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vineri, 26 iulie 2013

Thousands Joined In. Did You?

Friday, July 26, 2013

Thousands Joined In. Did You?

President Obama is fighting to build a better bargain for the middle class -- one that ensures that everyone who works hard can get ahead in the 21st century economy. And this week, he asked you to add your voices to the debate.

The response has been amazing. We've already received tens of thousands of submissions, and we're getting more every day.

There's just one problem: We didn't see your name.

Click here to add your name in support of the middle class.

Thanks to the grit and resilience of the American people, we’ve cleared away the rubble from the financial crisis and begun to lay a new foundation for stronger, more durable economic growth. But we’re not there yet. We need a strategy that builds on the cornerstones of what it means to be middle class in America, and what it takes to work your way into the middle class. Good jobs. A good education. Homeownership that’s based on a solid foundation. Affordable health care that’s there for you when you get sick. A secure retirement even if you’re not rich. More chances for folks to earn their way into the middle class as long as they’re willing to work for it.

The President thinks that some in Washington haven't been focused on what really matters to middle-class Americans. Join the thousands who have already signed their names and help bring clarity to this debate. Let us know that you think the middle class matters, and that our economy grows best from the middle out, not the top down.

So if that's something you believe in, if you think we need to make our economy work for working Americans, will you add your name?

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President Obama's Busy Week

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President Obama's Busy Week

This week, the President Obama traveled to Illinois, Missouri, and Florida to lay out his economic vision for the economy. The President also hosted the NCAA Champion Louisville Cardinals and the President of Vietnam, and he pressed for the passage of comprehensive immigration reform.

Click here to watch the latest installment of "West Wing Week."

The Key to Empowering your Marketing Team - Whiteboard Friday

Posted: 25 Jul 2013 06:17 PM PDT

Posted by randfish

What holds marketing teams back from accomplishing great things? In today's Whiteboard Friday, Rand tackles the big challenges many internal marketing teams face, and outlines a way to bring structure and empowerment back to your marketers.

Have something to add? Leave your thoughts and questions in the comments below!

For reference, here's a still of this week's whiteboard.

Video Transcription

Howdy, Moz fans, and welcome to another edition of Whiteboard Friday. Today I'm going to be talking to you a little bit about what holds marketing teams back from being able to accomplish great things inside of companies, and for external marketing teams that are on an agency or consulting basis, but really oftentimes internally.

So this, I've got here my six little friends. This one, this guy is kind of awkward. His back is a little out of whack. But that's okay. He's just a stick figure. He's probably feeling just fine.

The challenge for these guys is that they constantly need their work reviewed. They're kind of in the weeds, in the trenches doing marketing activities, building content, trying to get that content shared and linked to, trying to earn rankings and traffic, trying to buy advertising, trying to influence the website and the marketing materials, make the conversion rate higher, do all these things to promote the marketing funnel improving. Yet they're constantly changing course, sometimes daily, sometimes even hourly. Boss comes in, it's sort of like, "No, no, no, don't do that anymore. Focus on this thing. No, wait, I know I told you to do that, but we don't need that anymore. We need this other thing."

They're not empowered to make decisions, not even about their own work. They really have to get constantly reviewed. Someone comes and gives them feedback on everything they do. I've been this marketer myself before. Especially as a consultant, you're oftentimes in this position. You don't have that empowerment to make great decisions.

But there's a way to fix this, and it's an architecture I want to share with you that's been really powerful for me and for a number of other companies that have adopted this and that have shared it too. So the idea is basically that what we want to do is we want to take all the things that the company wants to accomplish today, in the future, in the far, far flung future, and we want to connect that all the way down to what the marketing team is actually working on today, right now. But it takes a little bit of work, and it takes a lot of transparency, and it takes some thinking. If you don't have this architecture yet, you should give it a try. Let me show you what I'm talking about.

