Central Perk: Mish's Global Economic Trend Analysis

joi, 27 septembrie 2012

Mish's Global Economic Trend Analysis

California Hit Parade Rolls On: Atwater Scrambles to Avoid bankruptcy
Real Per Capital "Core" Durable Goods Orders
Durable Goods Orders Ex-Transportation "Unexpectedly" Drop, Down Third Month, July Revised Lower; GDP +1.3% Second Quarter; June Recession Call Looking More Likely
Reader from Netherlands Says Last Election Not as Pro-Euro as Media Portrays; 81 in 150 Against More Bailouts

California Hit Parade Rolls On: Atwater Scrambles to Avoid bankruptcy

Posted: 27 Sep 2012 08:04 PM PDT

The California hit parade keeps on rolling as yet Another California city scrambles to avoid bankruptcy.

Atwater, a city of roughly 28,000 in California's Central Valley, may declare a fiscal emergency as soon as next week, but it is trying to avoid becoming the fourth California city to file for municipal bankruptcy this year, its mayor said.

Under California law, a local government must either declare a "fiscal emergency" or go through a 60-to-90 day confidential negotiation process with its creditors before it files for municipal bankruptcy. Since late June, three Golden State cities-Stockton, San Bernardino and Mammoth Lakes-have filed for bankruptcy protection.

"We are planning to stay current on our ... bonds," said Mayor Carol Joan Faul in a telephone interview with Dow Jones Newswires. "We are hoping to avoid" bankruptcy, she said, "but as far as I'm concerned, we may have to declare a fiscal emergency" on Oct. 3.

According to its fiscal 2011 financial statement, Atwater had roughly $95 million in outstanding debt, a mixture of bonds related to its sewer as well its now-defunct redevelopment agency. Ms. Faul said Atwater intends to make an upcoming bond payment of $2 million on its sewer bonds.

Atwater is Burnt Toast

Once things reach this stage, one does not even need to look at the details because it's a done deal.

Yet, I did look further and as expected, public unions appear to be smack in the middle of things as noted in a Reuters article on Potential Atwater Bankruptcy.

Atwater's economy is "pretty bleak" and starving the city of so much revenue its leaders must consider a drastic overhaul of the services, said Jim Price, vice president of operations at Gemini Flight Support at Atwater's Castle Airport.

"Police and fire, you keep them - and everything else is going to have to be privatized," Price said. "I just don't know how they can do it any other way."

RAISING REVENUE, CUTTING COSTS

Atwater's officials are just beginning to consider their options, Faul said, noting the city must consider raising 20-year-old rates for water services and 10-year-old rates for garbage services while clamping down on costs.

Union representative Nancy Vinson said she expects the city will seek concessions from its roughly 30 non-safety employees, who gave up 10 percent of pay last year through furloughs.

"They could ask for a wage reduction, they could ask for a different contribution to the retirement system, they could ask for a higher health benefit contribution," Vinson said. "We have not been unwilling to talk to them."

Atwater must also seek concessions from its roughly 50 safety and management-level employees, Vinson said, adding she is concerned city officials are moving too fast on a plan for declaring a fiscal emergency.

Atwater's Choice: Bankruptcy Today or Bankruptcy Later

Atwater can enter bankruptcy today, saving taxpayers a lot of money, or it can waste taxpayer money for years, scrambling to make bond payments and then default.

Either way, Atwater is burnt toast. Attempts to make bond payments is a fool's mission.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Real Per Capital "Core" Durable Goods Orders

Posted: 27 Sep 2012 03:04 PM PDT

Courtesy of Doug Short, here is an excellent pair of charts on Real Per Capital "Core" Durable Goods Orders

Core Durable Goods

click on either chart for sharper image

Core Durable Goods Percent Decline From Peak

Doug Short does excellent work. Click on the top link to see additional charts.

I have little to add other than this is how recessions start, an opinion expressed earlier in Durable Goods Orders Ex-Transportation "Unexpectedly" Drop, Down Third Month, July Revised Lower; GDP +1.3% Second Quarter; June Recession Call Looking More Likely.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Durable Goods Orders Ex-Transportation "Unexpectedly" Drop, Down Third Month, July Revised Lower; GDP +1.3% Second Quarter; June Recession Call Looking More Likely

Posted: 27 Sep 2012 08:07 AM PDT

"Unexpected" weakness and downward revisions are hallmarks of the beginnings of recessions. And so it it with durable goods. Economists had forecast a gain, instead there was a 1.6% drop. Moreover July was revised lower as well.

