SP Intel Report- November 9, 2015


Nearly 1 Out Of 3 City Of Chicago Workers Made $100K Or More Last Year

Having lived in a northwest side neighborhood chock-full of City of Chicago employees prior to moving out to the ‘burbs, I wasn’t really surprised to learn of the following. Chris Fusco and Tim Novak reported on the Chicago Sun-Times website yesterday:

Nearly one out of every three workers on the city of Chicago payroll made $100,000 or more last year — a far higher percentage of six-figure employees than in state or Cook County government.

That’s according to a Chicago Sun-Times analysis that for the first time combines city workers’ salaries, overtime and other extra pay.

Twenty-six city workers drew paychecks that eclipsed Mayor Rahm Emanuel’s pay of $216,210, the analysis found. They included a police detective, two fire department ambulance commanders and two water department operating engineers…

(Editor’s note: Bold added for emphasis)

Fusco and Novak noted that there were 35,761 City of Chicago employees last year. And nearly 1 out of 3 made $100K or more? Nice gig if you can get it, right? Regrettably, I predict that when tough financial times finally arrive at the Windy City’s doorstep, even “clout” won’t be able to protect certain positions and salaries from getting slashed.

Cook County President Toni Preckwinkle To Tax Ammunition Sales?

Gun “control” (or gun “safety” as certain word wankers are now trying to call it) is on the march again in Cook County. From a County blog post Friday:

In an effort to reduce gun violence and improve public safety by creating new revenue for preventative actions, President Preckwinkle is also proposing a tax on rounds of ammunition sold in Cook County. The ammunition tax, either a penny or nickel per round depending on the category of ammunition, is aimed at addressing the costs of future gun crimes and the revenue generated will be dedicated to public safety initiatives.

President Preckwinkle, long an advocate of common sense gun laws, previously supported and passed a $25 tax on gun sales in Cook County. She has advocated for legislation that would ban assault weapons and high-capacity magazines, require registration of existing firearms and require background checks on all firearms sales at gun shows — commonly referred to as the “gun show loophole.”

(Editor’s note: Bold added for emphasis)

Tax law-abiding firearm owners in Cook County for the actions of criminals? Yeah, that makes a lot of “common sense.” You see, felons and other convicted criminals can’t purchase ammunition legally in Cook County, because they shouldn’t be able to get an Illinois State Police-issued Firearm Owner’s Identification Card. From the Illinois State Police, Firearm Services Bureau website:

Unless specifically exempted by statute, any Illinois resident who acquires or possesses firearms, firearm ammunition, tasers or stun guns within the State must have in their possession a valid FOID card issued in his or her name…

To be eligible for a FOID card, a person must be 21 years of age or have a parent or guardian sponsor that is eligible for a FOID card. An applicant must not be prohibited from possessing firearms in accordance with state or federal law. This requires the applicant is/has:

• Not been convicted of a felony…
• Not subject to an existing order of protection.
• Not been convicted within the past 5 years of battery, assault, aggravated assault, violation of an order of protection, or a substantially similar offense in another jurisdiction, in which a firearm was used or possessed.
• Not been convicted of domestic battery, aggravated domestic battery, or a substantially similar offense in another jurisdiction…
• Not convicted of a misdemeanor crime of domestic violence…

So what’s President Preckwinkle’s goal from a Cook County ammo tax then? My guess is gun “safety.” Something tells me we’ll be seeing the county in court if they decide to pursue this matter.


Illinois Open Range Program To Be Held On November 14

Speaking of guns and the Illinois State Police, it’s that time of year again in the “Land of Lincoln.” From the website of central Illinois NBC affiliate WAND 17 on Friday:

The Illinois Department of Natural Resources is teaming up with Illinois State Police to promote hunting safety through the annual Open Range Program on November 14.

Officials say hunters and observers will be invited to ISP ranges in order to check the sighting in their shotguns…

Ranges in Effingham, Pawnee, Pittsfield, Macomb, Joliet, and LaSalle will be open for the program from 8 AM until 4 PM this coming Saturday. For more information, head on over to WAND 17’s website here.


Greece’s Government Confiscating Contents Of Bank Safe Deposit Boxes?

