| Rahm Emanuel to Succeed Daley as Chicago Mayor; Will Emanuel Rein in Public Union Abuses? Posted: 22 Feb 2011 10:30 PM PST Congratulations to Rahm Emanuel for his First-Round Win to Succeed Daley as Chicago Mayor. Rahm Emanuel, the former White House chief of staff, will take the reins of the nation's third-most- populous city in May after defeating several candidates to succeed retiring Chicago Mayor Richard M. Daley.
Emanuel's closest competitor was Gery Chico, 54, a former Daley chief of staff and Chicago school board president, with 24 percent of the vote. City Clerk Miguel del Valle had 9 percent, as did former U.S. Senator Carol Moseley Braun.
The election signals the end of two decades of rule by Daley, 68, who with his father, Richard J. Daley, ran Chicago for 43 of the past 55 years.
The new mayor confronts a declining population, pension shortfalls for city workers and a 2012 budget deficit forecast at more than $600 million. Emanuel will enter City Hall's fifth- floor mayoral suite with the added burden of troubled labor relations. His White House role in helping President Bill Clinton win passage of the North American Free Trade Agreement and comments he made about unions as President Barack Obama's chief of staff left lingering resentment.
'Shared Sacrifice'
In his campaign, the former Chicago congressman had called for "shared sacrifice" by public workers as the city seeks to address deficits. Congratulations are in order because Emanuel was the best of the lot by far. Not only was he a free trade advocate (which shows he has something on the ball), but he has picked up the ire of Chicago's public unions. Seriously, how much more could one possibly expect from anyone in contention for mayor of Chicago? A couple of posts will show what I mean. Seven More Unions Endorse ChicoFeb 8, 2011: More unions endorse Chico, bash EmanuelMayoral hopeful Gery Chico on Monday picked up the endorsement of seven more labor unions whose leaders accused rival candidate Rahm Emanuel of threatening their pensions and "demonizing" city employees.
What infuriated the labor leaders is an Emanuel campaign commercial in which the candidate appears to lecture city employees about the meaning of public service.
In it, Emanuel states that City Hall "is not an employment agency. ... It is delivering a service to the residents and taxpayers of the city. I want that mind set to be different. ... That means making sure that everybody [who] works for city government knows they're actually a public servant representing and helping the people [who] pay them."
Emanuel said he was not asking anything from police, firefighters and teachers that he would not be asking from himself as mayor.
"I don't think it's a radical idea to express the vision that taxpayers are the people we are all beholden to."
That is all you need to know right there. However, I have more. Chicago Unions Leaders Not Thrilled With Rham EmanuelDecember 6, 2010: Chicago Unions Leaders Not Thrilled With Rham EmanuelMost Chicagoans are assuming that former White House Chief of Staff Rahm Emanuel will become the next mayor of Chicago. But while the perception might satisfy many folks in the Windy City, at least one powerful Democratic sector isn't so sure they are happy with the whole idea. Chicago's union leaders are not very fond of the distempered former Chief of Staff.
Big Labor has been put off on Emanuel since he helped Bill Clinton get the North American Free Trade Agreement (NAFTA) passed in the 1990s when Emanuel was a Congressman from Chicago's 5th District.
Emanuel also has a history of dissing Big Labor. At least he's put other interests ahead of Big Labor enough times that labor leaders are not overly fond of the diminutive candidate.
A book about the Obama White House by Steven Ratner, Overhaul, even quoted Emanuel as saying, "**** the UAW," when the president was discussion the autoworker's union in a cabinet meeting. Added Bonus
As an added bonus, the very powerful and corrupt Alderman Ed Burke backed Chico. Please see Alderman Edward Burke: Top Machine Boss of Obama's Chicago-Part 1 for details of Burke's corruption. You may also wish to consider Part 2: A Top FBI Informant Accused Alderman Burke On Three Occasions of Fixing a Murder Trial For the Outfit. The election of Emanuel was not the best outcome. However, given the choices, his election was the best outcome possible. That aside, no one should expect miracles. If Emanuel does not deliver on reining in public unions, it will be time to pour on the criticism. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| CalSTRS - California State Teachers' Retirement System is Insolvent Posted: 22 Feb 2011 08:35 PM PST The time bomb of retiring teachers has gone off. Few admit it yet, but a pension reform group in California understands the problem, and taxpayers are on the hook. Please consider California teachers' pension system headed toward insolvencyAs California school districts anticipate possibly the worst budget crisis in a generation, many will try to lighten their burden by enticing older teachers into retirement. But as more and more teachers retire -- with a pension averaging 55 percent to 60 percent of salary -- they will be straining a system that already can't meet its obligations.
