Pension Amendment

  • Amendment 49 on the November ballot in Illinois is cleverly drafted to concentrate more monetary power in the same Springfield legislative leaders who have de facto bankrupted the Illinois Treasury. With $83 billion in projected liabilities, Illinois has the nation’s largest state budget crisis.

    Amendment 49 is crafted to strip local governments and voters of current decision-making prerogatives and transfer those decisions to Springfield.

    Among other subterfuges, Amendment 49 overrules and destroys the Illinois Constitutional protection against eliminating or reducing earned benefits, such as pensions for state retirees who by state law cannot receive Social Security and, in many instances, cannot receive Medicaid. 
This is where the big problem appears to be:
  • For example, hidden in the “last sentence” is the new constitutional provision: “(d) Nothing in this Section shall prevent the passage or adoption of any law, ordinance, resolution, rule, policy or practice that further restricts the ability to provide a ‘benefit increase,’ ‘emolument increase,’ or ‘beneficial determination’ as those terms are used under this Section.”

    Thus, Amendment 49 overrules the current Constitutional safeguard known as the “non-impairment provision” in Article XIII, sec. 5, of the Illinois Constitution.
This proposal appears to have a lot of baggage attached to it, a lot of unanswered questions, and needs to be studied quickly by the unions so the impact can be judged in time for the elections that are less than 40 days away. The fact that Madigan rushed this through is enough of a reason for us to vote against it - judge accordingly.

Dallas Favored by 3.5


Take Dallas anyway. The Bears' inconsistency so far doesn't inspire confidence.

Tweet the Guns Away

Way to look like you're doing something, when in fact, you are doing nothing at all:
  • The city of Chicago is asking residents with ideas on how to get illegal guns off the streets to share their thoughts – in 140 characters or fewer on Twitter.

    The initiative is part of Chicago Ideas Week, an annual forum for innovators, artists, scientists and others to share ideas and inspire action.

    Those who think they know how to cut off the flow of illegal guns into Chicago– which has strict gun control laws– are being asked to tweet suggestions with the hashtag #whatifchicago.

    The best submitted ideas will be debated at an Oct. 11 panel discussion.
Of course, the comments are where the entertainment lies. Most of the ones we saw encourage sensible gun ownership and law abiding citizens be allowed some form of Concealed Carry.  Forty-nine other states can't be wrong.

What If I Am Wrong About Europe?

I have long stated the eurozone will breakup. Historically speaking, no currency union has ever survived in the absence of a political union.

Moreover, in It's Just Impossible I noted

  1. The Bundesbank said there should be no banking union until there is a fiscal union.
  2. Angela Merkel said that there should be no fiscal union until there is political union.
  3. François Hollande said that there should be no political union until there is a banking union.
  4. The German supreme court will not allow a political union nor a fiscal union, nor a banking union without a German referendum.

Mathematically Speaking

Mathematically speaking, I also fail to see how the eurozone can stay intact.

Specifically, please consider point number nine of Michael Pettis: Long-Term Outlook for China, Europe, and the World; 12 Global Predictions
9. Disruptive European Politics

European politics will become much more difficult and disruptive. The historical precedents are clear. During a debt crisis the political system becomes fragmented and contentious. If the major parties don’t become radicalized, smaller radical parties will take away their votes.

Remember that the process of adjustment is a political one. We all know someone has to pay for the massive adjustment countries like Spain must make. The only interesting question is about who will be forced to take the brunt of the payment – workers in the form of unemployment, the middle classes in the form of confiscated savings, small businesses in the form of taxes, large businesses in the form of taxes and nationalization, foreigners, or creditors.

Deciding who pays is a political process, and because the stakes are so high it will be a very bitter process. This means, among other things, that politics will degenerate quickly, and of course if Europe doesn’t arrive at fiscal union in the next year or two, it probably never will. This conclusion is also the reason for my next prediction.
That prediction was made by Michael Pettis, and I am in complete agreement.

But what if I am wrong?

Can Politics Triumph Over Math and History?

What if the eurozone in spite of all obstacles stays intact? Daniel Hannan is a writer and journalist, and Conservative MEP for South East England since 1999 offers an interesting viewpoint for The Telegraph in Spain teeters on the brink
All of a sudden, the talk is of the breakdown, not just of the single currency, but of the parliamentary system on which it rests. Commentators across Europe fret that Spain, which emerged from dictatorship less than 40 years ago, might give up on multi-party politics.

Every round of economic figures is worse than the last. The deficit is massively larger than forecast. A bailout of unprecedented size is becoming inevitable, even as the prime minister gives his countrymen a ‘one hundred per cent assurance’ that he won’t apply for one. (He said much the same thing a few days before applying for the last one.)

Hundreds of thousands of people are protesting, some violently.  ....

The real tragedy of the euro is not that it will come crashing down upon the financial system, as Smaug upon Esgaroth, splintering it to sparks and gledes. The tragedy, rather, is that the monetary union will limp on, condemning hundreds of millions to gradual immiseration.

I am still trying, as gently as I can, to suggest that there is an alternative to the euro-imposed bailout racket. I did so again in our most recent parliamentary session, as you can hear in the clip above.

The trouble is that, while Spaniards recognise the folly of imposing cuts while at the same time bailing out banks, they shy away from the logical conclusion: that leaving the euro is now the least bad option.

The real threat to Spanish democracy is not internal but external; not a pronunciamiento but a Brussels-imposed civilian junta, as happened in Italy.  Mario Monti, the EU’s proconsul in Rome, indicated yesterday that he ‘might seek a second term’. Oddly, I don’t remember him seeking the first.
Sad Reality

The sad reality is Spain and Italy may linger on just as Greece did, destroying their countries in the process.

Consider once again what I said on September 26, in Firebombs, Teargas, Riots Near Greek Parliament; 57% Say Greece Should Abandon Pledges Made to Troika
Sentiment Has Turned

Sentiment in Greece has turned, and likely turned for good. 57% of Greeks have had enough of austerity to the point they would rather default.