Last week, I was working on my offshore asset protection-related projects quite a bit. And here’s something disturbing I noted Friday in a post on Offshore Safe Deposit Boxes that may interest you:

Just when the reputation of bank safe deposit boxes couldn’t get any worse comes this out of Greece. Anthee Carasavva reported on The Times (UK) website back on October 12:

Greece’s government is raiding savers’ safe deposit boxes to raise revenue and stamp out tax evasion.

Tryfon Alexiadis, the deputy finance minister, said yesterday that Greeks owing more than €150,000 in back taxes would be targeted. Those suspected of tax evasion would also come under scrutiny and their bank deposit boxes prised open without notice

“Safe deposit boxes across the country will be subject to these inspections immediately,” Mr Alexiadis told an Athens-based TV network…

(Editor’s note: Bold added for emphasis)

It’s being reported that the tax inspectors could seize half of the cash found, and stocks, bonds, jewelry, and works of art. You can read the entire post in its entirety here on my other blog.

Christopher E. Hill
Survival And Prosperity (


Fusco, Chris and Novak, Tim. “THE WATCHDOGS: A third of Chicago city workers make $100k or more.” Chicago Sun-Times. 7 Nov. 2015. ( 8 Nov. 2015.

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SP Intel Report- October 26, 2015

Welcome to the inaugural post of the “SP Intel Report.” On October 15 I blogged big changes were coming to Survival And Prosperity starting October 19. I wrote:

Each day will begin with an “SP Intel Report” (if it’s warranted), where I’ll be focusing on current events locally (Chicagoland area), nationwide, and overseas which I think readers should be aware of…

As luck would have it, my computer crashed October 19, delaying the implementation of these changes.

One week later, I’ve managed to repair my laptop, and I’m back in the saddle again.

So off we go then…


“If City Hall ‘loses’ downtown to the bad guys… you lose the tourists, their money, revenue… you get the point.”

Survival And Prosperity, May 4, 2011

The Chicago news media is reporting that two tourists from Minneapolis were robbed at knifepoint by three men near Oak Street Beach late Saturday evening. The male victim was stabbed during the holdup while trying to protect his girlfriend. Two of Chicago’s more upstanding residents have been charged with the crime (police are still looking for a third individual).

The last time I blogged about a tourist getting knifed downtown was back during the 2012 holiday season. Even though it’s been a while, I fear we’ll be hearing of similar incidents with increased regularity as the city’s financial health deteriorates and the Chicago Police Department keeps receiving lip service but not bodies (meaning manpower).

There will probably be plenty of the other based on recent trends.

Note to self. Study up on defense against knives.


Speaking of deteriorating financial health, the State of Illinois was hammered by two of the major credit rating agencies in the past week. On October 19, Fitch Ratings announced in a press release:

Fitch Ratings has downgraded the rating on $26.8 billion in outstanding Illinois general obligation (GO) bonds to ‘BBB+’ from ‘A-‘.

In addition, the ratings on bonds related to the state based on its appropriation have been downgraded to ‘BBB’ from ‘BBB+’…

(Editor’s note: Bold added for emphasis)

Three days later, Moody’s Investors Service stated in a release:

Moody’s Investors Service has downgraded the State of Illinois’ $26.8 billion of general obligation bonds to Baa1 from A3, while also lowering ratings on the state’s sales-tax (Build Illinois) bonds to Baa1 from A3, and on the state’s subject to appropriation bonds (issued by the Metropolitan Pier and Exposition Authority and for the state’s Civic Center program) to Baa2 from Baa1. The outlook for all of these obligations remains negative…

(Editor’s note: Bold added for emphasis)

Keep in mind the following observations by Karen Pierog over on the Reuters website on October 22:

Both general obligation bond ratings are now just three steps above the “junk” level… The downgrade by Moody’s marked the 17th by major credit rating agencies for Illinois since 2003… Even before this week’s downgrades, Illinois had the lowest credit ratings among the 50 U.S. states. Ratings histories from the three major credit rating agencies indicate few states have ever had their GO ratings fall below the A level…

Faced with a $105 billion unfunded public pension liability and a bill backlog of around $7 billion, I suspect Illinoisans will be on the hook for some sort of tax hike(s) in the near future.


