What is happening to you America? Once upon a time, the United States was a
place where free enterprise thrived and the greatest cities that the world had
ever seen sprouted up from coast to coast.
Good jobs were plentiful and a manufacturing boom helped fuel the rise
of the largest and most vibrant middle class in the history of the planet. Cities such as Detroit, Chicago, Milwaukee,
Cleveland, Philadelphia and Baltimore were all teeming with economic activity
and the rest of the globe looked on our economic miracle with a mixture of
wonder and envy. But now look at
us. Our once proud cities are being
transformed into poverty-stricken hellholes.
Did you know that the city of Detroit once actually had the highest
per-capita income in the United States?
Looking at Detroit today, it is hard to imagine that it was once one of
the most prosperous cities in the world.
In fact, tourists now travel to Detroit from all over the globe just to
see the ruins of Detroit. Sadly, the
exact same thing that is happening to Detroit is happening to cities all over
America. Detroit is just ahead of the
curve. We are in the midst of a
long-term economic collapse that is eating away at us like cancer, and things
are going to get a lot worse than this.
This past week Detroit stopped making debt
payments. Chapter 9 bankruptcy looms, the largest municipality in the nation to
file for bankruptcy protection is on the horizon: an ominous portrait of severe
cash flow shortages, junk credit ratings and at least $17 billion in long-term
obligations that, if left unchecked, will eat up about 65 percent of the city’s
total revenue by 2017. A city once home to 1.8 million residents now has a
population of 700,000. Roughly one-third of the city is unoccupied.
Since 1954 more than 60 cities, towns,
villages or counties have filed for Chapter 9. Of those 29 were dismissed or
resolved before reaching a final plan. Large cities in trouble like New York
and Cleveland in the 1970s and Philadelphia in the 1990s have found other paths
outside of bankruptcy court to ease financial hardship. What will happen when a
city the size of Detroit files bankruptcy is uncertain? This is a problem that
will not go away; bankruptcy is on the horizon for cities like Newark, New
Jersey; Pomona, California; and Gary, Indiana.
BONDS PLUNGE PUTS FED IN SPOTLIGHT - "The bond market's month long plunge has pushed
long-term interest rates on mortgages and U.S. Treasurys to their highest
levels in more than a year, sparking a debate: Is this a bursting bubble, the
aftereffect of clumsy Federal Reserve communication or a welcome sign the U.S.
economy is, at last, on the mend. Yields on the benchmark 10-year U.S. Treasury
note now stand above 2.1 percent - still low by historic standards, but nearly
half a percentage point higher than at the start of May. Rates on 30-year
fixed-rate mortgages rose a hair above 4 percent this week ... Six months ago,
they were below 3.5 percent. With stock prices, movements are easy to read: Up
is good. Down is bad. Reading the bond market is trickier.
"One camp sees the recent fall in bond
prices ... as confirmation of a bond-market bubble fueled by the Fed and bound
to end badly, retarding an economy whose growth is already painfully slow. ...
Another camp sees the same trends as a welcome move toward more normal interest
rates and a signal of better times ahead. The anomaly isn't the recent rise,
but the drop in yields at the end of April to levels lower than those recorded
during the Depression. ... If the bond market were signaling panic or loss of
confidence in the U.S. economy, proponents of this narrative say, stock prices
and the U.S. dollar would be falling, too. But since bonds turned at the start
of May, the Standard & Poor's 500-stock index has climbed 3.6 percent and
the WSJ Dollar Index 2.3 percent."
WARREN BUFFETT'S RISING STAR - "When
Tracy Britt arrived in Omaha, Neb., in 2009 to meet with Warren Buffett, she
brought a Harvard M.B.A., a glittering resume and a boatload of ambition. But
she also brought the famed investor a gift to highlight their shared Midwestern
roots: a bushel of corn and a batch of tomatoes. The seed Ms. Britt planted
that day yielded quick results: a job for Ms. Britt as Mr. Buffett's financial
assistant at Berkshire Hathaway Inc ... Almost four years later, it has
blossomed further, with Ms. Britt emerging as one of Mr. Buffett's top
lieutenants and even serving as chairman of four companies within his $284
billion conglomerate. ...
"Ms. Britt, now 28 years old and more
than five decades younger than her boss, occupies a role unlike any other
within Berkshire. With an office next to Mr. Buffett's at Berkshire's
headquarters, Ms. Britt helps with financial research, accompanies Mr. Buffett
to meetings and occasionally drives him around town. The billionaire gradually
tacked on additional responsibilities. The firms in which she serves as
chairman, including building-products company Johns Manville Corp. and paint
manufacturer Benjamin Moore & Co., total more than $4 billion in annual
sales."
MORE AMERICANS GET COLLEGE DEGREES - "The number of Americans graduating from college has
surged in recent years, sending the share with a college degree to a new high,
federal data shows. The surge follows more than two decades of slow growth in
college completion, which caused the United States to fall behind other
countries and led politicians from both parties, including President Obama, to
raise alarms. Last year, 33.5 percent of Americans ages 25 to 29 had at least a
bachelor's degree, compared with 24.7 percent in 1995, according to the
National Center for Education Statistics. In 1975, the share was 21.9 percent.
... The increases appear to be driven both by a sharp rise in college
enrollment and by an improvement among colleges in graduating students. The
trends could bring good news in future years, economists say, as more Americans
become qualified for higher-paying jobs as the economy recovers."
MANAGEMENT 101 – How is it when a
local University employee, whose title is Director of External and Summer
Programs, takes a vacation during the middle of summer programs? You would
think this position’s duties would require no vacation during the summer
months. Another example of Management 101.
BIRTHDAYS THIS WEEK – Birthday
wishes and thoughts this week to: Danny Aiello (80), Senator Dianne Feinstein
(80), Barry Manilow (70), Meryl Streep (64), Venus Williams (33).
JACK ASS OF THE MONTH – There are many
candidates for this months’ Jack Ass award but we would like to single out Mr.
Bill O’Reilly of Fox News for his Jack Ass actions of the past month. His
repeated attempts to undermine and lie about the Obama Administration, his head
in the sand view of Republican policies, and his overwhelming hypocrisy has
earned him the Jack Ass award for this month. I admit he is entertaining, but
not a source for accurate news information.
THE SWAMI’S TOP PICKS: NHL Playoffs,
Stanley Cup Finals – Chicago Black Hawks in seven; NBA Finals – San Antonio
Spurs in seven. Season to date (9-6)
DRIVING THE WEEK – Federal Reserve
Open Markets Committee meets this week with a policy announcement and Ben
Bernanke news conference on Wednesday. There is little to no chance the central
bank will start pulling back on quantitative easing at this meeting. But
nervous markets will hang on every syllable about when and under what
circumstances the Fed will start slowing its current purchase rate of $85
billion in securities each month. HFE's Jim O'Sullivan: "Mr. Bernanke ...
will emphasize that any change in policy will be dependent on the data; that
they are not ready to move yet; that tapering is not tightening, just less
easing; that the rate of purchases could also be increased; and that actual
tightening is still a long way away."
QUOTE OF THE MONTH – “The truth will set you free. But first, it will piss you off.” Gloria Steinem
Next week: words of the month and summer
reading.
Until Next Monday, Adios!
Claremont, CA
June 17, 2013
#IV-9, 166
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