Mish's Global Economic Trend Analysis

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• Stockton Doomed to Another Bankruptcy; Getting Out of bankruptcy the Worst Possible Way
• "Dirty Jobs" Mike Rowe on the High Cost of College; Get Ready to Get Dirty; What's Wrong With the College Model?
• Italy's "Pitchfork Protests" Spread to Rome; Interior Minister Warns of "Drift Into Rebellion"
• Does the US Have Enough Military Bases?

Stockton Doomed to Another Bankruptcy; Getting Out of bankruptcy the Worst Possible Way Posted: 13 Dec 2013 07:21 PM PST Heading into bankruptcy Stockton, California had about $147 million in unfunded pension obligations and about $250 million in debt from various bond issues. The city could have and should have shed some of those pension obligations and made changes in various pension agreements, but it didn't. It did shed bond debt for one cent on the dollar, subject to lawsuits. Stockton Doomed to Another "Stigma of Bankruptcy" The New York Times reports Stockton Return to Solvency, With Pension Problem Unsolved Battered by a collapse in real estate prices, a spike in pension and retiree health care costs, and unmanageable debt, this struggling city in the Central Valley has labored for months to find a way out of Chapter 9. Now having renegotiated its debt with most creditors, cobbled together layoffs and service cuts and raised the sales tax to 9 percent from 8.25 percent, Stockton is nearly ready to leave court protection. But what Stockton, along with pretty much every other city in California that has gone into bankruptcy in recent years, has not done is address the skyrocketing public pensions that are at the heart of many of these cases. "No city wants to take on the state pension system by itself," said Stockton's new mayor, Anthony Silva, referring to the California Public Employees' Retirement System, or Calpers. "Every city thinks some other city will take care of it." "They wanted to get out of bankruptcy in the worst possible way, and that's just what they did," said Dean Andal of the San Joaquin County Taxpayers Association, which fought the sales-tax increase. "If they go ahead and hire those new police officers, the city will be back in insolvency in four years." City officials insist their plan will work. "We got the tax, and thank God it passed," Councilman Holman said. "I have confidence that the numbers line up." Nor does the Detroit ruling this week make Stockton want to revisit pension reductions. Connie Cochran, a city spokeswoman, said that city workers had already seen their pay and retiree health benefits cut. In addition, she said, Calpers told the city that its only option was to pay a $970 million termination fee to leave the system, and Stockton could not afford it. Mayor Silva said the city's plan would help it out of bankruptcy sometime late next spring, if all goes well, after the judge hearing the case has time to rule on its fairness and viability and negotiations can be completed with one final bondholding creditor. "We will lose the stigma of bankruptcy, and it will buy us time," he said. Getting Out of bankruptcy the Worst Possible Way I am hoping the judge tells Stockton its plan is not viable (for the simple reason it isn't viable). Raising taxes is not the way you deal with preposterous pension obligations. When CalPERS  told the city "the only option was to pay a $970 million termination fee to leave the system" the city could have and should have spit in their face (not literally of course). The polite way of doing that would have been a balanced blend of pension haircuts and bond haircuts. Instead, by putting 100% of the burden on bondholders, the city virtually ensured inability to issue further bonds at a reasonable interest rate. Moreover, the city punished taxpayers, and did nothing to fix untenable pension obligations. Stockton is doomed unless the bankruptcy judge handing the case sends Stockton back to the drawing board. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

