Central Perk

sâmbătă, 2 iunie 2012

Mish's Global Economic Trend Analysis

City Council of North Las Vegas Unanimously Suspends Collectively Bargaining of Public Unions, Citing Emergency Statutes
German Finance Minister Pressures Spain to Accept Bailout; Germany Says €50 Billion to €90 Billion Needed; More Doublespeak
Spain's Prime Minister Begs for European Fiscal NannyZone and Banking Union; Obama Seeks End to "Crisis Cloud"; Merkel Immediately Rejects Proposal; Cloud? What Cloud?
Morgan Stanley Bonds Trade at Junk Pricing, Downgrades Coming; Will Morgan Stanley Survive? Top 5 Banks Collectively Have 45:1 Leverage

City Council of North Las Vegas Unanimously Suspends Collectively Bargaining of Public Unions, Citing Emergency Statutes

Posted: 02 Jun 2012 10:46 PM PDT

The city council of North Las Vegas, the 4th largest city in Nevada (population 216,961) voted unanimously to suspend collective bargaining agreements made with public unions.

In spite of having the highest property tax rates in the county, the city's budget is in a mess, wrecked by the busting of the housing bubble.

According to Wikipedia the city's budget deficit was $8.6 million. A budget balanced through personnel layoffs was passed last May, but judges reversed some of those pink slips, creating a financial emergency that could require the state to take over North Las Vegas' finances.

In response, the city decided to take matters into its own hands. City Manager Tim Hacker said the city was in a state of emergency and cited Nevada law NRS 288.150(4)

"A local government employer is entitled to take whatever actions may be necessary to carry out its responsibilities in situations of emergency.....such as a riot, military action, natural disaster or civil disorder."

With NRS 288.150(4) as the rationale, the city council unanimously passed Resolution 2475 suspending collective bargaining agreements as follows.

Resolution 2475 temporarily suspends certain terms of the City's existing collective bargaining agreements with the North Las Vegas Police Officers Association ("POA"), the North Las Vegas Police Supervisors Association ("PSA") and the International Association of Firefighters Local #1604 ("IAFF") beginning July 1, 2012. The suspended terms include only those that have the affect of increasing the City's labor costs in FY 2012/2013 including cost of living adjustments, merit pay, holiday sell-back pay and uniform pay.

The City's tax revenue has fallen sharply as a result of the recession and its tax base deterioration has been among the worst in the nation. The City's property tax revenue has declined by 37.1% from a high $62 million in 2009 to approximately $39 million in 2012. Similarly, consolidated tax revenue declined by 30% from a high of $54 million in 2006 to approximately $38 million in 2012. As the same time, labor costs have continued to increase largely due to automatic cost of living increases and other benefits specified in the City's Collective Bargaining Agreements.

I commend the actions of the North Las Vegas. Unions are up in arms, but they are the one who helped wreck the city.

Municipal Bankruptcy Not An Option

Unfortunately, municipal bankruptcy is not allowed in Nevada. However, should unions press the case, the city has one more possibility, disincorporation.

It would be perfectly fitting if it came to disincorporation and the unions were totally dissolved.

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

German Finance Minister Pressures Spain to Accept Bailout; Germany Says €50 Billion to €90 Billion Needed; More Doublespeak

Posted: 02 Jun 2012 02:42 PM PDT

Germany and Spain are both digging in their heels. Courtesy of el Economista and Google Translate, please consider Germany pressed for Spain to resort to bailout fund.

German Finance Minister, Wolfgang Schäuble, have pressured the Spanish owner of Economy, Luis de Guindos, for Spain to resort to European rescue fund, fearing that fails to stay afloat on its own.

According to reports advanced by the weekly Der Spiegel, Chancellor Angela Merkel and her minister chose this route earlier this week.

Schäuble would have raised the possibility to de Guindos at their last meeting held in Berlin on Wednesday, which the Spanish minister refused, arguing that Spain will be able to fend for themselves.