A big company vision is a great starting point. I know many small and medium businesses don't even really have a great big company vision. But if you can imagine one, if you can put one on there, "We want to be Cleveland, Ohio's best marketing agency, and we define best as our clients are the happiest, we have the most clients, and we have the highest revenues in the city." Okay, great, now you've got a company vision. Moz's vision, for example, is to help people do better marketing. Tesla's vision is to transform how the world is transported. NASA has an organizational vision to explore space. So you can get a company vision.

So let's say it is, "Help people do better marketing." From that flows things that you're going to do over the next few years. It could be five years, it could be just two or three years, but the mission that you have. I'm going to go back to Tesla again because I love Tesla's five-year mission. Tesla's five-year mission is to "Power the transformation from gas to electric vehicles and to become the world's leading car company by doing that." So become the world's leading company by powering the transformation from gas to electric.

Okay. Then, based on that mission, that thing that you want to accomplish over the next few years, you have a BHAG. A BHAG is Big Hairy Audacious Goal. I know it sounds a little funny, but this acronym is actually quite important, and so are all the letters in there. Big because you want it to be hard to achieve. My favorite thing that people say about a BHAG is,
"It's out of reach, but not out of sight." A goal that is out of reach, I can't see us accomplishing it today. My God, it's almost hard to imagine that we accomplished it, but not completely out of sight.

So perhaps Tesla would say that their BHAG is to be the world's number one auto manufacturer in ten years or in five years. That means that they have to build so many cars and sell so many cars that they are the world's leading car company through number of cars on the road. For Moz, our BHAG is one million people subscribing to our platform. For your Cleveland, Ohio consulting agency, it might be successfully keeping and maintaining 100 paying customers at $5,000 a month or more for a full year, nonstop. Whatever it is, it has to be definable, easily definable, easily measurable, and powerful, something that people can get behind.

I'll go back to NASA again. That moon mission that they had, in the 1960s NASA had the moon mission and the BHAG for the moon mission was, "Put a man on the surface of the moon and return him safely to the earth." Super measurable, super definable, incredibly powerful to get behind. If you're doing marketing for that, you can see that big vision and that big goal very clearly. Then from there, from these two, I'm going to take our mission and our BHAG, and I'm going to define a list of strategic goals, things we need to accomplish in order to get these things done. But they're going to be things that we do over the next 6 to 12 months, just 6 to 12 months, just the next little while. This is really powerful because those strategic goals should flow down to everything else that the company does.

So if, for example, I say, "Hey, in order to sell more cars, Tesla needs to open Tesla dealerships in 500 cities over the next 12 months, and here's the list of cities." Okay, that's a strategic goal. Now we've got to go get that done. We need to figure out people who know how to open stores and people who know about real estate, and we need to have a bunch of investment dollars that we can put it in these things. We need to figure out how long it is before we open a dealership before that actually turns into sales for us. We need to hire all the salespeople. We need to build a process for that. Huge list of things that come from those, but the strategic goal is very simple. "Open stores in 500 cities."

At Moz, one of our strategic goals is to increase the retention of our Pro subscribers. Build stuff. Make stuff in the product that makes people want to stick around and use Moz longer. Okay, these are strategic goals.

Then, from there, now we really start to get into the nitty-gritty with the marketing goals being tied to these company goals, and this is such a powerful architecture. It just removes all kinds of barriers, because now I can go and I can build a process like this, right here. So I take a goal that the team is trying to accomplish, and I translate that into what my actual marketing task is around it. Then I have the process and the people that I need for that goal. So actually, I'm going to use my checkboxes that I actually made.

I define my goal, I get the process and people I need, I figure out how we define success, what the measurable elements are. Maybe it's, "Hey, we need to broaden our brand's reach." We want to have more people exposed to the Moz brand, and so therefore, we are going to define a goal as half a million people following our Twitter account and 100,000 people following our Google + account, and maybe a million people following us on Facebook and whatever those things are.