Turn back the hands of time a bit and think how this might have played out if Greece simply left the euro and defaulted three years ago as it should have. Tourism would likely have increased and if  Greece had implemented true structural reforms rather than tax hikes, its economy would be stable or recovering now.

Instead, the country is in ruins, tourism is down, and in an on-again-off-again fashion, absolute chaos breaks out.

Another round of austerity and tax hikes can only make things worse at this point, and the people know it. This will pressure political parties to not go along with Samaras.

If another round of elections were held today, there is no way Samaras would win. Instead, the radical left, and radical right (both of which want to exit the euro), would be fighting over the pieces.

The nannycrats in Brussels and Chancellor Merkel are to blame for this sad state of affairs.

Finally, please note that the big fear of the nannycrats and Merkel is not that Greece leaves the euro per se, but rather Greece leaves the euro and the Greek economy starts to recover.

Well, here's the deal and it is something I said years ago: the sooner Greece abandons the euro, tells the Troika to go to hell, and defaults, the better off it will be
Same Track, Wrong Track

Spain, Greece, Portugal, and Italy are all on the same track and the wrong track. All need work rule reform and lower taxes. Instead, the countries have been short on productivity improvement, short on pension reform, short on work rule reform, and long on tax hikes.

It is no wonder their economies are imploding. It is no wonder protests are getting louder. Yet the political class, beholden to the banks and the IMF have taken the wrong track.

In the end, I highly doubt I will be wrong.

In the meantime, however, Telegraph writer Daniel Hannan appears to be correct in his assessment "the tragedy is that the monetary union will limp on, condemning hundreds of millions to gradual immiseration."

Mike "Mish" Shedlock

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At Some Point the Hat Runs out of Rabbits; First Catalonia, Now Basque Separatists Call for Independent Country; El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

Calls for the splintering of Spain have picked up steam. Euskal Herria Bildu (EHB, a left-wing, Basque nationalist party) has called for "A Great National Act" in Favor of Independence according to El Pais.
EH Bildu has called "a great national political act" in favor of the independence of the Basque Country for the next October 13 in the BEC Barakaldo (Bizkaia), announced its candidate for lehendakari, Laura Mintegi in an appearance before the media at EA headquarters in Bilbao.

Mintegi explained that the purpose of the meeting is to claim a free Basque state in Europe. The nationalist left has led in recent times to BEC, in a space with a capacity for 15,000 people, some of his most important acts to demonstrate their ability to mobilize. force.

The sovereignist coalition vindicate independence there to say "clearly and directly" to those "who do not want to hear, who kidnap our rights in the name of the Constitution imposed on us" you want "a free state in Europe."

Mintegi has defended "the pressing need to build a framework sovereign" in the Basque country that allows this community to have the tools to address their own economic, social and employment. "Only from the sovereignty we orient our policies towards true social justice," said the candidate.

In his view, "it is truly reckless remain at the expense of a corrupt system like Spanish, you're sacrificing the rights and freedoms of all the people to ensure the interests of a political and economic elite." With the "corrupt system" called on "break ties".
El Pais Survey Shows 43% Catalans For Independence, 41% Opposed

According to El Economists, Catalan Separatists Not Quite at Absolute Majority.
About the option of independence for Catalonia, El País published a survey in which, in case of a referendum, 43% would vote for secession, compared with 41% who would decide against.

The complete data interpretation contrasted with other numbers registered in June, when only 21% of respondents said anti-secession and another 21% abstained. The current difference can be understood as a translation of abstention towards not to Catalan independence, which in June this survey enjoyed the favor of 51%.

Various surveys seem to be fluctuating wildly so I am not sure any of the are accurate at the moment. That said, it is clear anger over austerity measures is picking up steam. Protests in numerous countries is proof enough.
At Some Point the Hat Runs out of Rabbits

I am sticking to my long held belief that "Eventually will come a time when a politician will hold up a copy of the EMU treaty, declare it null and void, and the debt null and void right along with it. That politician will be elected."

Yields have come down since my July 24, appearance on Capital Account: Discussion of Social Media Panic in Italy, Soaring Yields in Spain, and the Upcoming 20th Euro Summit, Bound to be Another Failure so it appears there was another rabbit left at the time.

However, the government of Portugal recently had to back off announced austerity measures following a mass protest, and additional protests elsewhere have become more frequent and more violent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Austerity Programs Hit France; Marchers Demand Vote on Treaty; Hollande Reneges on Campaign Promise

Following protests in Portugal, Spain, and Greece, a wave of Leftists march in Paris against austerity.
Thousands of leftists marched through Paris on Sunday demanding a referendum on the EU’s new fiscal discipline treaty in the latest of a series of anti-austerity protests in countries hit by the eurozone crisis.

The demonstration, the biggest political rally in France since May elections brought Socialist president François Hollande to power, followed protests on the streets of Madrid and Lisbon on Saturday.

The communist-backed Left Front and 60 other organisations backing the Paris march said tens of thousands of supporters turned out for the protest, timed to coincide with the opening this week of a parliamentary debate on ratification of the fiscal treaty, which Mr Hollande had originally vowed to renegotiate.

Jean-Luc Mélenchon, the Left Front leader, said austerity policies were “dangerous for all the people of Europe”. Demanding a vote on the treaty, he added: “Democracy is sicker than we thought.”

analysts worry that the recent upsurge in political unrest in Portugal, Spain and Greece – where the neo-Nazi Golden Dawn party has risen to third in national surveys – could be a sign of more trouble ahead as repeated rounds of austerity bite even further into daily lives.

“The cracks are showing in Spain’s social and economic fabric,” said Nicholas Spiro, a London-based sovereign risk consultant. “The risk is that in seeking to retain as much domestic ownership of the terms attached to any [EU rescue] programme, the government [of prime minister Mariano Rajoy] overdoes it and sparks an even more intense social and political backlash.”

In Portugal, tens of thousands of trade unionists turned out in Lisbon’s central square for a peaceful protest against terms of the country’s €78bn EU-IMF bailout.