Bloomberg reports Orders for U.S. Goods Excluding Transportation Unexpectedly Drop

Orders for goods meant to last at least three years, excluding volatile demand for such things as airplanes and automobiles, fell 1.6 percent last month after a greater-than- previously estimated 1.3 percent decrease in July, the Commerce Department reported today in Washington. Total bookings plunged 13 percent, the most since January 2009, paced by a decline in demand for civilian aircraft.

"There was broad-based weakness," said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. "What this now means is that capital expenditures are now going to probably fall for the first time since the recovery started. It remains a terribly challenging backdrop in the U.S."

The median forecast of 53 economists surveyed by Bloomberg projected a 0.2 percent gain in ex-transportation orders. The Commerce Department revised July data down from a previously reported 0.6 percent decrease.
Survey Results

The decline in total orders was more than twice as large as the 5 percent drop median estimate in the Bloomberg survey.

Other reports today showed the economy grew less than previously forecast in the second quarter and claims for jobless benefits dropped last week to a two-month low.

The world's largest economy expanded at a 1.3 percent pace in the second quarter after growing at a 2 percent rate from January through March. The revision, the third estimate for the quarter, compared with a prior estimate of 1.7 percent and the Bloomberg survey's 1.7 percent median forecast.

The reduction in growth reflected slower gains in consumer spending and farm inventories, the latter caused by the drought.

Civilian aircraft bookings, which are often volatile, slumped 102 percent in August after surging 51 percent the prior month, today's Commerce Department report showed. The size of the decrease may reflect some cancellations in prior months. Boeing Co. (BA), the largest U.S. aircraft maker, received an order for a single plane, down from 260 the month before.

Orders for non-defense capital equipment excluding airplanes, a proxy for future business investment in items such as computers, engines and communications equipment, rose 1.1 percent after decreases of 5.2 percent in July and 2.7 percent in June, the Commerce Department data showed.

Shipments of those goods, used in calculating gross domestic product, fell 0.9 percent after decreasing 1.1 percent in July.
Caterpillar Forecast

Exports dropped 1 percent in July as American companies shipped fewer automobiles, metals and consumer goods abroad, according to Commerce Department figures issued earlier this month.

Recession Call

I am very comfortable with pegging of the start of the recession in June and I expect more downward revisions in GDP and employment are on the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Reader from Netherlands Says Last Election Not as Pro-Euro as Media Portrays; 81 in 150 Against More Bailouts

Posted: 27 Sep 2012 07:08 AM PDT

European nannycrats breathed a sigh of relief following the re-election of Dutch Liberal Prime Minister Mark Rutte on September 12.

The results "will likely inject a little more confidence into parts of the European political elite" as they step up efforts to contain the debt crisis, David Mackie, chief European economist at JPMorgan Chase & Co. in London, wrote today. "The risks of the Netherlands changing policy direction in a fundamental way appear to have receded, doubtless to private sighs of relief in Berlin and elsewhere."

Really?

Reader Bert who lives in the Netherlands analyzed the actual stated positions of every member of the Dutch parliament and came up with this analysis. Bert writes ...

Hello Mish

As you can see in the table below, according to statements made by political party leaders in the past few weeks, 81 of the 150 seats in the Dutch parliament will vote against any future bailout of Greece. The same thing is likely should the ESM need additional funds for other countries.

Here is my interpretation.

VVD ( classical liberal / conservative)
Party leader and current prime minister made several time's a clear statement: "note a dime to Greece anymore" and got support from Wolfgang Schäubele (German finance minister) for that statement.

PVV (freedom party)
Is totally against the Euro and even the EU in its current form

SP (socialistic / maoistic party)
Totally against Euro bail-outs and the Brussels dictates)

CrU (centre/left with a Christian inspiration)
Tried in the parliament to keep the Netherlands out of the ESM

SGP (a strong biblical inspired party)
Totally against "shared responsibilities" in the socialistic way

PvdD (party for the well-being of animals especially critical to the mass bio-industry) Very Europe critical, a statement from them: "Europe is in its present form not democratic"

There was a huge move from voters from the very EU skeptical PVV to the VVD (a pro Europe party), but this was simply because the PVV blew up the last centre/right government. Voters did not liked that, and it had nothing to do with being pro-Europe.

Close analysis of the true positions of the elected parliament tells the real story: the Netherlands are becoming more and more euro-skeptical and EU critical, not the opposite. Thus, media interpretation that the Netherlands voted for pro-euro is totally wrong.

All the best

Bert