Der Spiegel says, without specifying sources, Merkel and Schäuble pressure on Spain to resort to European Financial Stability Fund (EFSF), to the growing threat of contagion to other countries of southern Europe, if possible abandonment of Greece in the euro area.

According to that publication, the German government estimates that Spanish banks will require a capital injection of between 50,000 and 90,000 million euros.

Berlin flatly rejected the possibility of direct aid to rescue fund banks, bypassing governments, in this case Spanish, contrary to the views expressed in that direction from the International Monetary Fund (IMF) and the European Commission (CE).

Both Merkel and Schäuble repeatedly this week expressed confidence in the measures taken by the government of Mariano Rajoy.

More Doublespeak

Who the hell do Merkel and Schäuble think they are fooling? How can one express confidence in Spain while simultaneously pressuring Spain to accept a bailout?

For more on Orwellian doublespeak, please see Edge of a Precipice; Doublethink Extraordinaire; Spain in Discussions With US Regarding Bank Aid; Gold Soars; Geithner to the Rescue?

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

Spain's Prime Minister Begs for European Fiscal NannyZone and Banking Union; Obama Seeks End to "Crisis Cloud"; Merkel Immediately Rejects Proposal; Cloud? What Cloud?

Posted: 02 Jun 2012 09:33 AM PDT

On Saturday, Spain's prime minister Mariano Rajoy Asked For a Eurozone Fiscal Authority, in effect the "Fiscal Nannyzone" that I have spoken about on numerous occasions.

Spain on Saturday proposed the set up a new fiscal authority in the euro zone which would control and harmonize national budgets and manage the European debts.

Prime Minister Mariano Rajoy said the authority was the answer to the European debt crisis and would go a long way in alleviating Spain's woes as it would send a clear signal to investors that the single currency is an irreversible project.

"The European Union needs to reinforce its architecture," Rajoy said at an event in Sitges, in the north-eastern province of Catalonia. "This entails moving towards more integration, transferring more sovereignty, especially in the fiscal field.

"And this means a compromise to create a new European fiscal authority which would guide the fiscal policy in the euro zone, harmonize the fiscal policy of member states and enable a centralized control of (public) finances," he added.

He also said the authority would be in charge of managing European debts and should be constituted by countries of the euro zone meeting strict conditions.

Obama Seeks End to "Crisis Cloud"

Bloomberg reports Merkel Rejects Debt Sharing as Obama Urges End to Crisis Cloud

German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe's leaders for not doing enough to stop the financial crisis.

With Europe's debt crisis cited last week for canceled IPOs, weaker-than-expected Chinese manufacturing figures and a rise in the U.S. jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying "under no circumstances" would she agree to Germany-backed euro bonds.

Now, some "come along and ask for euro bonds, saying all we need are equal interest rates and everything will turn out all right," Merkel said in a speech to members of her Christian Democratic Union in Berlin today. Instead, what's needed is an economic overhaul to tackle the lack of competitiveness in Europe, she said.

European 'Cloud'

Obama, speaking at a Chicago fundraiser yesterday as he bids for re-election in November, said that a report showing the slowest month of U.S. employment growth in a year was in large part "attributable to Europe and the cloud that's coming over from the Atlantic." The "whole world economy has been weakened by it," he said.

Cloud? What Cloud?

Clouds are imaginary. The markets have cast a clear sunshine vote that the euro is a failure.

Since the euro itself is the problem, the only clouds anyone can see stem from nannyzone proponents insisting at any and all costs to hold this untenable structure together.

Recall that when the economies of Spain and Ireland were artificially booming fueled by two of the biggest property bubbles in the entire world, the IMF, eurocrats in Brussels, and misguided economic fools everywhere were cheering the growth in those countries.

Contagion-Causing Policies

Nannycrats did not see this coming last time and they will not see the mess coming the next time either. Heck, they cannot even see the mess the LTRO has made now. Nor can they see just how counterproductive and contagion-causing their own policies have been.

Somehow these nannycrats are supposed to prevent messes?! Please be serious.