Greek unions have also vowed to hold big protests if the government moves forward with a new €13.5bn austerity programme agreed last week by the coalition government.

The recent upheavals in Portugal – where there had been widespread bipartisan support for the bailout since it was launched 16 months ago – has come as a particular shock to eurozone leaders, forcing Lisbon to reverse a rise in social security taxes designed to hit mandated budget targets.

Hollande Reneges on Campaign Promise

Recall that Hollande ran on a platform to rework the Merkozy Treaty.

We now clearly see that was just another campaign lie. However, Hollande has followed through on all of his economically destructive ideas including massive tax hikes, lowering retirement age, and pressuring companies to not lay off workers.

Destructive follow-through of the worst ideas, with no follow-through on the best campaign ideas is typical of presidential elections everywhere.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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A Suggestion

Maybe Rahm ought to save some of that $15 million in NATO money for lawsuit payouts?

Just a suggestion.

If he hasn't spent it all on anti-teacher ads that is.

Quick Arrest

  • A 14-year-old boy on Saturday was charged with allegedly murdering an older teen who was walking with friends on the South Side earlier this week.

    The slain 17-year-old boy – identified by the Cook County Medical Examiner’s office as Dejuan Jackson – was shot once in the head at 7:07 p.m. Wednesday in the 4000 block of South Lake Park Avenue, police said.

    Jackson, of the 3900 block of South Lake Park Avenue, had been walking with friends when the shooter opened fire, police and officials with the Cook County medical examiner’s office said.

    He was taken to John H. Stroger Jr. Hospital of Cook County, where he was pronounced dead.

    The 14-year-old, who police would not name because of his age, has been charged as a juvenile with one count of first degree murder, one count of aggravated discharge of a firearm and two counts of aggravated assault with a firearm, police News Affairs...
We wonder how they're going to spin this one - kids killing kids again. This pops up way too frequently in recent years.

Holiday Party Plans

Truth?  Or Rumor?

Word from HQ is no District holiday parties on Friday or Saturday nights.

We don't know about specifics, but some districts reserve dates at their venues literally a year in advance.  If so, then what?

And what makes Districts so much less special than Units?  Isn't Patrol the backbone?  The "go to" people?  Or is that just more smoke?

JPMorgan, Bank of America Forgive Debts that No Longer Exist; Wonderful News! But For Whom?

In February, five of the nation's largest banks agreed on a $25 billion settlement over widespread, systemic mortgage fraud and related issues.

The $25 Billion Deal, announced with huge fanfare, was supposed to help up to a million struggling homeowners, primarily via debt forgiveness.

Let's flash forward a few months to see how debt forgiveness is working out in practice.

Today, the New York Times notes Banks Forgive Debt That Isn't There.
GREETINGS, unhappy homeowners! Here’s some wonderful news: “We are canceling the remaining amount you owe Chase!” says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. “You are approved for a full principal forgiveness of your Home Equity Account,” says another, from Bank of America.

Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn’t elated — because she doesn’t owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out.

Others have received similar letters about phantom debts. A borrower in Florida received word this month that Chase was erasing $190,065.10 of debt that had already been wiped out. Bank of America told a Virginia resident that a $231,767 home equity loan was being forgiven, even though the debt was discharged last May.

Are the banks’ forgiveness letters a way to gain credits for debts these institutions are improperly claiming to have extinguished? The banks say no.

But Chase appears to be claiming to release a lien on Ms. Esposito’s property that it does not hold. And under the mortgage settlement, it could receive a credit.

As for Ms. Esposito, she said she found the bogus loan forgiveness letter from Chase especially upsetting because of the years she has spent trying to have the bank modify her first mortgage. She pays 9 percent on her loan and cannot refinance it into a lower-rate mortgage, given her recent bankruptcy.

Chase won’t help her modify her loan, Ms. Esposito said, but it is happy to help by forgiving a loan that has already been discharged and releasing a lien that is already gone.
Wonderful News! But For Whom?

If these events are happening on a broad scale, and I suspect they are, that $25 billion settlement will end up costing peanuts.

Bear in mind, I have little sympathy for people who themselves purposely took out loans they knew they could never pay back, nor do I have sympathy for people who were willing partners in bank fraud.

Regardless, I wondered at the time how the banks would take a $25 billion hit without getting crushed. Well, now we know.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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China New Export New Orders Decline At Fastest Pace in 42 Months; China's Precarious Rebalancing Act

HSBC China Manufacturing PMI™ shows Output falls at fastest pace since March.
Key points

  • New export orders fall at fastest rate in 42 months
  • Output and input prices continue to fall
  • Purchasing activity declines amid weak demand and lower production requirements



Data in September signalled a stronger decline in Chinese manufacturing output, as the volume of new orders fell for the eleventh consecutive month. New export orders declined at the sharpest rate in 42 months amid reports of weak international demand, while lower workloads were linked to a fall in backlogs of work.

After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – posted 47.9 in September, up slightly from 47.6 in August, and signalling an eleventh successive month-on-month deterioration in Chinese manufacturing sector operating conditions. However, the latest data signalled the rate of deterioration eased marginally.

The rate of reduction in manufacturing output in China accelerated during September, signalling the strongest contraction since March. A number of respondents that reported a fall in production levels attributed this to lower order volumes as both domestic and international demand weakened. However, the rate of reduction in new export orders remained stronger than the decline in overall new orders. Panellists commented on tough trading conditions in a number of key trading markets.
China's Precarious Rebalancing Act

Discounting the continually over-optimistic comments from Markit economists in general, I would otherwise be puzzled by comments of Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC who said: "Chinese manufacturing growth is likely to be bottoming out. However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment. Fiscal measures should play a more important role in the coming months."

What indication is there that manufacturing growth is bottoming out? In the first place, China manufacturing is in contraction, not growth. Moreover, the European recession is strengthening and a US recession is underway (just not recognized yet in my opinion). Thus it would be logical to assume China's export-driven economy is going to take another hit.