The California State Teachers' Retirement System is sliding down a steep slope toward insolvency. The threat isn't to teachers who have retired or plan to, but to the people of California. Taxpayers, who already pick up 23 percent of CalSTRS expenses, will be increasingly burdened as the giant pension system fails to meet its obligations.
"We're on a path of destruction," said Marcia Fritz, president of pension-reform group California Foundation for Fiscal Responsibility.
And merely rejiggering formulas for new employees won't rescue the system, she said. Simply put: "We overpromised."
Among those promises, "Californians have typically given their public employees richer retirement benefits" than have other states, according to the nonpartisan Legislative Analyst's Office.
Despite the looming disaster, CalSTRS is like an ocean liner that's slow and complicated to change course. Gov. Jerry Brown hasn't mentioned overhauling the system that benefits one of his major supporters, the teachers union. Nor has the Legislature taken up the issue.
Although CalPERS has imposed higher contributions, reformers say CalSTRS' formulas can be revised only by legislation, a statewide initiative or possibly a constitutional amendment and litigation -- not to mention immense political will. Courts have ruled that retirees are guaranteed the pensions promised them when hired.
Any move to pare benefits or collect more from employees would affect only future teachers, not current employees. That's why Fritz thinks a constitutional amendment to reduce benefits for current teachers is necessary.
CalSTRS' formula, which is based largely on employee salary, age and longevity, tends to reward retirement at age 61½. For example, a teacher who has worked for 35 years, making $90,000 in her final year, could retire at age 62 and reap a $75,600 annual pension -- 84 percent of salary. Teachers can add to their pensions by "buying" additional years.
A pension reform group has drafted a proposal that would cap the state share of future benefits at about 11 percent of salary.
In contrast to the proposed overhaul, teachers' pensions on average currently amount to 55 percent to 60 percent of their salaries, CalSTRS counselor Dave Gillies said.
The pension reformers hope to find a sponsor for their legislation soon, said Dan Pellissier of California Pension Reform. And if the Legislature doesn't pass a bill by mid-May, the group will circulate a petition to put it on the state ballot, he said.
"We have seen polls that 80 percent of likely voters know something needs to be done," said Fritz, an accountant and former CalPERS consultant. "They're listening." CalSTRS is not "headed" for insolvency. It "is" insolvent. I support all moves to rein in this system. The first step is to kill defined benefit pension plans entirely for all new hires. However, that alone would be insufficient. A legal way needs to be found to address those already in the system. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| OPEC Prepared to Pump More Oil; Qaddafi Vows to Fight to "Last Drop of My Blood"; Massive Shiite Protest in Bahrain Posted: 22 Feb 2011 02:09 PM PST Libyan chaos has now turned into a civil war as expected. President Qaddafi vowed to "fight until the last drop of my blood", which of course proves what little concern he has for the citizens of his country. Then again, that is how 30-year dictators stay in power, so the only thing new is the candid arrogance of his statement. Dice Have Been ThrownI highly doubt Qaddafi lasts long. Someone in the military is likely to take him out, sooner rather than later, assuming he does not voluntarily flee. What kind of government eventually gets in power is the key question, and no one has the answer to that. When it comes to civil wars in military dictatorships, history is not often kind. The dice have been thrown but they have not yet landed. As oil-related companies exit Libya, crude prices spiked. However, Saudi Arabia has offered to step up production. In other regional news Shiites have stated a huge protest in Bahrain. Rounding out the news, the Nasdaq closed down over 3% and the S&P 500 closed down over 2%. Corn, wheat, soybeans, oats, and rice all finished limit down, while Brent crude barely finished in the green. Here are some details. OPEC Prepared to Pump More OilThe New York Times reports Saudis, Trying to Calm Markets, Say OPEC Is Ready to Pump More Oil"OPEC is ready to meet any shortage in supply when it happens," the Saudi oil minister, Ali al-Naimi, said at a news conference after a meeting of ministers of oil producing and consuming nations in Riyadh, Saudi Arabia. "There is concern and fear, but there is no shortage."