Then you have those metrics-based targets. So those could be website visitor statistics. They could be conversions. It could be an ROI number. It could be a cost number. Many times a strategic goal will be to reduce cost to a certain amount, and then you have these goals. "Hey, we need to reduce customer acquisition costs. We need to find channels that don't cost as much." Oftentimes, inbound channels don't cost as much, things like SEO and email marketing, opt-in email marketing, community building, and content and those kinds of things, that's a great way to reduce customer acquisition costs. It could be a marketing goal, and you figure out who the process and people are behind that. We may need a writer. We're going to need someone who is a marketing analyst to do all the statistics work. We're going to figure out how we measure success. That's going to be measured through number of people acquired through these lower-cost channels. We're going to have metrics-based targets. We're going to say we want to acquire 20% of our customers through non-paid channels by the end of 2013.

Great. Now you have something so amazing. You have marketers that can see the big picture. They can see all the way. They know everything that's connected here, and that means that they know how their work matters. I can't tell you what a change in attitude you get when you understand how your work matters versus wondering why you're pushing buttons. It's just a remarkable change. Now, those same people can navigate project complexity without needing someone over their shoulder, looking all the time at their work, making sure that they're doing the right thing, reviewing, because they can see that full connection.

You might have someone who reviews the work at the end of the cycle or is in a project planning meeting with them, maybe a manager or a senior leader or something like that, and that's fine and that's a good thing. But you don't need to be in the weeds with your team anymore, and because they're empowered, they can choose how they work best, figure out what makes them most effective, and then they can execute on projects.

I urge you to give this a try. It won't take that long, especially if you've got some of these bigger things already defined, and it can really move the needle on how your marketing team works.

All right, everyone. Hope you've enjoyed this edition of Whiteboard Friday. We'll see you again next week. Take care.

Video transcription by Speechpad.com

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Seth's Blog : "People like us do stuff like this"

"People like us do stuff like this"

There is no more powerful tribal marketing connection than this.

More than features, more than benefits, we are driven to become a member in good standing of the tribe. We want to be respected by those we aspire to connect with, we want to know what we ought to do to be part of that circle.

Not the norms of mass, but the norms of our chosen tribe.

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joi, 25 iulie 2013

Mish's Global Economic Trend Analysis

Interesting Hussman Tweets on Case Shiller PE, Institutional Selling, Book Values
Durable Goods: Seen and Unseen (the Good, the Bad, the Ugly)
Only Hope For Italy is Bankruptcy
General Obligation Bondholders Beware: Detroit Bankruptcy Affirmed, Governor Shielded From Lawsuits; Triumph of Math Over Unions

Interesting Hussman Tweets on Case Shiller PE, Institutional Selling, Book Values

Posted: 25 Jul 2013 07:07 PM PDT

Here are a few interesting John Hussman Tweets from today.

On Valuations
Valuation Note: Shiller earnings = 6.3% of current S&P revenues vs. historical norm of 5.3%. At normal margins, Shiller P/E would now be 29

On Institutional Unloading vs. Retail Buying
Institutions have never dumped more stock onto retail investors as they have in the past 4 weeks.

On Book Value (Re-tweeted by Hussman)
Chanos says more companies >3x book value now than March 2000.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Durable Goods: Seen and Unseen (the Good, the Bad, the Ugly)

Posted: 25 Jul 2013 12:32 PM PDT

Inquiring minds are digging into the latest Durable Goods Report by the Census Bureau.

New orders for manufactured durable goods in June increased $9.9 billion or 4.2 percent to $244.5 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 5.2 percent May increase and was at the highest level since the series was first published on a NAICS basis in 1992. Excluding transportation, new orders increased slightly. Excluding defense, new orders increased 3.0 percent. Transportation equipment, also up four of the last five months, led the increase, $9.9 billion or 12.8 percent to $87.1 billion. This was led by nondefense aircraft and parts, which increased $6.5 billion.

