duminică, 3 iunie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Greek Poling Ban In Effect Until Election; Latest Results Show SYRIZA Support at 31.5 percent, Well in the Lead Over New Democracy; Why I expect Syriza to Win

Posted: 03 Jun 2012 05:05 PM PDT

The preponderance of recent Greek polls show a tight election. However, the latest Public Issue Survey stands out, and I happen to think that is the most accurate one.

Please consider Going into final stretch, SYRIZA builds poll lead
In the last opinion poll to be published by Kathimerini before the June 17 elections, leftist SYRIZA maintains a clear lead over New Democracy, although short of enough support for a clear parliamentary majority.

According to the Public Issue survey, SYRIZA garners 31.5 percent of the vote, 1.5 more than just a week ago. Support for New Democracy is largely unchanged at 25.5. PASOK has lost 2 percent and falls to 13.5. It is followed by Democratic Left (DIMAR) on 7.5 percent and the weakening Independent Greeks on 5.5. The Communist Party (KKE) also has 5.5 percent, while the neo-Nazi Chrysi Avgi (Golden Dawn) has fallen to 4.5 percent. The liberal alliance of Dimiourgia Xana (Recreate Greece) and Drasi attracts 2.5 percent.

In terms of parliamentary seats, this translates into 134 for SYRIZA, 68 for New Democracy, 36 for PASOK, 20 for DIMAR, 15 for KKE, 15 for Independent Greeks and 12 for Chrysi Avgi. Most would fall slightly if the liberals reach the 3 percent parliamentary threshold.

Most Greeks, however, are not convinced that SYRIZA will win. The poll indicates that 58 percent believes ND will come first and only 34 percent see the leftists triumphing.

Speaking to reporters on Thursday, IMF spokesman Gerry Rice said that the Washington-based fund is willing to listen to "any new ideas" that the next Greek government has with respect to how the fiscal targets agreed as part of the bailout can be achieved more effectively.

Rice also said IMF managing director, Christine Lagarde, regretted recent remarks concerning tax evasion by Greeks and comparing their suffering to children in Niger. "She regrets her remarks were misunderstood and caused offense, that was not her intention."
What's Lagarde's Game?

In Harsh Language from Lagarde: "IMF Has No Intention of Softening Terms"; From Head of Deutsche Bank: "Greece is a Failed Corrupt State" I expressed the viewpoint that remarks by Lagarde and Deutsche Bank were "purposefully Inflammatory".

I see no reason to change my mind about the statements made by Deutsche Bank. Is the apology by Lagarde an admission of a huge gaffe? Possibly but take a look at the statement once again.

In an uncompromising interview with the Guardian, Lagarde made it clear that the IMF has no intention of softening the terms of the country's austerity package.
Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."

"I think they should also help themselves collectively." Asked how, she replies: "By all paying their tax."
Those statements are clearly quite inflammatory. Regardless of her intention, I strongly believe those statements will swing votes to Syriza.

Numbers Add Up for Syriza? 

Kathimerini has additional details on the latest polls in Are the numbers starting to add up for SYRIZA?
For all the fluctuations polls showed in the support for SYRIZA and ND, PASOK has remained anchored to its feeble showing on May 6. The Socialists have hardly moved from around 13 percent and seem unable to convince their former supporters to return to the fold. In contrast, Democratic Left shows a modest rise, but this has not come at the expense of SYRIZA. There has been a drastic fall in the number of people intending to vote for parties that won't get into Parliament. If SYRIZA and Democratic Left are drawing support from this pool and not from each other, then Tsipras's party doesn't face a strong threat from the left side of the political spectrum.

The Public Issue poll indicates that SYRIZA is fishing support from an even larger tank. Over the last few months, a growing proportion of Greeks has positioned itself on the left wing of Greek politics. According to the latest survey, half of those questioned said they identified with the left. This was up from 39 percent just over a month earlier. Those identifying with the right, however, are at 28 percent, which has remained virtually unchanged for the last six weeks.

This presents a serious problem for New Democracy. These numbers suggest its potential appeal has a much lower ceiling than SYRIZA and that it has almost reached it. The conservatives have tried to pull out all the stops to build on the slim lead of 2 percent they had over the leftists on May 6. This included welcoming back Dora Bakoyannis, who suspended the operation of her Democratic Alliance party, and several members of the Popular Orthodox Rally (LAOS) and Independent Greeks, all of which had been a drain on ND's support. However, now that's been done, ND leader Antonis Samaras has nowhere else to turn to generate support. He's brought in the reinforcements but still seems outnumbered by Tsipras's amassing troops.

The last vestige of hope for Samaras has been to polarize the campaign, to turn it into an all-out battle between the responsible conservatives who would keep Greece on an even keel and in the euro and the reckless leftists who dream impossible schemes that would ensure the return of the drachma and deep misery. So far, the euro-vs-drachma dilemma has had only limited appeal and time is running out for Samaras to state his case convincingly.