The intensifying turmoil in Libya drove oil prices sharply higher again on Tuesday, in part because at least 50,000 barrels a day of output had already been suspended. That is only a fraction of what Libya produces, but with foreign oil companies beginning to shut down operations and evacuate workers, the price of Brent crude, a benchmark traded in London, rose to more than $106 a barrel on Tuesday.
Libya sends only a small fraction of its oil to the United States, but since oil is a world commodity, Americans are not immune to the price shock waves.
Refineries on the East and West Coasts, for example, depend on Brent crude, meaning that the higher prices paid by Europeans are also pushing up gasoline and heating oil prices paid by many New Yorkers, New Englanders and other Americans.
Tom Kloza, the chief oil analyst at the Oil Price Information Service, estimated that the Saudis could pump an additional million to million and half barrels of oil in a matter of days. As the largest producer, Saudi Arabia is by far the most influential member of the Organization of the Petroleum Exporting Countries, with a reserve capacity to deliver an additional five million barrels to the world markets after several weeks of preparation. That is roughly three times more oil than world markets would lose if production were halted completely by unrest in Libya.
"Unless this unrest spreads to the streets of Jeddah and Riyadh," Mr. Kloza said, "I think it's a very manageable situation and prices are closer to cresting than they are to exploding higher." I am very much inclined to agree with energy analyst Tom Kloza who says "Unless this unrest spreads to the streets of Jeddah and Riyadh. I think it's a very manageable situation and prices are closer to cresting than they are to exploding higher." The key of course is whether protests spread to Iran, Saudi Arabia or other oil exporters. Qaddafi Vows to Fight to "Last Drop of My Blood"Opposition forces have captured a number of Libyan cities yet Defiant Qaddafi Vows to FightLibya appeared to slip further into chaos on Tuesday, as Col. Muammar el-Qaddafi vowed to "fight until the last drop of my blood" and clashes intensified between rebels and his loyalists in the capital, Tripoli.
Opposition forces claimed to have consolidated their hold over a string of cities across nearly half of Libya's 1,000 mile Mediterranean coast, leaving Colonel Qaddafi in control of just parts of the capital and some of southern and central Libya, including his hometown.
Witnesses described the streets of Tripoli as a war zone. Several residents said they believed that massacres had taken place overnight as forces loyal to Colonel Qaddafi drove through the streets opening fire at will from the backs of pickup trucks.
"They would drive around, and they would start shooting, shooting, shooting," said one resident reached by telephone. "Then they would drive like bandits, and they would repeat that every hour or so. It was absolute terror until dawn."
With the Internet largely blocked, telephone service intermittent and access to international journalists constrained, information from inside the country remained limited, and it was impossible to determine whether the demonstrations were staged.
The rebellion is the latest and bloodiest so far of the uprisings that have swept across the Arab world with surprising speed in recent weeks, toppling autocrats in Egypt and Tunisia and challenging others in Bahrain and Yemen.
Opponents of Colonel Qaddafi had tightened their control of cities from the Egyptian border in the east to Ajdabiya, an important site in the oil fields of central Libya, said Tawfiq al-Shahbi, a protest organizer in the eastern city of Tobruk.
A growing number of Libyan embassies around the world, including in neighboring Tunisia, have also raised the country's pre-Qaddafi flag — now considered the banner of the revolt. Libyan diplomats around the world — including Libya's ambassadors to the United States, India and Bangladesh — said they had resigned to protest the bloody crackdown.
International condemnation of the violence continued to build. "Now is the time to stop this unacceptable bloodshed," said Secretary of State Hillary Rodham Clinton in a statement.
The chaos, meanwhile, rippled through Libya and the region. The Italian oil company ENI confirmed that it had suspended use of a pipeline that goes from Libya to Sicily and provides 10 percent of Italy's natural gas, and Turkey and European nations stepped up the evacuation of their citizens.
An exodus from Tripoli had begun, a witness said, and the freeways were crowded with cars and pedestrians trying to flee. Inside the capital, people waited for hours to buy fuel and bread. There are many more details in the above story. Inquiring minds may wish to read the above link. Massive Shiite Protest in BahrainThe New York Times reports In Bahrain, Shiites Turn Out to ProtestMANAMA, Bahrain — More than 100,000 protesters poured into the central Pearl Square here on Tuesday in an unbroken stream stretching back for miles along a central highway in the biggest antigovernment demonstration yet in this tiny Persian Gulf kingdom.