Trade matters with Japan, and the debate over ownership of islands in the East China Sea are also unsettling. For a discussion, please see Japan PMI: Output and New Orders Contract Further

Is Beijing going to step up and support employment and growth? I do not have the answer to that, but China needs to rebalance, and that rebalancing act will be painful. The transition to a consumer-led economy from an export and infrastructure-building economy will be slow and painful, but also very necessary.

For further discussion of the need to rebalance and the problems facing China please see.


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

Comment Error

Evidently we didn't fix everything in the comment section and some 40 comments were inadvertently deleted.

So if you have left a comment yesterday afternoon, it may have gotten caught up in the purge.  Sorry about that - we are working on a fix.

Closed Post

Number 400?

  • The bodies of two males were found in the trunk of a parked vehicle this morning in the Brighton Park neighborhood on the Southwest Side.

    Police were called to the 2400 block of West 45th Street at 10:11 a.m. when they found the bodies in the trunk of a parked vehicle, said police News Affairs....
We aren't sure if these are homicides yet, but two fully grown men don't usually climb into car trunks voluntarily.

Someone also mentioned that the September 2012 numbers have now surpassed the September 2011 total.  Anyone at the bean counter office care to verify?

Hiring Debacle?

Can anyone over at the Academy confirm this one?  It sounds like a doozy:
  • HR yesterday Wednesday the 26 after 1600 made calls to inform candidates that they had made it on for a class tomorrow Friday the 28th show time 0645. So these people exited and ready quit jobs on a days notice and for the ones that live outside the city probably spent the day trying to establish residency. But of course today after 1700 the night before they begin work, they have been called again and told sorry class starts next week Friday the 5th! 
So....what happened to giving your previous employer 2 weeks notice?  That courtesy has fallen by the wayside?  

And one day to establish residency?

And since the City seems to have canceled the class, all these people are without a paycheck for the next week?  We aren't ones to brag about the state of our financial affairs, but missing a week of pay would put a serious cramp in certain financial transactions. 

And why is the Academy starting a class on a Friday?

The List

We didn't post the list at first because it was still a work in progress thanks to the incompetence of one Human Resources director.

Then we didn't post it because we were hoping someone else would do the heavy lifting for us.

Then we ended up typing it ourselves.

Amended List:
Aguilar, Karina 005/142
Alvarez, Raul 620
Bailey, Thomas 002
Ciannella, James 193
Collazo, Elizabeth 017
DeMato, David 610
Devan, Brain 477
Dineen, Timothy 016
Fowler, Jennifer 630
Garcia, Salvatore 002
Glynn, Michael 011
Hanson, Kristen 015
Hawkins, Thomas 701
Henkels, Adam 017
Kadus, Andrew 025
Karpiel, Timothy 701
Keefe, Kevin 189
Lopez, Luis 014
Loughran, Kathleen 180
Martin, Dale 012
McClendon, Emmett 193
McHugh, Christopher 016
Molina, Joseph 012
Monaco, Angelo 016/213
Morse, Carlin 121
Muniz, Samuel 377
Murphy, John 314
Neris, Lourdes 025/606
O'Toole, Daniel 189
O'Carroll, Randi 341
Olijnyk, Bohdan 050
Paz, Franklin 010/192
Pendarvis, Tyrone 005/212
Pennix, Sidney 010
Perilli, Joseph 542
Rashan, Erich 004
Rigan, Keith 001
Romero, Angel 353
Roney, Brian 193
Ryan, Gerald 019
Smith, James 610/606
Sosa, Jaime 008
Spradley, Ernest 311
Svachula, Christopher 353
Taliaferro, Christopher 121
Tierney, John 014
Tully, Sean 008/193
Vencent, Maureen 007
White, Anton 007/606
Willingham, Russell 008

Late additions:

Fowler, Kenneth 012
Smith, Jarrod 079/606
Ramirex, Edward 004
Park, Kathy 189

Read Rahm's Lips - You're Screwed

  • Mayor Rahm Emanuel says he’s decided to hold the line on taxes, fines and fees in his 2013 budget and count on rebounding revenues, continued cost-cutting and dunning deadbeats to erase a revised $298 million shortfall.

    “Through the reforms and cuts and efficiencies, we’ll be able to have a budget that’s balanced without any taxes, fines or fees that we control. The only tax that will be dealt with is the employee head tax—and that will be eliminated,” Emanuel said.
Evidently, Rahm has found a magical source of revenue that doesn't necessitate sticking his hands in taxpayers' pockets.  We're going to call this new source "cutting the crap out of everything."  We're going to bet on no police hiring, closing firehouses, shuttering schools, gutting Streets & San and an entire shitload of cameras coming on-line in short order.

We don't see aldercreatures being cut, aldercreature expense accounts being depleted, or aldercreature staff being laid off.  Imagine that.

What the F#$%?

  • A veteran Chicago cop was ordered held in lieu of $100,000 bail Friday on charges he had sex with a prisoner he’d promised to release from the West Side lockup where the officer was stationed.

    Officer Nelson Stewart, 59, stood silently in court dressed in a red and white jacket and black pants as prosecutors detailed charges of custodial sexual misconduct, official misconduct and bribery, all felonies. He did not speak except to say he understood he could not have contact with the victim or witnesses if he is released on bond.

    Authorities said the incident occurred in early June in the lockup at the Harrison District police station, 3151 W. Harrison St., where the alleged victim was under arrest for prostitution.

    Stewart, a 24-year-veteran of the department, was in charge of the station’s male lockup facility when he approached the victim’s cell and offered to release him in exchange for a sexual “favor,” Assistant State’s Atty. Lynn McCarthy said.

    The officer then “relocated the victim to a different cell furthest away from the lockup keeper’s desk,” where the two performed sex acts on each other, McCarthy said. The victim later reported the incident to the district watch commander, who contacted the department’s Bureau of Internal Affairs. 
Anyone even vaguely familiar with what travels through an Area lockup has got to be appalled at this, simply from a disease point of view.  This behavior, if proven, is another issue and needs to be dealt with as harshly as the law allows.