The only thing nannycrats will do, were the idea ever to gain traction, would be to sink all of Europe into a permanent mess.

Nannycrat Flashback

For my original post on the Nannyzone written June 2, 2011, precisely one year ago today, please see Trichet Calls for Creation of European "Nanny-State" and Fiscal "Nanny-Zone"

Even if such a proposal were possible, it would require a whole new treaty, and a constitutional vote in Germany, Ireland, and other countries.

Fortunately, Rajoy's proposal is dead-on-arrival.

Thus, it is time to focus on reality, instead of imaginary clouds. The reality is the eurozone is going to bust up and nannycrats better get used to the idea or the markets will impose that break-up in their own messy way.

Addendum on the Nannycrats and the Nannyzone

Reader Stan says ..

Rajoy says he wants this "Nannyzone", but would he actually obey the dictates of the Nannycrats if they ordered Spain to live within it's means? I doubt it. He wants the Nannycrats to tell Germans they must subsidize the PIIGS, but he wouldn't care for Nannycrats telling PIIGS to balance their budgets.

Exactly!

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

Morgan Stanley Bonds Trade at Junk Pricing, Downgrades Coming; Will Morgan Stanley Survive? Top 5 Banks Collectively Have 45:1 Leverage

Posted: 02 Jun 2012 12:22 AM PDT

Morgan Stanley's corporate borrowing costs are already way higher than Goldman Sachs and more downgrades are likely in the works.

The Fiscal Times explains How Morgan Stanley sank to junk pricing

The bond markets are treating Morgan Stanley like a junk-rated company, and the investment bank's higher borrowing costs could already be putting it at a disadvantage even before an expected ratings downgrade this month.

Bond rating agency Moody's Investors Service has said it may cut Morgan Stanley by at least two notches in June, to just two or three steps above junk status. Many investors see such a cut as all but certain.

Even before any downgrade, the bank is suffering in the bond markets. Prices for Morgan Stanley's bonds and credit derivatives have been trading at junk levels since last summer, according to Moody's Analytics. Prices moved further into the non-investment-grade category over the past two weeks amid troubles in Greece and other Euro zone nations.

"The numbers have changed for the worse," said Otis Casey, director of credit research at Markit. "What has driven that, obviously, is Europe. The perception is – correctly or incorrectly – that Morgan Stanley is one of the U.S. banks most exposed to Europe's problems."

Morgan Stanley's problems were compounded by its handling of the Facebook IPO – its high price and large size, and selective disclosure of an analyst's reduction of his forecasts for the social network's revenue and earnings. Facebook shares ended regular trading at $27.72 on Friday, down 27 percent from their offering price of $38.

"A bank with a near-junk rating is in 'no man's land,'" said Edward Marrinan, credit strategist at Royal Bank of Scotland Group in Greenwich, Connecticut. "Banks rarely thrive with non- or borderline investment grade ratings."

In a May 7 securities filing, Morgan Stanley said it might have to post $7.2 billion worth of additional collateral and termination payments in the event of a downgrade to Baa2, the second lowest investment-grade rating, up from a $6.5 billion estimate it provided three months earlier.

But bond markets are not waiting for a downgrade. On Friday, it would have cost Morgan Stanley 1.20 percentage points more to raise five-year debt than its chief rival, Goldman Sachs Group Inc. The bank would even have to pay a little more than much-smaller competitor Jefferies Group.

"The Street is pretty efficient and is really moving ahead of the ratings agencies," said Carret Asset Management's Graybill. "It's never good in this business to have a disadvantage against a strong competitor."

Will Morgan Stanley Survive?

My answer is the same as I said about Citigroup in 2007: Not in one piece. And in spite of shedding numerous pieces over the years, Citigroup and others still have shedding to do.

JP Morgan added fat to the fire with massive derivatives losses, bringing the Volcker Rule back in the spotlight.

