Are they still smoking whatever they were puffing last fall? ...
From Oct '03 Cavuto on Business: Can Arnold Save the Golden State?
Neil Cavuto: He wanted it, now he's got it. Arnold Schwarzenegger (search) said he'd take on California's problems. Now he'll get his chance. So what should he do first to fix the world's 5th largest economy? Jack Welch, you came into General Electric years ago. A huge company with money problems, similar to what Schwarzenegger is walking into. What should Arnold do?
Jack Welch: He needs to capitalize on the success he had with the election. I hope there are good young stars on his team. I like the diversity on his team. He has to lay out his issues, but he better not go near taxes.
Neil Cavuto: He seems to have put himself in a box by saying he can do this buy cutting through waste and fraud without hiking taxes. Can he?
Meredith Whitney: California mirrors a lot of what happened in corporate America, where the idea was why hire one guy when you can hire one guy and five guys to watch that one guy. Arnold needs to cut costs. The state is spending money like it still has revenues coming in during the height of the bull market back 1999 and 2000.
Neil Cavuto: The governor doesn't have a great deal of power in that state, right Jim?
Jim Rogers: That's right. The democrats control the state congress and they are waiting for him so they can hack him out at the knees. Jack is right. He has to come in strong with his vision, but he has to have more than just vision. If they go back to what they had expended in 1998 or 1999, there would be no problems. The Democrats, under Gray Davis, shot spending through the roof.
Gregg Hymowitz: Arnold's charisma is only going to get him so far. Any budget or tax bills need to be passed by 2/3 of the legislature. As Jim said before the legislature is controlled by the Democrats. He's already said he's not going to cut education and education is 50 percent of the budget. Ultimately, the guy is going to have to raise taxes. And by the way Jack, in 1967 Governor Reagan raised taxes. In 1991, Governor Wilson raised taxes. And in 2003 or 2004 Governor Schwarzenegger will raise taxes.
Jack Welch: That's your answer for everything Gregg.
Jim Rogers: Gregg, you said Arnold said he won't cut back education. I don't want Arnold to cut back on education but if he cuts back the education bureaucracy, we don't need all these bureaucrats.
Gregg Hymowitz: You can't cut that much. The most aggressive analysts say the most you may be able to cut would be about $5 million. You're facing a $10 billion budget deficit. That's as large as the aggregate deficits of the other 49 states.
Neil Cavuto: Let's say that Arnold does do what Jack wants him to do. What do investors buy in that environment?
Meredith Whitney: I think a pure play is California Municipal bonds. I don't own them though.
Jim Rogers: I would also buy California bonds. It's the only thing you can buy. Just because California is getting better doesn't mean you should buy stocks. I would buy municipal bonds, but I wouldn't have them for very long. I would sell them into a rally.
Gregg Hymowitz: In order for California to improve, Silicon Valley will have to improve. And if that happens, I own and like Microsoft (MSFT). Although, I think Microsoft will rally before California improves. Also, I didn't hear Jack comment when I mentioned two very well known Republicans who raised taxes in California. One of which is, I'm sure one of Jack's idols, President Reagan.
Jim Rogers: Gregg, raising taxes has never made an economy get better.
Gregg Hymowitz: Balancing budgets makes economies better. I don't see how you don't agree with that. "
... well, one of 'em nailed it. Amen, Gregg. Sadly, I doubt the gullible fools that swallowed that line even remember what they ate.