    Japan PMI: Output and New Orders Contract Further

    The global economy continues to weaken most everywhere you look. The focus of this post is Japan where the Markit/JMMA Japan Manufacturing PMI™ shows Modest deterioration in operating conditions recorded in September.
    Key points:

    Output and new orders both down again, albeit at slower rates
    Weaker underlying demand and strong yen impact on export orders
    Charges cut at sharpest rate for over two years



    Summary:

    Operating conditions in Japan’s manufacturing sector continued to worsen at a modest pace in September. Output and new orders both fell amid reports of a general stagnation of economic activity in domestic and overseas markets. Manufacturers continued to deplete inventories, while they made further sharp inroads into their work outstanding. Payroll numbers were little changed.

    On the price front, companies responded to the weaker demand environment by discounting their charges to a greater degree. These efforts were aided in part by a further modest reduction in input prices.

    After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) improved to a three-month high of 48.0 in September (August: 47.7) but, by remaining below the 50.0 no-change mark, again signalled a modest deterioration in operating conditions.

    Production and new order volumes continued to decline on a monthly basis. Although slightly weaker than in August, rates of contraction remained marked, particularly in the investment goods sector.
    Looking ahead, the widening rift between Japan and China over disputed islands certainly cannot help yet Voice of America reports there is No Sign of Progress in Dispute.
    September 26, 2012
    A bitter territorial dispute between China and Japan showed no signs of improvement Tuesday, as foreign ministers from both countries held high-level talks to ease tensions.

    Relations have sunk to their lowest point in years, with anti-Japan protests breaking out across China and many Chinese refusing to buy Japanese-made goods. On Wednesday, Japanese automakers Toyota and Nissan said they are reducing production in China because of lessened demand.

    [Foreign Minister Yang Jiechi] warned that bilateral relations could not "return to the track of sound and steady development" unless Japanese officials "take concrete measures to correct its mistakes."
    Mike "Mish" Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

    France Piles €20 Billion in Tax Hikes on Businesses and Wealthy

    It's now official. The top tax rate in France is now 75% for those who make over a million euros. Moreover, there is a new band of 45% for those who make over 150,000 euros. Don't forget the existing VAT on all purchases.

    Europe is imploding and instead of fixing onerous work rules, France Hits Rich and Business to Slash Deficit.
    Socialist President Francois Hollande unveiled higher levies on business and a 75-percent tax for the super-rich on Friday in a 2013 budget aimed at showing France has the fiscal rigor to remain at the core of the euro zone.

    Of the total 30 billion euros of savings, around 20 billion will come from tax increases on households and companies, with tax rises already approved this year to contribute some 4 billion euros to revenues in 2013. The freeze on spending will contribute around 10 billion euros.

    To the dismay of business leaders who fear an exodus of top talent, the government confirmed a temporary 75 percent super-tax rate for earnings over one million euros and a new 45 percent band for revenues over 150,000 euros.
    Tough New Measures or Idiotic Measures?

    The Financial Times reports France unveils tough budget measures
    The measures announced on Friday included the controversial 75 per cent marginal tax rate on earned income above €1m a year, put in place for two years.

    But, as promised by President François Hollande, France was largely spared the kinds of hefty cuts in public spending, pensions and salaries imposed in other eurozone countries struggling to contain their sovereign debt.

    The official forecast of 0.8 per cent growth next year is above most independent forecasts, but Mr Pierre Moscovici [finance minister] said: “I am certain that if Europe steadies, then we are going to achieve this 0.8 per cent or more.”
    For starters, with government spending in France accounting for 55% of GDP, those are not "Tough Measures" those are idiotic measures. France needs to reduce government spending and ease work rules. Instead it has tightened pressure on companies laying off workers.

    If Wishes Were Fishes

    The French Finance minister is "certain that if Europe steadies, France will achieve 0.8 per cent growth or more". That is about as meaningful as this statement by me "I am certain that if I had a billion dollars, I would be a billionaire".

    Simply put, neither Europe nor France is going to steady, but given France's growth is currently 0%, steady would not be enough anyway.

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

    Can the Fed Fight Droids and Win? Apple's SIRI, Driverless Trucks, What's Next? Riveting Video: Are Droids Taking Our Jobs?

    Today, a single farmer can produce as much goods as 100 farmers a half-century or less ago. That freed up labor for manufacturing and the service economy.

    However, droids are now replacing humans in both manufacturing and services.

    When does it stop?

    Every time I go into a grocery store, I see more self-service checkout lanes and fewer manned ones. When RFID checkout comes into vogue, and it will quickly, an entire grocery basket will be scanned at once, and even fewer checkout clerks will be needed.

    For a discussion of RFID, please see JCPenney to Eliminate All Checkout Clerks, Instead Using RFID Chips and Self-Checkout.

    With each technological advance more and more goods and services are produced by fewer and fewer people. In isolation, that drives down costs, and in the process, standards-of-living have soared.

    Because of ever-increasing productivity, it's easy to show that deflation is the natural state of affairs.

    But what does that mean looking ahead? Will there be any jobs left? If so where? And what happens to the Fed's effort to prevent falling prices?

    Riveting Video: Droids Taking Our Jobs

    Let's start off with an entertaining, yet scary video by Andrew McAfee who asks Are droids taking our jobs?



    Working Age Population vs. Projected Jobs



    Notice the widening gap. Moreover McAfee states "If these predictions are accurate, that gap is not going to close. The problem is I do not think these predictions are accurate. In particular, I think my projection is way too optimistic. ... Because when I look around I think we ain't seen nothing yet when it comes to technology."