"Dirty Jobs" Mike Rowe on the High Cost of College; Get Ready to Get Dirty; What's Wrong With the College Model? Posted: 13 Dec 2013 12:39 PM PST Mike Rowe, host of the Discovery Channel series Dirty Jobs chimes in on the US education system in an interview with Nick Gillespie on Reason.Com. click on above link if video does not play Rowe: If we are lending money that ostensibly we don't have to kids who have no hope of making it back in order to train them for jobs that clearly don't exist, I might suggest that we've gone around the bend a little bit. Gillespie: We are doing everything we can to push every kid to go to a four-year college. What's wrong with that? Rowe: It's not working. You have a trillion dollars in debt on the student loan side. You have a skills gap, something [interrupted by Gillespie] Gillespie: What do you mean a skills gap? Rowe: Right now you have about 3 million jobs in transportation, commerce, trades, that can't be filled.   Gillespie: Anything from carpentry to electricians, plumbers, Rowe: [interjects] Heating, electric, truck drivers, welders is a big one, jobs that typically parents don't sit down and say to their kids - look if all goes well, this is what you are going to do. Rowe's advice is summed up in the following clip I took from the video. Get Ready to Get Dirty The video is a lengthy 41 minutes but Reason.com provides this synopsis so you can skip to topics that interest you. His bad experience with a high school guidance counselor (3:20) Why he provides scholarships based on work ethic (6:57) The problem with taxpayer-supported college loans (8:40) Why America demonizes dirty jobs (11:32) The happiest day of his life (13:14) Why following your passion is terrible advice (17:05) Why it's so hard to hire good people (21:04) The hidden cost of regulatory compliance (23:16) The problem with Obama's promise to create shovel ready jobs (33:05) Efficiency versus effectiveness (34:17) Life after Dirty Jobs (38:24) Work Smart, Not Hard The 3:20 mark discusses this higher education ad campaign thrust upon Rowe by Mr. Dunbar, high school guidance counselor Picking up at the 7:50 mark ... Gillespie: When did the idea disappear that you should learn a skill that is actually useful or in need? Rowe: That's a good question for a real social anthropologist. My own opinion is there is a kind of inertia that most parents would agree that it exists. And it's  a desire see something better for your kids than you had. The question of course is "what is better?" Is it better, right now today, to have $140,000 in debt but a degree from Georgetown, or is it better to be that kid I described in Butler. It's an excellent interview, please listen to at least a portion of it. My Take At the right price, college may be a good choice, but it's not always a good choice.  Government interference in education has so increased the cost of education, and so many kids are pushed into totally useless degrees, that college is an increasingly poor choice until costs come down.  Points one and two especially hold true for those in programs that qualify a person to do nothing but work as a retail clerk upon graduation. To help bring down education costs, we need more alternative courses, more two-year trade courses, more online courses, reduced administration costs, and termination of defined benefit pension plans for teachers. Simply put, we need more competition and reduced costs at every point in the system. The student loan program is an abysmal failure and should be abolished. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