Any Survival And Prosperity readers skeptical about the future existence of the Internet? Personally, I won’t be surprised if it goes kaput one day. Don’t get me wrong, I’m somewhat of a techie (driven by needs, not wants) and love the Internet. But I’m not sold on its staying power due to frailties with its infrastructure. A couple of years ago I remember reading about an elderly Georgian woman accidently cutting off neighboring Armenia’s access to the World Wide Web for up to five hours- using only a spade. And now there’s this from The New York Times website this past Sunday. David E. Sanger and Eric Schmitt reported:

Russian submarines and spy ships are aggressively operating near the vital undersea cables that carry almost all global Internet communications, raising concerns among some American military and intelligence officials that the Russians might be planning to attack those lines in times of tension or conflict.

The issue goes beyond old worries during the Cold War that the Russians would tap into the cables — a task American intelligence agencies also mastered decades ago. The alarm today is deeper: The ultimate Russian hack on the United States could involve severing the fiber-optic cables at some of their hardest-to-access locations to halt the instant communications on which the West’s governments, economies and citizens have grown dependent

(Editor’s note: Bold added for emphasis)

So the Russians could switch off the Internet. Or a rogue Uncle Sam could do it and blame the Russkies.

I told my girlfriend her brilliant nephew should get into the BBS game. Wave of the future?

“Apple II on a BBS in 2014!”
YouTube Video

Christopher E. Hill
Survival And Prosperity (


Sobol, Rosemary Regina. “$500K, $950K bails set for 2 accused of robbery, stabbing near Oak Street Beach.” Chicago Tribune. 26 Oct. 2015. ( 26 Oct. 2015.

Pierog, Karen. “UPDATE 2-Illinois bond rating cut again over budget impasse.” Reuters. 22 Oct. 2015. ( 26 Oct. 2015.

Sanger, David E. and Schmitt, Eric. “Russian Ships Near Data Cables Are Too Close for U.S. Comfort.” The New York Times. 25 Oct. 2015. ( 26 Oct. 2015.

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Peter Schiff: ‘The Whole U.S. Economy Is One Gigantic Bubble At This Point’

Back to finance and investing matters. In 2012, “crash prophet” Peter Schiff predicted Ben Bernanke and the Federal Reserve would attempt to inflate another asset bubble to revive the U.S. economy.

The CEO and chief global strategist of Euro Pacific Capital underestimated how successful they would be- in terms of inflating multiple bubbles.

Schiff, who correctly called the housing bust and 2008 economic crisis, was on the phone with Free Talk Live discussing the student loan bubble last Sunday when he told listeners:

I think we have a much bigger bubble. The bubble in student loans is a small part of what’s actually going on. The government has managed to reflate the housing bubble, the stock market bubble, but we have a bond market bubble, a dollar bubble, a consumer loan bubble. The whole U.S. economy is one gigantic bubble at this point. That’s all we’ve got left. And that’s why interest rates have been at zero percent for almost seven years because the Fed is desperately trying to keep the air in these bubbles. It doesn’t want them to deflate. It doesn’t want to pop them. That’s why I don’t believe they’re actually planning on raising interest rates. I think they recognize that they cannot prick this bubble because it will be much worse than the bursting of the housing bubble or the dot-com bubble. But there is no avoiding this. The government has created this disaster and there’s no way around it. They’re just trying whatever they can to delay the inevitable. But because they’ve succeeded in delaying it, they’ve just made it much, much worse. It’s going to be a lot worse. So people really have to protect themselves from this. More so than I think in past crises…

Owning gold is one way to protect yourself. But people should also diversify. They shouldn’t only have gold. But they should definitely have some gold. But they should also invest internationally.

“The US Economy Is One Giant Bubble”
YouTube Video

Schiff later warned:

So there’s a lot, I think, that’s going to happen to really upend the status quo. And I think a lot people are going to go broke in this next crisis. And if you’re not prepared for it, you could suffer that fate. So I think it’s more important now, even than with the dot-com bubble or the housing bubble because this one is going to have much more profound consequences for typical Americans when it bursts. I think we’re going to see a big loss of value of the dollar, not just internationally and not just for tourists going to Europe. But as Americans try to buy things here in America. Things that they used to be able to afford are going to be completely unaffordable for the vast majority of Americans.