    Video Discussion Points

    • Free Language Translation
    • Apple's SIRI
    • An article on Forbes about Apple, written by an algorithm (It's not decent it's perfect says McAfee). I tracked down the article: Forbes Earnings Preview: Apple, written by "Narrative Science".
    • Jeopardy: IBM Watson computer vs. Human who won 74 times in a row
    • If SIRI functionality increase according to Moore's Law (which it will) it will be sixteen times better than today, six years from now
    • Google Autonomous Car

    Google Autonomous Toyota Prius Car



    Managing the Transition to a Workerless Society

    "There are 3 and a half million truck drivers and they will be impacted by this technology. .... We are going to transition into an economy that is very productive and just does not need a lot of human workers. Managing that transition is going to be the greatest challenge that our society faces" says McAfee.

    In spite of that gloom for 13 minutes, McAfee concludes on a positive note, quoting Freeman Dyson: "Technology is a gift of God. After the gift of life, it is perhaps the greatest of God's gifts. It is the mother of civilizations, of arts, and of sciences."

    Play the 14 minute video. It is riveting.

    Can the Fed Fight Droids and Win?

    The Fed wants to increase jobs and wages. It is fighting a battle it cannot possibly win. Forcing down interest rates while hoping to force up labor costs simply increases desire of companies to replace humans with droids.

    We would get there anyway, as technology always improves. However, the Fed, by attempting to do the impossible, is actually speeding up the loss of jobs.

    Living Wages

    Who (besides the Fed and seriously misguided economists) does not like falling prices?

    The problem with the "living wage" concept is not that wages are too low, but rather excess money from the Fed has driven up costs of goods and services.

    People have been conditioned (by the Fed) to believe they need higher wages. What they really need is lower prices.

    Technology, demographics, attitudes, and increasing lifespans, all mandate a need for lower, not higher prices.

    If the Fed "succeeds" in further driving up prices, it will destroy the middle class because the technological rampage is sure to increase job losses for skilled labor, at least for the foreseeable future.

    The Fed cannot defeat droids. Unfortunately, the Fed does not understand it is exacerbating the problem. Sadly, the Fed does not even understand the nature of the forces it is fighting.

    Addendum:

    It never fails. Someone misses obvious implications of what I said.  One person ranted and raved that increased productivity is a good thing. Of course it is.

    I specifically stated  "standards-of-living have soared" as a result of technology. And of course that is a good thing.

    My problem clearly is not technology and the deflationary effect that has on wages and prices (both good things), my problem is the Fed's attempt to counteract those forces. The result has been an increase in the wealth effect of those with first access to money, namely banks, the already wealthy, and government bureaucrats.

    If you are looking for a reason the 1% have done so well lately, simply look at the policies of the Fed coupled with technology that is going to reduce the need for human labor "for the foreseeable future".

    I have stated many times there will be another wave of job creation based on new technologies (most likely energy) at some point in the future but I do not know when that may be.

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

    Class Action Suit Coming?

    As far as we can tell, the Department did everything correctly.  Then the Department members follow the policy as written and do a damn good job at it.  And one judge undoes it all while putting officers' personal assets at risk:
    • In the latest legal fight between protesters and local authorities, a Cook County judge on Wednesday threw out the charges against 92 Occupy Chicago demonstrators arrested in Grant Park last year, saying the law used against them was unconstitutional.

      The city had arrested and charged the protesters last October for not leaving the park after it closed at 11 p.m.

      But Cook County Associate Judge Thomas More Donnelly wrote in a 38-page ruling that the curfew law violates the right of free assembly.

      In his ruling, the judge said the city treated the Occupy Chicago rally differently than the Obama 2008 presidential election victory celebration in Grant Park. The judge noted that the Obama rally also violated the curfew, but no one was arrested at that event.
    So since no one was arrested at the Obama victory party, every action since then is a freebie in terms of closing the parks?

    We guess that only follows as no one is arrested for murder 75% of the time in Cook County, therefore murder is legal in most cases and the numbers rise as a result.

    This also means that arresting Obama supporters is kind of an obligation now if we ever want to take back the streets and parks.

    Here's Where to Save Money

    • Chicago’s Inspector General is out with his latest list of options that could help the city reduce its nearly $300 million budget shortfall.

      [...]

      “They’re absolutely not recommendations in the sense that we’re endorsing any one or more,” Ferguson said.

      For example, he said the city could save more than $5 million by reducing the number of paid holidays for city workers.
    That's a negotiated item - isn't (or shouldn't) happen automatically:
    • He also resurrected an old, controversial idea – reducing the minimum staffing on fire trucks from five firefighters to four. That move could save $71 million a year, according to Ferguson’s report.

      “In many instances, the same level of safety and operational efficiency can be achieved with four on a rig,” Ferguson said.
    Safe - except for the part about someone watching the equipment while everyone else is in the fire.  Or running the ladder while teams of two go in.   And after CFD gets gutted, guess who's next?
    • .... The police side of the ledger – civilianizing positions in the various administrations of the Police Department – we estimate preliminarily that could save as much as $3.6 million a year,” Ferguson said.
    You can tell the police side of things has been gutted pretty badly when the listed "savings" is around one-twentieth of what the CFD reduction is.  We're only burying forty bodies a month and patching up 140 or so, all directly attributable to budget cuts and no police.  And they still want more.

        Epic Fail on Tap

        • After dropping seven of their past eight, the Chicago White Sox need just to simply play better and not be consumed with the success of American League Central leader Detroit, which extended its lead to 1 1/2 games earlier Thursday.

          “If you need to be told what to do, or you need a pep talk right now, then you might as well walk out that door and ‘see ya,’ " Sox designated hitter Adam Dunn said before the Sox opened a four-game series against Tampa Bay.
        In other sporting news, the entire NHL preseason has been canceled.

        California Hit Parade Rolls On: Atwater Scrambles to Avoid bankruptcy

        The California hit parade keeps on rolling as yet Another California city scrambles to avoid bankruptcy.
        Atwater, a city of roughly 28,000 in California's Central Valley, may declare a fiscal emergency as soon as next week, but it is trying to avoid becoming the fourth California city to file for municipal bankruptcy this year, its mayor said.

        Under California law, a local government must either declare a "fiscal emergency" or go through a 60-to-90 day confidential negotiation process with its creditors before it files for municipal bankruptcy. Since late June, three Golden State cities-Stockton, San Bernardino and Mammoth Lakes-have filed for bankruptcy protection.

