Grand Rapids, MI -- (SBWire) -- 04/17/2013 --Financial advisor Dennis Tubbergen can usually be found helping his own clients. When he has a little free time he is busy writing his daily blog, his weekly newsletter Moving Markets or interviewing his next guest expert for his weekly radio show.
Tubbergen's next guest is Gerald Celente, an American economic trend forecaster. Celente is the founder and director of The Trends Research Institute. Often called "the martial artist of trend forecasting," Celente claims the purpose of trend forecasting is to provide insights and directions in anticipation of what the future may bring and to be prepared for the unexpected.
Tubbergen, who is an author, radio show host, and CEO of PLP Advisors, LLC, spends a lot of time giving his opinions on the economy in his online financial blog. On April 8, 2013 his blog was titled Federal Judge: Stockton Eligible for Bankruptcy Protection.
"A Federal judge recently ruled that the City of Stockton, California is eligible for bankruptcy protection while many of the city's creditors had been arguing that the city should be forced to come up with more money," began Tubbergen.
Below he quotes from an April 2, 2013 article in The Los Angeles Times.
A federal judge ruled Monday that Stockton is eligible for bankruptcy protection, over the objection of creditors who argued the city could come up with more money.
U.S. Bankruptcy Judge Christopher Klein said Stockton can move forward with a plan to reorganize debt. He twice stated that the creditors had acted in bad faith and had refused to pay their share of the costs for negotiations.
"The creditors got a big black eye today," said Karol Denniston, an attorney who helped draft the legislation that guided Stockton's mandated mediation before filing for bankruptcy protection. "Now the stage is set for the real dogfight."
In late June, Stockton became the nation's largest city to fail financially. At that time, all eyes were on the port city of 300,000 as experts warned the action could set off a string of similar filings among cash-strapped municipalities. Since then, a half-dozen cities have filed for Chapter 9 protection under the U.S. Bankruptcy Code, including the city of San Bernardino.
During the 90-day mediation period, Stockton's creditors refused to negotiate unless the city cut payments to the state pension plan, CalPERS.
By law, the negotiations were confidential, but that detail emerged during the three-day trial that concluded last week.
Klein said the creditors could not legally walk away from the table, but he left the door open for CalPERS obligations to be part of negotiations in the coming phases of the bankruptcy.
At issue will be whether U.S. bankruptcy law trumps California law, which says the pension plan must be funded.
The $900 million Stockton owes to the California Public Employees Retirement System to cover pensions is its biggest debt -- as is the case with many cities in California.
Stockton slashed its police and fire departments, halted bond payments, cut employee benefits and adopted an emergency spending plan that cut many city services. But the city continues to pay into the state pension.
Stockton's bankruptcy is expected to be closely watched for precedent, and could be appealed as high as the U.S. Supreme Court.
"This is typical of an economic winter season when debt levels reach unsustainable levels," explained Tubbergen. "During the autumn season that precedes the winter season, debt levels build to unsustainable levels and create an illusion of prosperity with high stock prices, high real estate prices and plentiful jobs."
Tubbergen goes on to say that during this autumn period, tax revenues increase at every level of government and many governments make promises and commitments that can't possibly be kept during the winter season as tax revenues fall.
"That's what is happening in Stockton and other cities," states Tubbergen. "But at this point almost all eyes are on Stockton. If the City of Stockton can reduce its required pension contributions through bankruptcy, I look for the floodgates to open and for municipal bankruptcies to become common."
Interestingly, the judge in this case left pension contributions on the table as far as future negotiations was concerned. This means there is a possibility that contributions to the state pension plan on behalf of city workers could be cut.
"That could result in lower pension benefits, or, as occurred in the Central Falls, Rhode Island case, even cuts for existing pension recipients," concludes Tubbergen. "Stay tuned."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his April 8, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.
About Host Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.
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