Christopher E. Hill
Survival And Prosperity (

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Analysts: Massive Chicago Property Tax Hike Just The Beginning

“And if Chicagoans think this major tax increase is some sort of one-off, well, I know of a certain bridge for sale out east.”

Survival And Prosperity, September 3, 2015

Chicago readers of this blog have been warned the last couple of years that the City of Chicago’s poor financial health means a sustained hunt for much more revenue (new and higher fees/fines/taxes) for the foreseeable future.

And Tuesday, this grim-yet-likely scenario was the focus of a City Club of Chicago luncheon.

Fran Spielman reported on the Chicago Sun-Times website yesterday afternoon:

A $500 million property tax increase will not be enough to solve Chicago’s $30 billion pension crisis or rid the city of the junk bond rating that has saddled the taxpayers with tens of millions in penalties and borrowing costs, analysts concluded Tuesday.

Civic Federation President Laurence Msall and Matt Fabian, a partner at Municipal Market Analytics, offered the grim assessment during a lively panel discussion on city finances before a packed house at a City Club of Chicago luncheon…

Fabian’s conclusion was that, as tough as it will be for homeowners and their aldermen to swallow a $500 million property tax increase, Mayor Rahm Emanuel and the City Council need to bite the bullet even harder

Msall agreed that a $500 million increase that would be Chicago’s “largest in modern history” is “not the full answer and it’s not going to be enough because we’ve dug the hole so deeply” by underfunding pensions and granting benefits that taxpayers cannot afford.

“We are going to have raise taxes very significantly just to pay the interest on the debt we have built up and it’s not going to be enough to save the city of Chicago,” he said…

(Editor’s note: Bold added for emphasis)

Still interested in that bridge?

Head on over to the Chicago Sun-Times website here to read- no, digest- what looks to be in store for the “Windy City” in the coming years.

Christopher E. Hill
Survival And Prosperity (

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Jim Rogers: ‘You Should Be Prepared, You Should Be Knowledgeable, And You Should Be Worried’

Well-known investor, author, and financial commentator Jim Rogers recently talked to J.D. Hayworth, the host of the Newsmax TV show Newsmax Prime, about a number of topics, including what he suspects the Federal Reserve will do the next time there’s panic on Wall Street. From the exchange published on the Newsmax website tonight:

What’s going to happen is every time people start calling up and panicking they’re going to do something. I don’t know what they’ll do next. They’ll buy more shares. Or they’ll buy shares, they’ll buy more bonds, they’ll do something. And then we’ll have another big rally. But J.D., that’s going to be the last rally. Maybe they can save the market one more time. But the world is starting to give up on all this artificial money printing. It’s happening in Japan, Europe, Britain, and America. It’s never happened before in recorded history that all the major central banks are printing a lot of money. This is not going to end well, J.D. You should be prepared, you should be knowledgeable, and you should be worried

We’ve had economic slowdowns every four to seven years since the beginning of the Republic. We’re going to have them again. It’s been six years since the last time. So start getting worried. Maybe it’ll be seven, maybe it’ll be eight years this time, but it’s going to come…

(Editor’s note: Bold added for emphasis)

The former investing partner of George Soros went on to address Hayworth’s question regarding “three main things that need to happen to avert economic gloom-and-doom if possible.” You can watch the entire discussion over on the Newsmax website here.

Christopher E. Hill
Survival And Prosperity (

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Must-Read Marc Faber Interview

Regular readers of Survival And Prosperity know on Sundays I try and blog about the latest investment activities/recommendations of the “crash prophets”- Marc Faber, Jeremy Grantham, Jim Rogers, and Peter Schiff. This week, three of the “prophets” are sounding off. First up is Marc Faber. An interview of the Swiss-born investment advisor/money manager was published Friday on the website of MarcoPolis, a Paris-based international online publishing company. Johnnes Maierhofer and Peter Matay conducted one of the most comprehensive interviews of Dr. Faber I’ve ever come across, writing on

In this exclusive interview with Marc Faber covers it all: from commodities and China to the outlook on inflation, the Euro and gold. According to him the global economy is not healing. To the contrary, we might find ourselves back into recession within six months or a year. In that case he expects more money printing by central banks, which eventually could lead to high inflation rates and renewed strength in commodity prices.