In a nation of only a half a million citizens, the sheer size of the gathering was astonishing. The protest, organized by the Shiite opposition parties, began in the central Bahrain Mall, two miles from the square and seemed to fill the entire length of the highway between the two points.
Security forces were nowhere to be seen along the demonstration route. The Ministry of the Interior, which has been regularly providing updates on the situation in the capital via its Twitter feed, issued a terse acknowledgment of the protest: "Sheikh Khalifa Bin Salman towards Manama is now closed."
Since the fall earlier this month of President Hosni Mubarak in Egypt, the Sunni royal family in Bahrain has struggled to hold back a rising popular revolt against their absolute rule.
Bahrain is a close ally of the United States in the region, and the Navy's Fifth Fleet is based here, helping ensure the flow of oil through the Strait of Hormuz and the gulf and safeguarding American interests.
Washington's posture toward the Shiite majority, which is spearheading the opposition, could prove crucial to future relations with this small but strategically valuable nation.
Over the years, the American military, the advisers and the human rights advocate said, believed that King Hamad bin Isa al-Khalifa and his court were reform-minded leaders who could advance democracy and preserve stability. That narrative contrasts sharply with the experience of the Shiites, as documented by human rights groups and some of the military's own advisers.
In Bahrain, as in Egypt and Tunisia, the United States finds itself again torn by its desire to preserve relations with autocratic leaders who back American foreign policy interests and by the danger of further alienating Arab public opinion by failing to promote democracy. At the moment, feelings toward the United States are neutral, and in some circles even positive, but they could slip toward hostile, opposition advocates said. Excellent Coverage by New York TimesThe New York Times coverage of these events, including Egypt, has been exemplary, by far the best in the mainstream media. I have used a lot of their content. All three articles above are from the NYT. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Commodities Bloodbath Except Gold, Silver, Crude; Nasdaq Off 2.7%, S&P 400 Off 2%; VIX Shows Little Fear; Will this be the Dip that Won't be Bought? Posted: 22 Feb 2011 11:31 AM PST Commodities and equities are taking a steep dive today with the turmoil in Libya. Please see Libya's Deputy Ambassador Calls for "No-Fly Zone Over Libya"; Crude, Gold, Silver Futures Spike, Equities Hit; Oil Companies Prepare Exit for more details on Libya. Gold and silver are in the green but well off the highs. Energy is struggling to hold on to its gains. Here are a few screen snapshots. click on any chart for sharper imageGrains Metals Energy Financials Indices Items of Note- Agricultural commodities were blasted across the board. Corn was limit down. Most trading at or near the lows.
- Gold and silver are in the green but both are well off the highs.
- Energy is particularly interesting given Libya is the 12th largest energy exporter. Libya produces light sweet crude. Brent crude spiked to 108.57 and is now barely in the green. WTI (West Texas Intermediate) a light sweet crude, spiked by $8.44 but has given quite a bit back. WTI is now up $5.03. I had expected convergence between WTI and Brent and this is a big step in that direction.
- Treasuries are up as one might expect in a flight-to-safety trade. The US$ index was green by a modest amount but is now flat.
- The VIX is up nearly 28% to 21 as I type, but 21 is hardly a measure of severe fear
Big Reversal Day or Another Dip to be Bought?The one big question on nearly everyone's mind is: "Should I buy the dip tomorrow or should I wait for two days?" Indeed dip-buying is so firmly entrenched many dip-buyers are probably loading up today. I do not know if this is just another dip to be bought or the start of a major trend reversal. However, no one else knows either. What I do know is history suggests it is not prudent to be in this market without significant hedges. Optimism in general and earnings expectations in particular are at insane levels, and PEs are priced well beyond perfection. I presented the bearish case for equities in Negative Annualized Stock Market Returns for the Next 10 Years or Longer? It's Far More Likely Than You ThinkIf you haven't read it, please do. If you have read it, you may wish to give it a second look. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Libya's Deputy Ambassador Calls for "No-Fly Zone Over Libya"; Crude, Gold, Silver Futures Spike, Equities Hit; Oil Companies Prepare Exit Posted: 22 Feb 2011 01:48 AM PST Protests in Libya have now entered their 8th day. In a decidedly different tone to the revolts in Egypt and Tunisia, Libyan authorities shot at demonstrators from war planes and helicopters. Please see Warplanes, Militia Fire on Libyan Protesters; Libya's U.N. Diplomats Break With Qaddafi, Call Leader "Genocidal War Criminal" for details. In response to those plane attacks, Libyan diplomats are now asking the US and UN for help. Libya's Deputy Ambassador has asked for a "No-Fly Zone Over Libya" Oil Companies Prepare for ShutdownThe Financial Times reports Oil groups prepare to close down in LibyaOil production in Libya is set to drop dramatically as major international companies and sub-contractors evacuate their staff from the north African country, potentially sending oil prices much higher.
