Detroit

• Triumph Confirms 'Era of Merkelism' (Spiegel)
• Merkel must reach out to leftist rivals after poll triumph (Reuters)
• Norwegian Air says both its Dreamliners hit by technical issues (Reuters)
• Chinese court gives Bo Xilai life sentence (CBS)
• Social Dems Deflect Talk of Merkel Alliance (Spiegel)
• Blasts shake Nairobi mall, smoke pours from building (Reuters)
• Open-Government Laws Fuel Hedge-Fund Profits (WSJ)
• Forbes Calls Goldman CEO Holier Than Mother Teresa (Matt Taibbi)
• BlackBerry move away from consumers unlikely to stem decline (Reuters)
• And another Greek strike: Greek teachers, civil servants to strike against layoffs (Reuters)

To say that bonds are under pressure would be an understatement. Over the last few months, sentiment about fixed income has flipped dramatically: from a favored investment destination that is deemed to benefit from exceptional support from central banks, to an asset class experiencing large outflows, negative returns and reduced standing as an anchor of a well-diversified asset allocation. Similar to prior periods, history will regard the ongoing phase of dislocations in the bond market as a transitional period of adjustment triggered by changing expectations about policy, the economy and asset preferences – all of which have been significantly turbocharged by a set of temporary and ultimately reversible technical factors. By contrast, history is unlikely to record a change in the important role that fixed income plays over time in prudent asset allocations and diversified investment portfolios – in generating returns, reducing volatility and lowering the risk of severe capital loss. Understanding well what created this change is critical to how investors may think about the future.

Much to the amazement of doom-and-gloomers, everything's been fixed and as a result, everything's great. The list is impressive: China: fixed. Japan: fixed. Europe: fixed. U.S. healthcare: fixed. Africa: fixed. Mideast: well, not fixed, but no worse than a month ago, and that qualifies as fixed. Doom and gloomers have been wrong, just like Paul Krugman said. The solution to every problem is at hand: create more money and credit, in ever larger sums, until a tsunami of cash washes away all difficulties. Let's scroll through a brief summary of everything that's been fixed.

As opposed to the "pixie dust tout of fairy tales forever" that is trotted out by the herd every day, the fllowing brief look at Taper realities, 'manufactured' numbers unreality, systemic Muni bonds concerns, and of course, political risk provide color for what was described this morning on CNBC as a market bereft of 'bear market theses. As Tartakower once wrote, "The winner of the game is the player who makes the next-to-last mistake;" until then ts all foreplay.

• Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
• Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
• Five years after Lehman, risk moves into the shadows (Reuters)
• U.S. shares raw intelligence data with Israel, leaked document shows  (LA Times)
• Japan to raise sales tax, launch $50 bln stimulus (AFP) - so 1) lower debt by sales tax, then 2) raise debt through stimulus.
• Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
• Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
• Brussels probes multinationals’ tax deals (FT)
• Wall Street's Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) ... and fails
• Tablet sales set to overtake PCs (FT)
• The end of angst? Prosperous Germans in no mood for change (Reuters)

"Not only was it a civil war, an effort by a people who had for years been seeking their liberation from any colonial influence whatsoever, but also we found that the Vietnamese whom we had enthusiastically molded after our own image were hard put to take up the fight against the threat we were supposedly saving them from. We found most people didn't even know the difference between communism and democracy. They only wanted to work in rice paddies without helicopters strafing them and bombs with napalm burning their villages and tearing their country apart. They wanted everything to do with the war, particularly with this foreign presence of the United States of America, to leave them alone in peace..."

10 years ago last month, Detroit (along with most of the North-East) suffered a major blackout. It seems, in an awkward anniversary remembrance, two main electrical lines have failed in downtown Detroit. As WXYZ reports, some of Detroit’s municipal buildings as well as downtown traffic lights and the People Mover are without power. Parts of the Wayne State University campus in midtown also have no electricity. Power went out just after 1:00 p.m. Only a few more hours until dark... just beware the packs of rabid dogs...