Durable Goods Seasonally Adjusted

Durable Goods	Seasonally Adjusted
	Monthly			Percent Change
	June 2013	May 2013	April 2013	May-June	April-May	March-April
Total:
Shipments…………	229,757	229,773	226,915	0.0	1.3	-0.6
New Orders…………	244,494	234,581	223,003	4.2	5.2	3.6

Excluding transportation:
Shipments…………	160,646	160,465	160,211	0.1	0.2	-0.4
New Orders……………	157,420	157,369	155,774	0.0	1.0	1.8

Excluding defense:
Shipments………	217,464	217,701	215,110	-0.1	1.2	-0.3
New Orders………………	230,302	223,629	213,124	3.0	4.9	2.6

Manufacturing with unfilled orders:
Shipments……	161,645	161,836	158,586	-0.1	2.0	-0.9
New Orders………	183,051	173,160	161,842	5.7	7.0	4.8

Primary metals:
Shipments…………	24,915	24,379	24,698	2.2	-1.3	0.6
New Orders………	25,405	25,466	25,307	-0.2	0.6	2.3

Fabricated metal products:
Shipments………	28,943	29,009	29,090	-0.2	-0.3	2.2
New Orders……	29,617	29,593	29,712	0.1	-0.4	1.2

Machinery:
Shipments…………	34,217	34,624	34,255	-1.2	1.1	-2.3
New Orders………	35,392	34,572	34,396	2.4	0.5	1.2

Computers and electronic products:
Shipments………	27,471	27,259	27,569	0.8	-1.1	-3.1
New Orders………	21,661	22,239	21,541	-2.6	3.2	4.6

Computers and related products:
Shipments………	2,283	2,307	2,336	-1.0	-1.2	-5.9
New Orders…………	2,265	2,313	2,362	-2.1	-2.1	-3.7

Communications equipment:
Shipments……………	4,049	4,117	3,960	-1.7	4.0	0.6
New Orders…………	4,620	5,233	4,543	-11.7	15.2	11.9

Electrical equipment, appliances, components
Shipments…………	10,300	10,405	10,195	-1.0	2.1	-0.8
New Orders…………	10,519	10,712	10,358	-1.8	3.4	0.1

Transportation equipment:
Shipments…………	69,111	69,308	66,704	-0.3	3.9	-1.0
New Orders…………	87,074	77,212	67,229	12.8	14.8	8.0

Motor vehicles and parts:
Shipments…………	45,161	44,564	45,158	1.3	-1.3	2.3
New Orders………	45,340	44,758	45,127	1.3	-0.8	2.3

Nondefense aircraft and parts:
Shipments………	11,840	12,637	9,709	-6.3	30.2	-10.0
New Orders………	27,267	20,750	12,346	31.4	68.1	18.4

Defense aircraft and parts:
Shipments………	4,627	4,669	4,618	-0.9	1.1	-9.5
New Orders………	5,107	4,303	4,106	18.7	4.8	42.8

All other durable goods:
Shipments………	34,800	34,789	34,404	0.0	1.1	0.8
New Orders………	34,826	34,787	34,460	0.1	0.9	1.3

Capital goods:
Shipments…………	84,187	85,510	80,950	-1.5	5.6	-3.8
New Orders………	103,596	95,064	83,807	9.0	13.4	5.4

Nondefense capital goods:
Shipments………	74,253	75,770	71,394	-2.0	6.1	-3.5
New Orders………	91,601	86,190	76,374	6.3	12.9	3.5

Excluding aircraft:
Shipments………	65,822	66,399	65,164	-0.9	1.9	-2.1
New Orders……	69,526	69,013	67,531	0.7	2.2	1.2

Defense capital goods:
Shipments………	9,934	9,740	9,556	2.0	1.9	-5.7
New Orders………	11,995	8,874	7,433	35.2	19.4	29.9

Easily Seen

Note how orders for aircraft can skew the overall numbers. A closer look at the "New Orders" components will show precisely what I mean.