On the bright side, he sees great economic potential in Vietnam. Also, the Iraqi stock market has good potential now that a deal with Iran has been reached. While mining stocks are extremely depressed we might see defaults before any meaningful recovery…

Followers of Faber know he’s been a gold bull for years now. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report said this about the precious metal (and other investments of his) during the exchange:

I own gold and it doesn’t worry me that it went down because as I mentioned to you I have this diversification, the bonds in US dollars and the cash in US dollars has been a good investment essentially over the last twelve months. Then I own equities and I own properties in Asia that have been reasonably good investments so the fact that gold is going down doesn’t worry me and I buy every month a little bit but I think on this weakness I will increase the position substantially because I had maybe say 25% in gold but because equities and properties went up, the dollar went up and gold went down, the allocation to gold is no longer 25% but maybe only 10 or 15%.

So then I have to stock it up again. But I would say an individual should definitely own some physical gold…

“Doctor Doom” believes gold confiscation is a possibility, and added later in the discussion:

I think they will take the gold away and go back to some gold standard by revaluing the gold say from now 1000 dollars an oz. to say 10,000 dollars an oz…

A “must-read” interview for Faber followers, which you can access in its entirety on here.

Christopher E. Hill
Survival And Prosperity (

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Judge Rules Chicago’s Pension Reform Legislation Unconstitutional

Here’s the latest on Chicago’s public pension crisis. Hal Dardick and Rick Pearson reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems.

The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services.

The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers. The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations — and are at risk of going broke within 13 years — after many years of low investment returns fueled by recession and inadequate funding.

Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation

(Editor’s note: Bold added for emphasis)

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

And the City’s response to the ruling? Mayor Emanuel’s Press Office countered Friday:

Statement of City of Chicago Corporation Counsel Stephen Patton on SB1922

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there. We continue to strongly believe that the City’s pension reform legislation, unlike the State legislation held unconstitutional this past spring, does not diminish or impair pension benefits, but rather preserves and protects them. This law not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, over time, they will be fully funded and the 61,000 affected City workers and retirees will receive the pensions they were promised.”

As to the City of Chicago’s credit rating possibly getting whacked after the decision? Timothy W. Martin reported on The Wall Street Journal website Friday afternoon:

Moody’s said Friday’s ruling had no effect on Chicago’s bond grade. But rival Standard & Poor’s Ratings Services, which currently has an investment-grade rating for the city, said that “regardless of the ultimate outcome” of Mr. Emanuel’s pension law, it “will likely lower” its Chicago rating in the next six months, unless city leaders chart out a solution to address its pension problems.

(Editor’s note: Bold added for emphasis)

Like I’ve been saying for a couple years now, that proverbial brick wall keeps approaching for Chicago.

Since City Hall can’t get its affairs in order, Chicagoans might want to look at straightening out theirs if they intend to stick around for the long haul.


Dardick, Hal and Pearson, Rick. “Judge finds city’s changes to pension funds unconstitutional.” Chicago Tribune. 24 July 2015. ( 25 July 2015.

Martin, Timothy W. “Chicago’s Pension Overhaul Plan Tossed Out by Judge.” The Wall Street Journal. 24 July 2015. ( 25 July 2015.

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S&P Cuts Chicago’s Credit Rating Twice In Less Than 2 Months

Surprise, surprise. The City of Chicago’s credit rating was lowered yet again.

This time, it’s Standard & Poor’s that did the cutting.

Karen Pierog and Tanvi Mehta reported on the Reuters website last night:

Standard & Poor’s Ratings Services cut Chicago’s credit rating one notch to BBB-plus with a negative outlook on Wednesday, citing the windy city’s nagging structural budget deficit and the lack of a plan to close it.