        "We are planning to stay current on our ... bonds," said Mayor Carol Joan Faul in a telephone interview with Dow Jones Newswires. "We are hoping to avoid" bankruptcy, she said, "but as far as I'm concerned, we may have to declare a fiscal emergency" on Oct. 3.

        According to its fiscal 2011 financial statement, Atwater had roughly $95 million in outstanding debt, a mixture of bonds related to its sewer as well its now-defunct redevelopment agency. Ms. Faul said Atwater intends to make an upcoming bond payment of $2 million on its sewer bonds.
        Atwater is Burnt Toast

        Once things reach this stage, one does not even need to look at the details because it's a done deal.

        Yet, I did look further and as expected, public unions appear to be smack in the middle of things as noted in a Reuters article on Potential Atwater Bankruptcy.
        Atwater's economy is "pretty bleak" and starving the city of so much revenue its leaders must consider a drastic overhaul of the services, said Jim Price, vice president of operations at Gemini Flight Support at Atwater's Castle Airport.

        "Police and fire, you keep them - and everything else is going to have to be privatized," Price said. "I just don't know how they can do it any other way."

        RAISING REVENUE, CUTTING COSTS

        Atwater's officials are just beginning to consider their options, Faul said, noting the city must consider raising 20-year-old rates for water services and 10-year-old rates for garbage services while clamping down on costs.

        Union representative Nancy Vinson said she expects the city will seek concessions from its roughly 30 non-safety employees, who gave up 10 percent of pay last year through furloughs.

        "They could ask for a wage reduction, they could ask for a different contribution to the retirement system, they could ask for a higher health benefit contribution," Vinson said. "We have not been unwilling to talk to them."

        Atwater must also seek concessions from its roughly 50 safety and management-level employees, Vinson said, adding she is concerned city officials are moving too fast on a plan for declaring a fiscal emergency.
        Atwater's Choice: Bankruptcy Today or Bankruptcy Later

        Atwater can enter bankruptcy today, saving taxpayers a lot of money, or it can waste taxpayer money for years, scrambling to make bond payments and then default.

        Either way, Atwater is burnt toast. Attempts to make bond payments is a fool's mission.

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

        Real Per Capita "Core" Durable Goods Orders

        Courtesy of Doug Short, here is an excellent pair of charts on Real Per Capita "Core" Durable Goods Orders

        Core Durable Goods



        click on either chart for sharper image

        Core Durable Goods Percent Decline From Peak



        Doug Short does excellent work. Click on the top link to see additional charts.

        I have little to add other than this is how recessions start, an opinion expressed earlier in Durable Goods Orders Ex-Transportation "Unexpectedly" Drop, Down Third Month, July Revised Lower; GDP +1.3% Second Quarter; June Recession Call Looking More Likely.

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

        Durable Goods Orders Ex-Transportation "Unexpectedly" Drop, Down Third Month, July Revised Lower; GDP +1.3% Second Quarter; June Recession Call Looking More Likely

        "Unexpected" weakness and downward revisions are hallmarks of the beginnings of recessions. And so it it with durable goods. Economists had forecast a gain, instead there was a 1.6% drop. Moreover July was revised lower as well.

        Bloomberg reports Orders for U.S. Goods Excluding Transportation Unexpectedly Drop
        Orders for goods meant to last at least three years, excluding volatile demand for such things as airplanes and automobiles, fell 1.6 percent last month after a greater-than- previously estimated 1.3 percent decrease in July, the Commerce Department reported today in Washington. Total bookings plunged 13 percent, the most since January 2009, paced by a decline in demand for civilian aircraft.

        “There was broad-based weakness,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. “What this now means is that capital expenditures are now going to probably fall for the first time since the recovery started. It remains a terribly challenging backdrop in the U.S.”

        The median forecast of 53 economists surveyed by Bloomberg projected a 0.2 percent gain in ex-transportation orders. The Commerce Department revised July data down from a previously reported 0.6 percent decrease.
        Survey Results

        The decline in total orders was more than twice as large as the 5 percent drop median estimate in the Bloomberg survey.

        Other reports today showed the economy grew less than previously forecast in the second quarter and claims for jobless benefits dropped last week to a two-month low.

        The world’s largest economy expanded at a 1.3 percent pace in the second quarter after growing at a 2 percent rate from January through March. The revision, the third estimate for the quarter, compared with a prior estimate of 1.7 percent and the Bloomberg survey’s 1.7 percent median forecast.

        The reduction in growth reflected slower gains in consumer spending and farm inventories, the latter caused by the drought.

        Civilian aircraft bookings, which are often volatile, slumped 102 percent in August after surging 51 percent the prior month, today’s Commerce Department report showed. The size of the decrease may reflect some cancellations in prior months. Boeing Co. (BA), the largest U.S. aircraft maker, received an order for a single plane, down from 260 the month before.

        Orders for non-defense capital equipment excluding airplanes, a proxy for future business investment in items such as computers, engines and communications equipment, rose 1.1 percent after decreases of 5.2 percent in July and 2.7 percent in June, the Commerce Department data showed.

        Shipments of those goods, used in calculating gross domestic product, fell 0.9 percent after decreasing 1.1 percent in July.
        Caterpillar Forecast

        Exports dropped 1 percent in July as American companies shipped fewer automobiles, metals and consumer goods abroad, according to Commerce Department figures issued earlier this month.
        Recession Call


        I am very comfortable with pegging of the start of the recession in June and I expect more downward revisions in GDP and employment are on the way.

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

        Reader from Netherlands Says Last Election Not as Pro-Euro as Media Portrays; 81 in 150 Against More Bailouts

        European nannycrats breathed a sigh of relief following the re-election of Dutch Liberal Prime Minister Mark Rutte on September 12.