Top 5 Banks Have 45 Times Leverage

Reuters reports JPMorgan case puts Volcker Rule and SIFIs back in the spotlight

The massive losses which resulted from JPMorgan Chase hedging its positions against derivatives has once again cast the spotlight on the Volcker Rule and whether systemically important financial institutions (SIFIs) are too big to fail, industry observers said. Questions have also been raised about the firm's hedging strategy, and what constitutes hedging in the first place.

Industry officials in Asia suggested that JPMorgan's $2 billion hedging losses might embolden regulators to strengthen the Volcker Rule, on the premise that it would be of benefit to SIFIs. The rule, named after former Federal Reserve chairman Paul Volcker, forms part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and has proposed the separation of proprietary trading from commercial banking activity. Most notably, it has argued against investing in derivatives or using derivatives as a hedge on investments. The rule has, however, faced strong opposition from many of the large global financial institutions.

Top five SIFIs' OTC derivatives exposures

A look at the 2011 fourth quarter bank trading and derivatives activities report released by the U.S. Office of the Comptroller of the Currency (OCC) showed that the top five SIFIs — Bank of America, Citibank, Goldman Sachs, HSBC and JPMorgan — collectively accounted for more than 50 percent of the $700 trillion OTC derivatives trades worldwide in total notional value. JPMorgan alone accounted for more than $70 trillion of the $700 trillion, the report said. "That [$70 trillion] represents one-tenth of the global OTC derivatives exposures. This is what I call concentration of risk and what is defined as an institution that is too big to fail," an industry official told Thomson Reuters on condition of anonymity.

The official said he found it alarming that, when the top five banks' assets and total exposures to derivatives activities were added up, they showed a leverage of one to 45 times. The OCC report showed that JPMorgan Chase North America has total assets of $1.8 trillion to cover $70 trillion worth of OTC derivatives exposure. JPMorgan Chase & Co has total assets of $2.26 trillion, the report also stated.

"Five to 10 years ago, a leverage of one to 10 times was considered scary but now we are talking about a leverage of one to 45 times. The questions to ask JPMorgan are: 'Were you using these derivatives for speculation or for hedging purposes?' and 'Can you qualify your definition of hedging?'" he said.

If regulators get really serious about enforcing the Volcker rule, none of the top financial institutions will survive in one piece.

Actually, they will all breakup regardless. At some point the derivatives time-bomb will go off, and that will take care of matters so to speak.

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

Damn Cool Pics

Who is the Fairest of Them All? [Infographic]
How to Dance in The Club
Every Instagram Filter on One Photo

Who is the Fairest of Them All? [Infographic]

Posted: 01 Jun 2012 10:43 PM PDT

In case you haven't heard, today the movie 'Snow White and the Huntsman' was released. The movie has a star studded cast including Kristen Stewart, Chris Hemsworth and Charlize Theron. While the reviews are just now starting to come in, the special effects, production design and Snow White and the Huntsman costumes are said to be outstanding. Whether you see the movie or not most everyone knows the story of Snow White. And according to the mirror in this fairytale, there is only one woman in all the land who is more beautiful than Queen Ravenna – SNOW WHITE. Believing herself to be the rightful most 'fair', Queen Ravenna orders Snow White to be killed in the ultimate tale of vengeance. We thought it would be fun to take a look at these two iconic women in this fairytale. Does the mirror speak the truth? Who really is the fairest? You be the judge. Let's take a look.

INFOGRAPHIC: Who Is The Fairest of Them All?

Via: Halloween Express

How to Dance in The Club

Posted: 01 Jun 2012 09:57 PM PDT

A video posted by is going viral on youtube with almost 1.5 million views..It showcases different dance moves and to be specific he said "A tutorial on how to dance in the CLUB".

How to Dance in the Club 1

How to Dance in the Club 2

Every Instagram Filter on One Photo

Posted: 01 Jun 2012 09:25 PM PDT

What you will get if you apply every single Instagram filter on a single photograph? Belgian blog Appelogen wanted to find out by experimenting with an individual normal photo applying each filter over another. The end result an "abstract" looking photo with a white patch at the center.