S&P analyst John Kenward said the U.S.’ third-largest city needs “a credible, public, detailed plan” to deal with budget gaps projected to grow to $588 million in fiscal 2017, largely due to escalating contributions to its police and fire fighter retirement funds.

S&P also warned Chicago’s general obligation bond rating may fall further if a credible plan does not surface within six months…

(Editor’s note: Bold added for emphasis)

According to the S&P website, “BBB” indicates:

Adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

It was less than two months ago that Standard & Poor’s last downgraded the City of Chicago’s credit rating. I blogged on May 17:

Standard & Poor’s joined in on the downgrade parade later in the week. From a press release Friday:

Chicago, IL GO Bond Ratings Lowered To #A-# From #A+#, Placed On CreditWatch Due To Short-Term Liquidity Pressure
CHICAGO–15 May–Standard & Poor’s

CHICAGO (Standard & Poor’s) May 14, 2015–Standard & Poor’s Ratings Services lowered its rating to ‘A-‘ from ‘A+’ on the city of Chicago’s outstanding general obligation (GO) bonds, and placed the ratings on CreditWatch with negative implications…

Stay tuned…

Christopher E. Hill
Survival And Prosperity (


Mehta, Tanvi and Pierog, Karen. “UPDATE 1-S&P downgrades Chicago’s GO bond rating to BBB-plus.” Reuters. 8 July 2015. ( 9 July 2015.

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Chicago’s Credit Rating Lowered By Fitch Ratings, Moody’s, Standard & Poor’s

The three major U.S. credit rating agencies have downgraded the City of Chicago this past week. Last Tuesday, Moody’s announced on its website:

Rating Action: Moody’s downgrades Chicago, IL to Ba1, affecting $8.9B of GO, sales, and motor fuel tax debt; outlook negative

Also downgrades senior and second lien water bonds to Baa1 and Baa2 and downgrades senior and second lien sewer bonds to Baa2 and Baa3, affecting $3.8B; outlook negative

New York, May 12, 2015 — Moody’s Investors Service has downgraded to Ba1 from Baa2 the rating on the City of Chicago, IL’s $8.1 billion of outstanding general obligation (GO) debt; $542 million of outstanding sales tax revenue debt; and $268 million of outstanding and authorized motor fuel tax revenue debt…

In case readers didn’t notice, that was a two-notch downgrade from “Baa2” to “Ba1.”

According to Moody’s “US Municipal Ratings,” “Ba” indicates “Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.”

In other words, “junk.”

A day later, Moody’s was at it again, lowering the Chicago Board of Education’s credit rating. From their site on May 13:

Moody’s downgrades Chicago Board of Education, IL’s GO to Ba3; outlook negative

Ba3 rating applies to $6.2 billion of GO debt

New York, May 13, 2015 — Moody’s Investors Service has downgraded to Ba3 from Baa3 the rating on the Chicago Board of Education, IL’s $6.2 billion of outstanding general obligation (GO) debt. The Chicago Board of Education is the primary debt issuer for the Chicago Public Schools (CPS) (the district). The outlook remains negative…

A three-notch downgrade. And even worse “junk.”

Standard & Poor’s joined in on the downgrade parade later in the week. From a press release Friday:

Chicago, IL GO Bond Ratings Lowered To #A-# From #A+#, Placed On CreditWatch Due To Short-Term Liquidity Pressure

CHICAGO–15 May–Standard & Poor’s

CHICAGO (Standard & Poor’s) May 14, 2015–Standard & Poor’s Ratings Services lowered its rating to ‘A-‘ from ‘A+’ on the city of Chicago’s outstanding general obligation (GO) bonds, and placed the ratings on CreditWatch with negative implications…

According to the S&P website, “A” indicates:

Somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

Fitch Ratings was the last of the three major credit rating agencies to the party, releasing the following Friday on their website:

Fitch Downgrades Chicago, IL’s ULTGOs and Sales Tax Bonds to ‘BBB+’; Ratings on Negative Watch

Fitch Ratings-New York-15 May 2015: Fitch Ratings has downgraded the ratings on the following Chicago, Illinois obligations:

–$8.1 billion unlimited tax GO bonds to ‘BBB+’ from ‘A-‘;
–$546.5 million (accreted value) sales tax bonds to ‘BBB+’ from ‘A-‘;
–$200 million commercial paper notes, 2002 program series A (tax exempt) and B (taxable) bank bond ratings to ‘BBB’ from ‘BBB+’.

