Archive - Jul 24, 2013 - Story

With parent income and savings dwindling, grants and scholarships (and student loans) are making up a greater and greater share of the budget for the typical family paying for college.

"We are left in the world of Wile E. Coyote who had the habit of dashing off cliffs in the pursuit of the elusive Road Runner, before  noticing the thin air below. Plenty of economists and money managers have their eyes fixed on leading indicators and tell me that Southern Europe’s economies are "stabilizing" and "prosperity is around the corner." In reality economic activity in Greece, Portugal, Italy, Spain, and also France, is collapsing."

In every era, there are certain people and institutions that are held in the highest public regard as they embody the prevailing values of society. Not that long ago, Albert Einstein was a major public figure and was widely revered. Can you name a scientist that commands a similar presence today? Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value. Money is power. And history has shown that power is never ceded spontaneously or willingly. But the stability of this parasitical system begins to weaken quickly when the lifeblood it depends on begins to dry up. And that's when things can begin to go south in a hurry

The judge has decided to over-rule both objections and that nothing with regard the Chapter 9 process is held up.

• *DETROIT JUDGE OVERRULES OBJECTIONS CLAIMING BANKRUPTCY INVALID
• *DETROIT JUDGE SAYS HE HAS POWER TO GRANT GOVERNOR SUIT IMMUNITY
• *DETROIT BANKRUPTCY FILING IS VALID, FEDERAL JUDGE RULES
• *DETROIT BANKRUPTCY ELIGIBILITY TO BE DECIDED IN FEDERAL COURT

Now, we proceed to the Federal eligibility hearing (whether the city is eligible to proceed with Chapter 9). Remember this took almost a year with Stockton, CA. For now, Unions 0 - Orr 1 but it seems like neither side will be a winner when this is all over (which makes sense as while there is the law and the Obama-law, there is simply no money). The current plan (for now rejected by creditors) means a 90% loss for muni-worker retirees, 81% loss for unsecured creditors, and a 75% loss for secured creditors.

Presenting: the American middle class and its leader.

Did the world of retail investors just realize that they are indeed the greater fool (as we showed here), as it seems this high-volume dip in US equities - the largest since the July 5th ramp-fest began - is not seeing the BTFATH mentality coming in quite yet. Or perhaps it is the somewhat belligerent tone that the President is using towards the hard-working US CEOs who see profits over employment.

Just 45% of those surveyed in the NBC News-WSJ poll said they approved of the job the President was doing. This is a big drop from just a few months ago - even as stocks surge (and apparently so do jobs?). This is close to the lowest ever approval rating for a President proclaiming things are on the up. Congress is even worse - with its lowest approval rating on record - as bad as during the debt-ceiling debt debacle. What is most stunning is that a huge 57% of those surveyed would vote fopr a ballot measure to replace all members of Congress. As is clear from the charts below - people in the real economy do not care about the market (anymore) as it appears the link between Obama's popularity and stocks broke in February 2013.

We had absolutely no concern about the outcome of today's 5 Year auction: after all, when push comes to shove, Bill Gross who yesterday was pitching 5 Year bonds to twitter would have certainly bought up the entire issue. Yet we were surprised to find that Direct Bidders, among which such bond kings as PIMCO, tendered only $6 billion (a 47% hit rate) in bids into today's $35 billion auction. Odd - could Bill Gross have been untruthful in expressing his interest in the bond and was merely looking for greater fools? Unpossible.

With his report cards firmly in the 'failing' category, President Obama begins his own 'New Deal' path. Starting with today's speech at Knox College (scheduled to begin at 1255ET), Obama will unveil his grand plan for "A Better Bargain for the Middle Class." Explaining what it means to be 'middle-class in America' (who are ranked 27th in the world), he notes "the success of our economy has always depende not just on the size of our GDP, but on the reach of our prosperity." Sounds to us like some more wealth transfer is on its way. As long as Bernanke can keep elevating stock prices then the wealthy can afford to vig a few points off to the plebians to keep the social unrest at bay.

As the President prepares to address Congress (and the nation) with his next new new 'better bargain' deal to secure the economic future for the US, we thought it appropriate to dust off the economic scorecard for how things are going under his old new deal. Obviously, the President of the United States is not really solely responsible for where we are economically. The condemnation, or praise, must be applied equally to all branches of government responsible for the fiscal and monetary policy decisions made. The problems that exist today were not due to just the last few years of excess but rather come as a result of more than 30 years of fiscal irresponsibility that spans both Republican and Democratic Administrations alike. However, since President Obama has taken the position of responsibility for "clearing away the rubble and getting us back to where we were", we can review the economic data to see whether, or not, this is indeed the case.

French bonds are rallying; French stocks are rallying; French PMI is rising (though still below 50); so everything must be great in the Gallic nation. Despite a Brit having won the Tour de France for the 2nd year in a row, however, it seems the dismal reality on Main Street is that the number of unemployed French people has reached yet another all-time record high. As Les Echos noted previously, this casts even greater doubt on President Francois Hollande's pledge to reverse a long-running rise in joblessness. As we have explained in great detail (here and here most recently) France's economic fortunes remain depression-like and today's Jobseeker data merely goes to confirm this.

Several days after Schrodinger's Egyptian coup, which is both a particle and a wave, but certainly not a coup in the eyes of the Muslim Brotherhood-backing Obama administration, the Pentagon decided that it would go ahead and proceed with a previously planned sale of several F-16 fighter jets to the country, even though it was unclear just who the recipient would be: the revolutionary forces or the previous administration. Moments ago AP reported that this sale has now been "delayed" for reasons unknown.

Today's entertaining European PMI data has gotten quite a few participants excited, with some of the more tabloidy elements even proclaiming that the recovery has arrived. Amusing: one wonders if they did the same when the European PMI printed above 50 the last time around Europe "telegraphed" a recovery back in early 2012 only to crash and burn promptly thereafter. The answer, of course, is rhetorical. Sadly for Europe, not its subsidized industrial complex, what PMI does is a month to month phenomenon driven by FX, government injections, and restocking cycles. A far more important question to the overall European economy caught in a Keynesian debt trap is what is happening with credit creation. It is here that the true fundamental problem affecting Europe is exposed and demonstrates precisely what it is that keeps Mario Draghi up at night.

Portugal, Spain, and Italy all saw healthy high-beta gains in stocks and bonds today as the EU Composite PMI printing fractionally above 50 'proves' the crisis is over (just like it did in January 2012). Bunds suffered in this 'growth' rennaisance - underperforming Treasuries by 2bps and rising 9.5bps on the day. This is the worst day in Bunds in 5 weeks. Sell-side strategists couldnt get out of each other's way fast enough to proclaim the 'bottom is in'. Sadly, Greek stocks and bonds did not manage gains on the day as delays remain (even though D-Boom promised it will all be fine by July 29th).

With the Detroit bankruptcy hearing under way (constitutional crises notwithstanding), we thought it useful to cut through the rhetoric, break-down the mutally-assured-destruction barriers, and peer into the cold-hard facts as the city looks to restructure its $18 billion in debt.