The presentation of his party's economic program on Thursday lacked the pomp and circumstance of previous addresses at Zappeio Hall but, more crucially, seemed to carry little weight. Media interest was scant and the ideas presented were tired. It had the air of an inconsequential conference, where everyone was staring at the clock for the last speaker of the day to finish. Compare this with the heightened expectation for Tsipras's address on Friday, and the SYRIZA leader seemed like the guy with all the momentum. Brighter and fresher, he even got his audience of their seats a couple of times. Maybe the body language and aura meant very little but one imagines the conservatives would have gladly swapped places with the leftists at this stage of the campaign.

One encouraging sign for the conservatives could be that almost twice as many Greeks think that ND will win the elections as those who believe SYRIZA will come first. The leftists want to break with the past but they have to conquer it first by making people believe a SYRIZA-led government is possible and viable. It may be the only thing left standing between them and what until recently was an election result nobody could have predicted.
New York Times Has Different Results

The New York Times reports matters much differently in UPDATE: Greek Conservatives Lead In Three Final Polls Before Vote
Greece's conservative New Democracy Party led the radical left Syriza Party in three polls released Friday, the last to be published before crucial June 17 elections that are widely seen as a de facto referendum on the country's future inside the euro zone.

According to a survey of voter intentions for the privately owned ANT1 channel released late Friday, New Democracy had a razor-thin 0.7 percentage point lead over Syriza, with 22.7% favoring the conservatives and 22% favoring the radical leftists.

A survey released earlier Friday in the newspaper Ta Nea showed 26.1% of respondents intend to vote for New Democracy, up from 25.8% in the previous poll just over a week ago, versus 23.6% who said they would vote for Syriza. The poll, conducted by Kapa Research between May 29-31, showed an increase in undecided voters, with those yet to make a final decision rising to 14% from 10.8%.

The Socialist party, Pasok come in third place, with 9.9%. The survey showed the Communists, Independent Greeks, Democratic Left and the ultra-nationalist Golden Dawn all set to gain more than the 3% support required to return lawmakers to parliament.

Another poll published in the newspaper Eleftheros Typos also showed New Democracy ahead, backed by 26.5% of respondents versus 24.2% who supported Syriza.

The three polls confirm a broad trend shown by more than half-a-dozen similar surveys in the last week that give the conservatives a slight advantage. But in each poll the difference separating the two parties is less than three percentage points and within the statistical margin of error. That suggests the race remains too close to call.

In last month's elections, Syriza was catapulted from a small fringe party with about 5% of the vote into a surprise second-place finisher.

A fourth survey published Friday in the newspaper Kathimerini adjusts the results for undecided voters. It shows Syriza ahead, gathering 31.5% of the vote versus 25.5% for New Democracy.
Throw the Bums Out

European voters have an overwhelming tendency to throw the bums out.

  • Nicolas Sarkozy a centrist went down in flames to Socialist Hollande in the French presidetial election. 
  • Socialists were thrown out en masse in the last elections in Spain. 
  • In spite of German chancellor Angela Merkel's popularity, her party, the Christian Democratic Union, has been trounced in recent election in Germany.


Expect Syriza to Win

Take the tendency to blame the party in power along with the fact that New Democracy and Pasok have been ruling Greece for years, then add in the exceptionally inflammatory remarks by Lagarde, and one should expect Syriza to be in the lead.

I rate Syriza a 2-1 favorite to win the election with a similar chance of actually forming a coalition government if they do.

If so, Greece will default on payments to the Troika, and funds to Greece will be shut off.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Another Meaningless Nannycrat Rumor: Europe Mulls "Secret Plan for New Europe"

Posted: 03 Jun 2012 11:45 AM PDT

A story is making the rounds that suggests leaders are going to get together and hammer out a "fiscal union".

The story appears to have originated on the Welt Online, a German tabloid. The article mentions a Secret Plan for a New Europe.
EU institutions should design the master plan

At their informal meeting on 23 May had given the leaders a work order to the EU Council President Herman Van Rompuy, Commission President Jose Manuel Barroso, on the Euro Group President Jean-Claude Juncker and the head of the European Central Bank (ECB), Mario Draghi.

The four are to design a roadmap "for the EU to a new level" can be lifted. "Three or four conversations," President of the round was planned in the coming weeks, there will be conference calls, the institutions were in close contact.

Van Rompuy will present key elements of the plan at the summit in late June. They should be included in the final declaration. By the end of the year, the Heads of State and Government of the "roadmap" and decide then officially in black and white. It could be a revolutionary document.
More Holes Than Swiss Cheese

One look at the nannycrat participants led by Van Rompuy and Jean-Claude "lie when it's serious" Juncker, is all you need to do to know the plan has far more holes than Swiss Lorraine cheese.

I would have thought that no one could possibly take this seriously, even if such a meeting were agreed to.