Italy's "Pitchfork Protests" Spread to Rome; Interior Minister Warns of "Drift Into Rebellion" Posted: 13 Dec 2013 10:11 AM PST Over the past four days "pitchfork protests" have spread to numerous cities, disrupting road and rail travel in protest of the state of the economy. The pitchfork movement started with a loose group of Sicilian farmers concerned about rising taxes and cuts to agricultural state funds, then evolved into a nationwide umbrella grouping of truckers, small businessman, the unemployed, low-paid workers, rightwing extremists and ultras football supporters according to IBTimes. Map of Major Protests Map courtesy of Stratfor. Pitchfork Protests Spread to Rome Reuters reports Italy's 'pitchfork protests,' in fourth day, spread to Rome. Italy's "pitchfork" protests spread to Rome on Thursday when hundreds of students clashed with police and threw firecrackers outside a university where government ministers were attending a conference. Truckers, small businessmen, the unemployed, students and low-paid workers have staged four days of rallies in cities from Turin in the north to Sicily in the south in the name of the "pitchfork" movement, originally a loosely organized group of farmers from Sicily. "There are millions of us and we are growing by the hour. This government has to go," said Danilo Calvani, a farmer who has emerged as one of the leader of the protests. Interior Minister Angelino Alfano told parliament the unrest could "lead to a spiral of rebellion against national and European institutions." The protests are fuelled by falling incomes, unemployment above 12 percent and at a record 41 percent among people below 25, and graft and scandals among politicians widely seen as serving their own rather than the country's interests. The protesters' precise aims remain vague beyond demanding the government be replaced and parliament dissolved. Targets range from tax collection agency Equitalia and high fuel prices to privileged elites and the euro. Mario Borghezio, an outspoken Northern League member of the European Parliament, on Thursday used the protests to attack the euro and European Central Bank chief Mario Draghi. "The wind of revolt that is blowing in Italy today is the direct result of the euro and the wrong choices made by the EU and the ECB," he said during the ECB chief's testimony to the European Parliament. 'Pitchfork' Protests Rattle Italian Government The BBC reports 'Pitchfork' Protests Rattle Italian Government First it was the anti-establishment Five Star Movement, led by charismatic comedian Beppe Grillo, that shook up Italy's political landscape. Now a new populist movement headed by disgruntled farmers and lorry drivers has taken its anti-austerity message to Italy's streets and squares. The past week has seen four days of rallies and protest actions across the country by the Forconi, or "Pitchforks". The name derives from the movement's roots among struggling farmers in Sicily, who in 2011 and 2012 staged strikes and roadblocks to demand more help from the government. The loose-knit grouping has expanded nationwide and has drawn in a variety of groups who have suffered badly as Italy's economic crisis has dragged on. The protesters include road hauliers, small businessmen, low-paid workers, the unemployed and students. Some of the protesters complain of excessive state regulation and are unhappy about austerity-driven tax hikes. Others have denounced capitalism and the euro. All seem to be united in their contempt for Italy's politicians, who are accused of failing to address the country's grave economic problems. 'Drift into rebellion' The Italian government on Thursday expressed its concern and Interior Minister Angelino Alfano warned of the danger of a "drift into rebellion" by the movement. He spoke of the protests drawing in elements bent on violence. Beppe Grillo Urges Police to Join Movement Reuters reports Italy's Grillo urges police to join "pitchfork" protests The head of Italy's anti-establishment 5-Star Movement Beppe Grillo urged police on Tuesday to join protesters as a wave of "pitchfork" protests gave vent to bitter frustration after years of austerity and recession. Grillo, whose movement has no direct connection with the protests, welcomed reports that several police officers took off their riot helmets and expressed sympathy with demonstrators on Monday. "Italians are on your side. Join them. At the next demonstrations, tell your guys to take off their helmets and fraternize with the citizens," he wrote on his popular blog. "It will be an extreme, peaceful and revolutionary signal and Italy will change," he wrote. Though there are no direct ties to Grillo's movement, both tap into the growing anger in many parts of Italy after the worst recession in postwar history. Letta has warned repeatedly that opposition to the government and the EU is growing strongly, fuelled by sacrifices needed to keep public finances in order and which could result in a massive anti-EU vote in next year's European parliamentary elections. Eventually, Will Come a Time When .... I repeat once again my 2011 message Eventually, Will Come a Time When .... Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected. Greece, Finland, Germany, Belgium, and even France are possibilities. All it will take, is for one charismatic person, timing social mood correctly, to say precisely one right thing at exactly the right time. It will happen. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

Does the US Have Enough Military Bases? Posted: 12 Dec 2013 11:32 PM PST Inquiring minds might be interested in the analysis of artist Josh Begley who catalogs every U.S. military base in the world. Here is a representation. Gizmodo comments on the Chilling Geometry of Every US Military Base Seen From Space. The United States military is everywhere. It's so big that it's hard to quantify just how massive it is—any number used to describe it is so large that it defies the understanding of an ordinary human brain. A self-described "data artist," Begley has started an ongoing effort to collect satellite imagery from every U.S. military installation in the world. The initial map, parked at Empire.is, collects all of the data listed in the Department of Defense's 2013 Base Structure Report. The official report doesn't include the military's secret bases, though, so Begley has included others that have been unearthed—and he encourages people to submit information for others that he's missing. The resulting collection is mind-boggling. At the top, there's a zoomable world map with all of the installations plotted. Keep zooming in, and eventually the map will reveal the satellite imagery for each location, assuming it exists. As Begley points out, plenty of sites have been censored from public view. Mapping the United States Military Footprint Please consider Mapping the United States Military Footprint on Google Maps Mania (an unofficial Google Maps blog tracking the websites, mashups and tools being influenced by Google Maps). The United States has well over 700 military bases across the planet with official facilities in at least 37 countries. Empire.is is a map showing the location of United States military installations, not only in the US but around the world. As well as mapping known United States military installations Empire.es also provides aerial imagery of a large number of the bases, sourced from Google and Bing Maps. The data for the military locations is from the 2013 Base Structure Report and from sites reported by journalists and geographers. The author of the map says that there are still many military bases missing from the map. Image from Empire.Is  Questions Given that any satellite can pick up this information, is there any rational reason to have "secret bases"? Is any base really a secret? Would US security be hampered if 25% of the bases were shut down? 50%? 80%? The answers are 1-no, 2-no, 3-no, no, no. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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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