Crude oil prices shot up on Monday to a fresh 2½-year high above $105 a barrel as traders braced for the impact of political unrest in Libya, the first major oil exporting country to be hit by turmoil in the Middle East. Brent rallied further in after-hours trading, up to $108.70 a barrel.
Given that Libya is the 8th-largest oil-producer in OPEC and the 12th-largest exporter overall, oil futures are flying this evening, while equities are getting hammered.
Oil traders offered conflicting reports about oil loadings at Libyan ports, with some reporting problems at several terminals and refineries and others saying that vessels were still load. Shipbrokers said some vessels were refusing to sail to Libya.
The country is the world's 12th largest oil exporter and a critical supplier to European countries. Italy, Germany and France imported last year more than half of Libyan oil.
While Libya's state-owned national oil company controls the majority of the country's oil production, international oil companies are key for sustaining output through joint ventures. Sub-contractors are also essential to run the fields.
Oil prices jump as violence spreads in LibyaThe LA Times reports Oil prices jump as violence spreads in LibyaUnlike Egypt, Tunisia and Bahrain, which are not major oil producers, Libya is a member of the Organization of the Petroleum Exporting Countries, or OPEC. The world's 12th-largest oil exporter, Libya sells most of its 1.8-million-barrel daily output to Europe. Citizen protests and the attempts by the government of Moammar Kadafi to suppress the demonstrations have begun to squeeze the country's oil production.
A German oil venture is suspending its daily production of 100,000 barrels, while other major oil companies have started to evacuate family members and non-essential employees from Libya. The Nafoora oil field in a prolific part of the country has been shut down by strikes, the Al Jazeera news network reported. A tribal leader in eastern Libya, home to several major fields, also told Al Jazeera that his tribe "would stop oil exports to Western countries" if the regime did not end its violent crackdown.
The regime's spokesman, Kadafi's son Seif Islam, said oil fields could be attacked by "thugs" if the protests go too far.
"We will have a new Libya, new flag, new anthem," he said Sunday in a rambling, often combative speech that was the regime's attempt at compromise. "Or else, be ready to start a civil war and chaos and forget oil and petrol."
On Monday, the U.S. average price for a gallon of regular gasoline rose to $3.171, up from $3.126 a week earlier, according to the AAA Fuel Gauge Report. California's average gasoline price, the highest in the U.S. except for Hawaii and Alaska, rose to $3.561 a gallon, up more than 11 cents from last week's $3.450.
At the downtown Los Angeles Shell station on Olympic Boulevard at Grand Avenue, Mya Ross of Culver City uttered a profanity when she saw the $3.91-a-gallon price, even though her 2005 Toyota Corolla is thrifty in terms of fuel economy. She said she refuses to buy more than a few gallons at a time when prices are this high. "I get so disgusted," said Ross 23. "But it's kind of silly because it just means I stop at more gas stations and get angry all over again."
Libya exports "light sweet," or low-sulfur, crude, which is prized for gasoline production and could be hard to replace, even if the Saudis step in, said Edward Morse, head of commodities research for Credit Suisse. Equity and Futures MarketsAs one might expect, oil futures are flying, as is gold. Silver was up $1.64 but has given back most of that. The US dollar is firm. Here are a few details as of 3:00 AM Central. - S&P 500 Futures are -22 points, -1.64%
- Nasdaq 100 Futures are -42 points, -1.77%
- WTIC Crude is up $8.24 to $97.94
- Brent Crude is up $1.97 to $107.71
- Gold is up $12.60 to $1401 having reached as high as $1411
- Silver is up $.60 to $32.90 having reached as high as $34.32
- US$ index is +$.47
This can easily change a great deal by morning. Brent Crude click on any chart for sharper imageWTI Crude Equity Sea of Red - Asia click on any chart for sharper image
Equity Sea of Red - Europe The European markets were not yet closed when I took that snapshot. All will likely close in the red but Asia got hit harder with the Shanghai stock index off 2.6%. Live Blog LibyaHere is a link to the Al Jazeera Libya Live Blog Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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