credit analyst Tom Kozlik argues states are on the road to recovery.
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Popular belief out there our next guest says that states do have this sovereign ability to cut their spending and they're on the road to recovery things are getting better off.
Credit analyst -- -- -- he's with us from from Philly today and talk just a little bit about Todd didn't think -- -- Illinois needs to get its act together but overall you say the picture is getting better.
It is -- let me say thank you for -- let me come back to the show but we are seeing.
That US states are continuing -- gradual but widespread recovery.
As you know -- -- recently saw this in recent data that was just confirmed.
Where -- the the states have seen eight straight quarters of higher revenues and now just recently in the fourth quarter of 2011.
-- revenues did hit the pre recession peak.
Are -- every time we talk about this topic is somehow it comes around and the Meredith Whitney sixty minutes interview when.
If you -- you thought the world is gonna end in every state which is gonna run out of money.
But as you say things have improved since -- so how do you take advantage of it from an investment perspective.
At this point -- You know I think of -- you know from what -- put that in perspective the time to have been.
Concerned.
About the trends would have been maybe in the beginning or middle of 2010.
Bucks you know since then like -- pointed out.
There have been eight consecutive quarters of up revenues for the for the states and also one of the other positives is that.
US state shortfall budget shortfalls are estimated to be much lower this year.
Than they were last year and that is really a product of the fact that states.
Do have the sovereign ability to cut spending or raise revenues when they need to and whether or not -- A Republican governor or democratic governor you know most states have been doing some common -- combination.
Of these of these strategy which one works.
Best at least in terms of your analysis that is it better did.
Well you should you just approach it in a balanced.
From some sort of a balanced perspective where you're raising some taxes and cutting some spending or does it look like in this recovery process one -- the other has worked better generally speaking for the states.
-- oftentimes that's going to be that's gonna depend on the political will of the political actors that are involved.
You know -- some of the examples that you been talking about your show earlier right you would general generally this in the states have they are most of the states are rated double leg.
Illinois for example is -- two.
And Illinois credit spreads or the amount above a triple -- -- that investors are expecting to be compensated for the risk involved in Illinois has been as high as about 20225.
Basis points it's now.
Moderated a little bit and about a 150 basis points over the triple AAA benchmark.
Obviously aren't even in Illinois things are getting better your point -- now they cleaning up yet even in California say which is that speaking a poster -- for this type of thing.
It -- California's good example there's credit spreads are about a 160 basis points now they're down to about ninety okay armed over the past two years so you know is so it.
The market is reacting to.
V positive kind of credit friendly budget solutions of the states have been coming up when.
We've often hear about when things improve but that's a good sign for obviously that they are Tom thanks a lot have a good we can appreciate you coming on thank you Tom and obviously from my Janney Montgomery --