New Orders

Total +4.2%
Excluding Transportation +0.0%
Primary Metals -0.2%
Fabricated Metals +0.1%
Machinery +2.4%
Computers and Electronic Products -2.6%
Computers Related Products -2.1%
Communications Equipment -11.7%
Electrical Equipment -1.8%
Transportation Equipment +12.8%
Motor Vehicles and Parts +1.3%
Non-Defense Aircraft and Parts +31.4%
Defense Aircraft and Parts +18.7%
Other Durable Goods +0.1%

One quick glance at new orders will give you the "easily seen" look at the durable goods numbers. Although such analysis is "easily seen" not many bother. Instead, many rely on the baseline reported number.

But what about the "not-so" easily seen? I am talking about constant revisions and the overall use of the report in general.

Revisions

Alan Hartley of Black Cypress Capital says Beware Revisions.

Today the U.S. Department of Commerce reported new orders for manufactured durable goods. One data point often analyzed by investors within the report is "non-defense capital goods ex aircraft". This is considered a good proxy for business capital spending in the U.S.

That is all well and good, but we find the data less useful than most.

Why? Heavy revisions.

Take June 2012 for instance.

When non-defense capital goods ex aircraft (non-seasonally-adjusted) was originally reported in 2012, it was $67,693. The following month it was revised to $66,452. It was then revised to $64,906. Today June 2012 was revised yet again to $68,555. Over the course of the year, June 2012 looked as though it had fallen nearly 5% from June 2011, only to be revised today to show an actual gain of 0.5%.

History of Non-Defense Capital Goods Ex-Aircraft Revisions

Here is the telling chart that Hartley put together.

Core Durable Goods

"Core Durable Goods" are the "total durable goods orders excluding transportation equipment. The new orders numbers are closely followed by market participants as they provide indications on current economic conditions as well as future production commitments in the manufacturing sector."

Today we see Durable Goods Excluding Transportation is +0.0%. If June 2012 is any guide, the number may be off by 5% in either direction.

Of what use is that?

And the reported baseline number of +4.2% is even more useless. Non-defense aircraft orders are up a whopping 31.4% on the strength of 287 new orders for Boeing aircraft.

Such orders are extremely volatile, and cancelable.

The Good, The Bad, The Ugly

The Good: The basline number was up
The Bad: The overall core number was flat; Numerous core numbers were negative
The Ugly: Over the course of the next year (or longer), the census bureau is likely to significantly revise all of the numbers in multiple directions, multiple times.

The bad and the ugly clearly outweigh any good in this report. So don't take today's surprisingly good number seriously.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Only Hope For Italy is Bankruptcy

Posted: 25 Jul 2013 08:44 AM PDT

Via Mish-modified Google translation from Libre Mercado (LM), Enrico Colombatto, Professor of Economics at the University of Turin says in an interview "The only hope for Italy is the bankruptcy of the State"

Enrico Colombatto (EC), Professor of Economics at the University of Turin and director of the Center of Economic Research in the Piedmontese town, offers a groundbreaking proposal: "Do not pay the debt."

It seems unthinkable, but he believes it will be the only way to start fresh, leaving those who have lent money to irresponsible politicians pay for their mistake.

LM: Spain and Italy have very large states, but they are very inefficient. Our laws are stifling, heavy.

EC: In Italy, the public sector is not intended as an aid to the production of wealth and public goods and services. It has been conceived as an observatory to generate political consensus and to please the own clientele. The concept of public is of assistance but not to the public, but the public sector employee. The beneficiary of the public sector is dependent on this sector, not the public.

LM: After six years of crisis we have more spending, more laws, more intervention, ... Where does change start?

EC: By the mentality. It has aggravated the welfare spirit that we have within us. The state is the problem, not the solution.

LM: It's counter-intuitive, but when politicians fail, they want more power. And politicians who are succeeding all want more power to the state. In Spain, demonstrations call for a public banking as a solution to problems. Can we escape this trap?