At the same time, the ratings have been placed on Negative Watch…

According to the Fitch Ratings website, “BBB” indicates:

Expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

You can read the May 12 Moody’s press release on their website here. The May 13 Moody’s release is here. Standard & Poor’s press release can be found here (on and the Fitch Ratings release on their website here.

Christopher E. Hill
Survival And Prosperity (

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Chicago To Be Run By Emergency Financial Control Board Within 2 Years?

Last Wednesday, I reminded Survival And Prosperity readers (local ones in particular) that Chicago- upon reelecting Rahm Emanuel as Mayor- remains in serious financial trouble. From that post:

As Rahm Emanuel enters his second term as Mayor of Chicago, I feel that proverbial brick wall is still fast-approaching.

Perhaps the best Chicagoans can hope for at this point is a controlled crash landing.

I know one thing. If I were still living in the city, I’d be preparing for the coming carnage…

Some readers might feel I was being a little too “sensational” with that statement. Therefore, I’d like to offer up the following for your consideration. Reuters’ Megan Davies and Karen Pierog reported on April 8:

Chicago has not seen the population losses Detroit did and its business and commercial real estate markets remain healthy, but its current circumstances are more dire than any other major American city today, with aggregate debt of $21.4 billion, up 60 percent since 2004.

Although Chicago’s situation isn’t bad enough yet to warrant a bankruptcy filing, that threat is out there if it fails to tackle its problems.

“People say Chicago’s not Detroit,” said Tom Metzold, a senior portfolio advisor at investment manager Eaton Vance. “Not right now. Chicago is Detroit ten years from now. I don’t care how economically strong your economy is. They don’t have a printing press. You can only tax so much.”

Metzold estimated the odds of a Chapter 9 bankruptcy in the next five years are “virtually zero” but said in the next 10 years that could rise to 25 percent if it fails to act

(Editor’s note: Bold added for emphasis)

In case readers are wondering, Metzold’s s “Street cred” includes serving as VP and Co-Director of Municipal Investments at Eaton Vance (one of the oldest investment management firms in the U.S.- established 1924), and as its Portfolio Manager since 1991.

Not as “optimistic” about Chicago’s financial future is Joe Mysak, Editor of Bloomberg Brief. He warned in an April 8 commentary:

I’m not a betting man. If I were, I’d bet that Chicago is going to be run by an Emergency Financial Control Board, or something like it, within two years, the same as New York City back in 1975 (and until 1986)…

(Editor’s note: Bold added for emphasis)

Mysak, who’s been covering the municipal bond market since 1981, pointed out the city’s abysmal Moody’s credit rating (“one step from the basement of investment grade”) and wrote:

So a cut to junk may well be in the cards, and with it diminished and eventually lack of access to capital. Chicago has already creatively used, and some would say abused, the municipal market to subsidize city operations…

When the banks no longer want to lend to Chicago is presumably when the state of Illinois would come in, offering cash, loan guarantees, intercession with the federal government and whatever else the city needs in exchange for external management via an Emergency Financial Control Board…

(Editor’s note: Bold added for emphasis)

The author of the Encyclopedia of Municipal Bonds signed-off with:

Two years. That’s how long I give the city of Chicago. Good luck, Rahm.

Good luck Chicago…

Christopher E. Hill
Survival And Prosperity (


Davies, Megan and Pierog, Karen. “Chicago Mayor Rahm Emanuel confronts fiscal nightmare as he begins second term.” Reuters. 8 Apr. 2015. ( 12 Apr. 2015.

Mysak, Joe. “Next Stop for Chicago: Emergency Financial Control Board.” Bloomberg Brief. 8 Apr. 2015. ( 12 Apr. 2015.

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Survival And Prosperity
Christopher E. Hill, Editor
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