Normal

Normal + Amaro

Normal + Amaro + Rise

Normal + Amaro + Rise + Hudson

Normal + Amaro + Rise + Hudson + Sierra

Normal + Amaro + Rise + Hudson + Sierra + X-pro II

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden + Hefe

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden + Hefe + Valencia

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden + Hefe + Valencia + Nashville

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden + Hefe + Valencia + Nashville + 1977

Normal + Amaro + Rise + Hudson + Sierra + X-pro II + Lo-fi + Earlybird + Sutro + Toaster + Brannan + Inkwell + Walden + Hefe + Valencia + Nashville + 1977 + Kelvin

Weekly Address: It's Time for Congress to Get to Work

Your Daily Snapshot for
Saturday, June 2, 2012

Weekly Address: It's Time for Congress to Get to Work

President Obama speaks to the American people from a Honeywell manufacturing facility in Minnesota about his proposal to make it easier for companies to hire our returning service members for jobs that utilize their skills and help grow our economy.

Watch the President's weekly address:

President Barack Obama tapes the Weekly Address at a Honeywell manufacturing facility in Golden Valley, Minnesota, June 1, 2012. (Official White House Photo by Pete Souza)

Weekly Wrap Up

Your quick look at this week on Whitehouse.gov:

The Nation’s Heroes: This Monday the President, Vice President, First Lady, and Dr. Biden traveled to the Arlington National Cemetery where the President laid a wreath at the Tomb of the Unknowns. He then spoke to the families gathered there, asking that we remember the fallen soldiers for the people they really were, “One thing we can do is remember these heroes as you remember them -- not just as a rank, or a number, or a name on a headstone, but as Americans, often far too young, who were guided by a deep and abiding love for their families, for each other, and for this country.”

The President then made his way to the Vietnam Veterans memorial to commemorate the 50th anniversary of the Vietnam War. There he spoke of the service that the veterans undertook for America, both in war and once they returned home, “Like generations before you, you took off the uniform, but you never stopped serving. You became teachers and police officers and nurses -- the folks we count on every single day. You became entrepreneurs, running companies and pioneering industries that changed the world. You became leaders and public servants, from town halls to Capitol Hill -- lifting up our communities, our states, our nation. You reminded us what it was like to serve, what it meant to serve.”

Extraordinary People: On Tuesday the President awarded the Presidential Medal of Freedom, the nation's highest civilian honor, to 13 extraordinary individuals. These people came from all walks in life, ranging from a doctor to a musician, the President said that each has made his or her mark on America, “Together, the honorees on this stage, and the ones who couldn’t be here, have moved us with their words; they have inspired us with their actions. They’ve enriched our lives and they’ve changed our lives for the better. Some of them are household names; others have labored quietly out of the public eye. Most of them may never fully appreciate the difference they’ve made or the influence that they’ve had, but that’s where our job comes in.”

A Step in the Right Direction: President Obama also signed a bipartisan, Import-Export Bank reauthorization bill to help strengthen our economy. “Soon, there are going to be millions of new customers for our goods and services in Korea, in Colombia and Panama. That way, even though we got some Hyundais over here, we’re also going to have some Chryslers and Fords and Chevys in Seoul that are imported from Detroit and Toledo and Chicago.” The President also took this time to reiterate that more needs to be done in order to fix our economy and particularly focused on the need for Congress to get to work on the “To-Do-List” that President Obama has been pushing for over the past month.

Portraits Unveiled: On Thursday Former President and First Lady Bush returned to the White House to unveil their official White House portraits. These portraits will join those of previous Presidents and First Ladies in the halls of the White House.

Equal Pay for Equal Work: On average, full-time working women earn just 77 cents for every dollar a man earns, a wage gap that exists regardless of personal choices like education or occupation. That's why President Obama is supporting the passage of the Paycheck Fairness Act. To help make more people aware of the pay gap, we’ve created some e-cards that you can send via email or share on social media that explain why equal pay for equal work is essential.

West Wing Week: Your video guide to everything that's happened this week at 1600 Pennsylvania Avenue: Watch here.

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