EC: If we think that the state is the solution, all the problems are going to focus in that perspective. The problem is cultural and ideological. It starts when our children go to school and get to talk about social justice. Children are taught the state should solve every problem: pensions, sickness, education ... The solution is to drop the veil that protects the state. In bankruptcy, people will realize that giving loans to the State, and state guarantees are useless.

LM: A few days ago there was a poll in which the public demanded more taxes.

EC: It is a matter of propaganda. The State says "do not worry, I will only raise taxes on the rich". However, the rich pay more, but also the poor. For example, in Italy, the Monti government introduced a tax on real estate, and 85% of Italians are owners. This is a middle class tax hike. And a country that stifles and suffocates its middle class can not grow.

LM: From your perspective as a university professor, do you have bad omens in regards to a lost generation for Italy and Spain?

EC: Yes and no, It could be 50 years, not just 15. The key will be in the new political class.

LM: Some people think it might not be so bad that we intervene. They prefer to let Germany or the troika decide instead of our politicians.

EC: Because the Germans have many Spanish and Italian bonds, they always favor higher taxation so Southern Europe can pay back those loans. I trust the Chinese more than the Germans. We need a new ruling class because the existing system is corrupt and must be eliminated - No IMF, EU bureaucrats, or Germany.

LM: Where to begin?

EC: You have to start by deregulation. Monti's government has made things worse, especially in the labor market. The regulation is where it was 10 years ago ... well, maybe as it was 150 years ago.

LM: It is always said that Spain and Italy need to get to compete globally, but many of the labor laws limit the growth of companies, with more regulation and more taxes to the largest companies.

EC: Yes, there are two elements. First regulation, both in general and the labor market in particular, changes to the size of companies. Often the entrepreneur thinks "it's not worth growing, because I will have many new demands." There is also an issue of tax evasion: it is much harder to do it when you're big. And finally, we have the element of funding. To grow need a functioning credit market. And in Italy in the last thirty years, the credit market has served to finance the public debt. There are so many resources that should be used to finance the growth of businesses, but only served to finance the growth of the state. As a result, businesses remain small, because they are funded with self-financing.

LM: Correct. But with this in mind, is there way out of this? Because Italian public debt is the highest in Europe after Greece.

EC: The only hope is the default by the State. We paid about 90,000 million euros in interest. And along with this, we have to face the return of credit. It can't be done.

LM: And the financial system does not collapse?

EC: Why? The underlying conviction is that we will emerge from the crisis by printing money. It is a politically attractive solution, but destructive. The last example in Europe led to Nazism. I do not think we'll get to that, of course, but inflation certainly create social problems and tensions. The question is who should pay? The one who has financed the bad debtor [Spanish or Italian politicians] or the community via higher taxes? The European socialist solution is that losses should be disseminated throughout the population. But this has failed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

General Obligation Bondholders Beware: Detroit Bankruptcy Affirmed, Governor Shielded From Lawsuits; Triumph of Math Over Unions

Posted: 25 Jul 2013 01:43 AM PDT

As hoped and expected Detroit Bankruptcy Protections Affirmed, Snyder Shielded.

Detroit can enjoy the protections of bankruptcy, including immunity from lawsuits related to the case, a federal judge ruled, extending that shield to Michigan Governor Rick Snyder.

U.S. Bankruptcy Judge Steeven Rhodes in Detroit today blocked lawsuits by public employee groups and pension funds who allegd the state overreached in seeking court protection from creditors. Such claims must be heard in bankruptcy court, Rhodes said. His ruling gives the city the opportunity it said it needs to address $18 billion in debt without disruptions.

Chapter 9 of the U.S. Bankruptcy Code, which covers municipalities, typically prevents creditors from taking actions against the debtor that might interfere with reorganization.

City unions and pension officials claim Snyder, 54, violated Michigan's constitution by authorizing Orr to file for bankruptcy. Pension funds for retired city workers sued in state court to have the filing declared illegal.