In the first three parts (Part 1, Part 2, Part 3) of this disheartening look back at a century of central banking, income taxing, military warring, energy depleting and political corrupting, we made a case for why we are in the midst of a financial, commercial, political, social and cultural collapse. In this final installment we’ll give our best estimate as to what happens next. There are so many variables involved that it is impossible to predict the exact path to our world’s end. Many people don’t want to hear about the intractable issues or the true reasons for our predicament. They want easy button solutions. They want someone or something to fix their problems. They pray for a technological miracle to save them from decades of irrational myopic decisions. As the domino-like collapse worsens, the feeble minded populace becomes more susceptible to the false promises of tyrants and psychopaths. Anyone who denies we are in the midst of an ongoing Crisis that will lead to a collapse of the system as we know it is either a card carrying member of the corrupt establishment, dependent upon the oligarchs for their living, or just one of the willfully ignorant ostriches who choose to put their heads in the sand and hum the Star Spangled Banner as they choose obliviousness to awareness. Thinking is hard. Feeling and believing a storyline is easy.

"It's getting concerning," notes one fixed-income banker, Puerto Rico muni bond yields "never got near 10% [yields] even in the crisis." Some of the 27-year maturity Puerto Rico bonds just traded at a dismal 67 cents on the dollar (10.082% yield) and the most recently issued 2036 Electric Power bonds have collapsed from par a month ago to just above 82 cents on the dollar today. As the WSJ reports, the fall in prices also is a sign of investor risk aversion in the wake of Detroit's record municipal-bankruptcy filing in July; but it seems the anxiety and outflows from ETFs is having just as big an impact as Puerto Rico bonds now trade cheaper than Detroit's. "It's out of whack," one analysts warns, though the island's double-digit unemployment and recent weakness in economic indicators somewhat support the concerns - and while the "yields are attractive" it is possible that the island's borrowing costs could go higher as supply is extremely heavy in coming months. With 77% of managers holding Puerto Rico bonds, this is a problem...

Japan’s vast network of local banks: caught between slack loan demand from businesses and the treacherous currents of Abenomics

On the eve of the eighth anniversary of Hurricane Katrina the Greater New Orleans Community Data Center, which has been tracking recovery indicators since the early months after the storm, issued a snapshot of post-Katrina statistics... and the results are mixed. From the good (63% of New Orleans students passing vs 30% pre-Katrina); to the bad (rising adult unemployment and child poverty rates); to the ugly (rapidly collapsing population dynamics reflecting a very 'detroit'-like scenario), it seems there is still work to be done...

There’s too much of a sameness about Japan and the USA today. The Land of the Rising Sun and good old Uncle Sam have been copying each other far too much and now it seems as if they are railroading on the same train to the Land of Debt.

A month ago we reported that US fast food workers in several US cities, namely New York City, Chicago, St. Louis, Detroit, Milwaukee, Kansas City, Mo., and Flint, Mich., walked out Monday in a one-day strike demanding a doubling of their pay. Not unexpectedly, even though the president himself has been a strong proponent of rising the minimum wage, the corporations balked and the strikers achieved nothing and just in case there is some confusion, there is a lot of minimum skills, minimum wage applicants (not to mention robots) out there which translates into two words for the strikers: no leverage. However, these concepts may be foreign to a fast-food labor force that probably just wants a day out in the nice weather and to take a break from hard work for a change.

While Case Shiller is about as backward looking an indicator as they come (June housing data when it is almost September is pretty much completely useless), today's release showed yet another miss relative to expectations, with the 20 City Composite posting a monthly increase of 0.89%, missing expectations of 1% (for the second month in a row), was the third consecutive month of a slowing growth, and the lowest sequential growth since November 2012.

After the banks, after the city of Detroit it will be the USA that will be going bankrupt and filing for Chapter 11 bankruptcy. If only that were possible! But unfortunately it won’t be.