Note that the Financial Times, New York Times, and Wall Street Journal did not bite on this story, but Libre Mercado came out with its version: The German 'Die Welt' reveals a "Secret Plan for a New Europe".

El Economista says EU, ECB and Eurogroup working on a comprehensive plan for a new Europe.

Rumor Spreads

To show you how rumors spread, Reuters has picked up on this silly story in Europe mulls major step towards "fiscal union"
After falling short with her "fiscal compact" on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice.

The goal is for EU leaders to agree to develop a road map to "fiscal union" at a June 28-29 EU summit, where top European officials including European Council President Herman Van Rompuy will present a set of initial proposals.

European countries would then put the meat on the bones of the plan in the second half of 2012, several European sources have told Reuters, including a timetable for overhauling EU treaties, a step Berlin sees as vital for setting closer integration in stone.
Nothing But Hot Air

The "meat on the bones will come in the second half of 2012". The plan is "so secret" that no one has any details now other than an alleged proposal to agree to agree sometime down the road.

This is what it boils down to: The secret plan is to develop a secret plan at the already scheduled June summit.  Yeah right.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Wells Fargo Seizes Stockton California City Hall, Parking Garages; City Prepares Bankruptcy Contingency Plans; Bondholder Mediation Underway

Posted: 03 Jun 2012 08:16 AM PDT

Add Stockton, California (population 292,000) to the list of cities bankrupted because of bad management and over-generous public union wages and benefits.

Please consider New Stockton City Hall building seized by Wells Fargo; city preps bankruptcy contingency plan
The Stockton City Council announced Wednesday that they will look at bankruptcy contingency plans after Wells Fargo seized the new city hall building.

The city paid $35 million to buy the 8-story building, but was not able to move in because of its money problems, and recently stopped making debt payments all together. This is the fourth building that was repossessed by Wells Fargo; the bank seized three city parking garages for the same reason.

At the June 5 Stockton City Council meeting, members will look at a contingency plan if mediation between the city and creditors failed, city spokesperson Connie Cochran said. For the past two months, the city, under AB 506, has been in a mediation process with creditors to come up with a payment plan in order to avoid bankruptcy.


Incompetent City Management and Unions to Blame

The firefighters' union put together a list of 10 wasteful things the city has done wrong totally about $116 million, including $48 million for the new city hall.

$417 Million Healthcare Liability

The union does not tell you that Stockton has a $417 million liability for its "pay-as-you go retiree health care system"

And that's just healthcare. What about pensions and untenable salaries?

So who is more to blame here?

Bondholder Mediation

Mediation with bondholders and unions is now underway, the outcome of which will determine whether or not the city files for bankruptcy.

Recordnet reports Wealth of interest in Stockton mediation
Wall Street lawyers are likely taking the hardest line in mediation with Stockton, waiting for the closed-door talks to play out with their arms folded, but seated at the table.

"It's one thing to be forced by a court to give up your rights," said Matt Fabian, a bond analyst at Municipal Market Advisers in Connecticut. "It's another thing to give them up willingly."

Stockton entered mediation March 27, and it agreed with its creditors and labor groups to continue until June 25. Mediation is the last-ditch effort to avoid bankruptcy.

The conversation in mediation starts with Stockton's general fund deficit of $26 million, a fourth multimillion dollar shortfall year. The city must chip away at that figure with an eye on restructuring its obligations and forecasted deficits for years to come.

These are Stockton's major obligations next year, absent any concessions:

Bondholders will get $13 million, an amount that has increased 600 percent in four years. Payments have ballooned just like homeowners who took adjustable-rate mortgages;

Stockton must fund its pay-as-you go retiree health care system at $9 million annually, something City Manager Bob Deis has compared to a Ponzi scheme. To begin funding this $417 million liability, the city would have to put aside $18 million next year;

A few things are known about mediation. There are 18 parties involved, and they are represented by 100 attorneys and accountants combing Stockton's finances.

They are the city's labor groups, retired city employees, CalPERS, Wall Street investors, Wells Fargo Bank and insurers responsible for paying bond holders if and when Stockton defaults.
My Take?

The best course of action for the city is to seek bankruptcy. The city is indeed clearly bankrupt so there is no point in delaying. Delays will only serve the bondholders at taxpayer expense.

In bankruptcy court, the city should win the right to unilaterally modify the pension and healthcare agreements made with public union workers as well as terminate all collective bargaining rights. 50% or even 75% haircuts on pension and healthcare plans may be necessary. So be it.

Bondholders must also take a hit. I suggest 100% on the new city hall (minus whatever it can recover from the seized building). Wells Fargo deserves to be punished for being stupid enough to lend Stockton money.

Inquirung minds should also consider City Council of North Las Vegas Unanimously Suspends Collectively Bargaining of Public Unions, Citing Emergency Statutes.

If Stockton files bankruptcy it will be the largest city in the US to seek  Chapter 9 bankruptcy protection. Don't worry, that record will fall soon enough. LA and Oakland cannot be that far behind.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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