Barring lawsuits against Snyder related to the bankruptcy would be unfair to Michigan's citizens, said Sharon Levine, an attorney for the American Federation of State, County & Municipal Employees, part of the AFL-CIO.

"We're taking away very fundamental constitutional rights," Levine said.

Michael Artz, a lawyer for the American Federation of State, County & Municipal Employees, said outside court after the hearing that while the question of the constitutionality of the Chapter 9 filing should have remained in state court, the union "will fight whatever court we're in."

Fights by AFL-CIO Welcome

I welcome these fights by the AFL-CIO. Indeed I hope they spend every cent they have because they are going to lose.

And when they lose, others cities will decide to escape preposterous unions contracts and pension benefits via bankruptcy.

General Obligation Bondholders Beware

Several people emailed me that that bondholders should have nothing to worry about because the bonds are backed by tax revenue.

Really?

If that was the case, then there should be little to no difference in interest rates between such bonds. But there is. Just like there is a difference between Greek bonds and German bonds, even though we heard the ECB say for years "we say no to default".

Well guess what? The market was correct, not the ECB.

All bets are off in bankruptcy court because you cannot tax a hollow shell. And what is Detroit but a hollow shell?

Triumph of Math Over Unions

As for pension claims and the Michigan constitution? Same thing: You cannot pay what you do not have. This is the triumph of math and common sense over union greed, arrogance, threats, and coercion.

Future Rating Impact

The Bond Buyer says Detroit Filing Could Impact Future Rating Analysis

CHICAGO - As Detroit enters into what would be the largest municipal bankruptcy in the U.S., ratings agencies said the outcome may have a negative impact on unlimited-tax general obligation bonds in future credit analysis.

Detroit emergency manager Kevyn Orr's restructuring plan treats the city's unlimited-tax general obligation bonds as unsecured, on par with the its lowest-secured debt, such as retiree health care benefits.

The move marks a departure from traditional treatment of ULTGOs, typically considered among the strongest municipal debt.

Orr's plan, if accepted by a bankruptcy judge, may affect the way Fitch Ratings analyzes ULTGOs in the future, the ratings firm said in a comment released Friday.

Fitch analyst Amy Laskey said in a telephone interview that it's still uncertain how broad the impact would be if a bankruptcy judge approved Orr's plan.

"These are issues we're talking about internally, how broadly that might extend," Laskey said. "It would certainly make us reexamine the value to credit quality of having that unlimited-tax pledge versus other tax-supported obligations," she said.

"Our feeling was that with unlimited-tax general obligation bonds you have the pledge to levy property tax without limitation to pay the debt, and that seemed somewhat more secure [than other tax-supported bonds]," said Laskey. "They do give you a little more financial flexibility because you have the ability and the obligation to pay for them, which you don't have for limited-tax bonds, certificates of participation, or lease revenue bonds."

If the city moves into Chapter 9, the case could set precedents when it comes to treatment of ULTGOs, she said.

Once again, I cite common sense: you cannot tax a hollow shell. Bondholders took a risk for higher yield, just as did buyers of Greek debt. If there was no risk, yields on Detroit bonds would not have been higher in the first place.

So, pensioners and bondholders both should take it on the chin.

Detroit Will Be In Bankruptcy 'For A Long Time'

Harvey Miller, partner at Weil, Gotshal & Manges, tells Bloomberg Law's Lee Pacchia that Detroit's recently filed Chapter 9 bankruptcy case will not be an easy restructuring. In addition to the profound economic challenges facing the city and the limited ability of a bankruptcy court to force changes on its government, the fundamental tension between bondholders, pensioners and taxpayers could mean Detroit will remain in tangled up in litigation for a long duration of time. "There's going to be a lot of legal fighting in this," he says.

Link if video does not play: Harvey Miller on Detroit Chapter 9

Expect a lot of municipal bond downgrades before too long. Downgrades are coming, deserved, and welcome.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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