        The results “will likely inject a little more confidence into parts of the European political elite” as they step up efforts to contain the debt crisis, David Mackie, chief European economist at JPMorgan Chase & Co. in London, wrote today. “The risks of the Netherlands changing policy direction in a fundamental way appear to have receded, doubtless to private sighs of relief in Berlin and elsewhere.”

        Really?

        Reader Bert who lives in the Netherlands analyzed the actual stated positions of every member of the Dutch parliament and came up with this analysis. Bert writes ...
        Hello Mish

        As you can see in the table below, according to statements made by political party leaders in the past few weeks, 81 of the 150 seats in the Dutch parliament will vote against any future bailout of Greece. The same thing is likely should the ESM need additional funds for other countries.



        Here is my interpretation.

        VVD ( classical liberal / conservative)
        Party leader and current prime minister made several time's a clear statement: "note a dime to Greece anymore" and got support from Wolfgang Schäubele (German finance minister) for that statement.

        PVV (freedom party)
        Is totally against the Euro and even the EU in its current form

        SP (socialistic / maoistic party)
        Totally against Euro bail-outs and the Brussels dictates)

        CrU (centre/left with a Christian inspiration)
        Tried in the parliament to keep the Netherlands out of the ESM

        SGP (a strong biblical inspired party)
        Totally against "shared responsibilities" in the socialistic way

        PvdD (party for the well-being of animals especially critical to the mass bio-industry) Very Europe critical, a statement from them: "Europe is in its present form not democratic"

        There was a huge move from voters from the very EU skeptical PVV to the VVD (a pro Europe party), but this was simply because the PVV blew up the last centre/right government. Voters did not liked that, and it had nothing to do with being pro-Europe.

        Close analysis of the true positions of the elected parliament tells the real story: the Netherlands are becoming more and more euro-skeptical and EU critical, not the opposite. Thus, media interpretation that the Netherlands voted for pro-euro is totally wrong.

        All the best

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

        Ladner Caves

        Evidently, someone explained the facts of life to this ignorant creature:
        • Hey SCC, just got word that four officers excluded from the promotional class will be added in Thursday morning.  Hope they didn't miss too much so far.
        Now someone can look into the disaster that HR has turned into under a political hack.

        French Unemployment Tops 3 Million, First Time Since 1999

        Given the disastrous mess in Southern Europe, compounded by the election of socialist Francois Hollande (together with his extremely foolish tax hike policies), France Set to Implode was a very easy call to make.

        The evidence is strongly pointing in that direction. Please consider French unemployment tops 3 million as economy struggles
        The number of unemployed people in France has topped 3 million for the first time since 1999, according to latest labour ministry figures.

        Speaking before the data was officially announced, Labour Minister Michel Sapin said: "It's bad. It's clearly bad."

        However, the government blamed the previous regime of Nicolas Sarkozy.

        [Hollande] pledged to revive the eurozone's second largest economy, tackle rising unemployment, and reverse industrial decline. However his approval rating is now at its lowest since he assumed power, pollsters say.

        Since May, major companies have announced thousands of layoffs, including carmaker Peugeot, drugmaker Sanofi, airline Air France-KLM, and retailer Carrefour.

        Mathieu Plane, economist at the French Economic Observatory, told the Reuters news agency: "There are almost one million more unemployed people compared with early 2008 and we can't yet say that we have reached the peak."

        The French economy has posted three consecutive quarters of zero growth, and forward-looking data suggests it may continue to flatline.

        The 2013 budget, due to go before the cabinet on Friday, is expected to contain more than 30bn euros in budget savings, and fresh tax rises.

        The government has forecast 0.3% growth for the year, and has so far kept its 2013 target at 1.2%, which many economists now consider unrealistic.

        France's central bank this month predicted that the economy would contract by 0.1% in the third quarter after flatlining for the first half of the year.
        Flatline? Please Be Serious

        The idea that France is going to flatline is ridiculous. Growth estimates for next year are even more ridiculous.

        Eurozone Unemployment Rates



        With the rest of Europe slowing dramatically, do not expect German unemployment to buck the trend forever. Italy is in a steep downturn now, and France is going to follow suit.

        Meanwhile, France, Spain, Greece, and Italy are busy hiking taxes which is economic insanity in a recession. They ought to be reforming work rules, but on that score there is little progress, with negative progress in France.

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

        Crime Commission Says What?

        How can this be true?


        More cops? Harsher penalties? Golly, wherever could these heathens have gotten this idea?

        The Law of Garry

        • With Chicago’s murder rate capturing national headlines, Police Supt Garry McCarthy is on the defense, touting recent progress his department has made in the fight against crime.

          Still, headlines and news stories continue about murder after murder in Chicago, but are the numbers they telling the whole story?

          [...]

          On patrol Monday, McCarthy talked candidly about the bloodshed in Chicago that has drawn national attention.
        And what happens as soon as McLookOverThere! opens his mouth?
        • A man was killed and a person critically hurt in separate shootings on the South Side overnight, police said. The fatal shooting occurred about 9 p.m. Monday in the 8800 block of South Cottage Grove Avenue in the Burnside neighborhood, police said, citing early reports.  
        • Patterson was walking home from a family get-together with her sister early this morning, and was passing Carter and other neighbors at Eggleston and 120th when a dark-colored car drove past and someone inside opened fire, according to family and police. Patterson, 25, was dead at the scene. Carter, 38, was taken to Advocate Christ Medical Center in Oak Lawn, where he was pronounced dead.
        • A former employee of the CeaseFire violence prevention program was fatally shot today in the Woodlawn neighborhood on the South Side, officials said.
        • An autopsy conducted today determined that a man whose body was found by city workers in a garbage bag in Marquette Park Monday was shot to death.
        • An autopsy today determined a 55-year-old South Loop man died Monday in part from injuries he suffered during an assault, authorities said. 
        • A hooded gunman shot and killed a 20-year-old man on the street hours after another man was slain in the same South Side neighborhood, Chicago police said this morning.
        • A 17-year-old boy was fatally wounded this evening in a shooting on the South Side in the city’s Oakland neighborhood. 
        All in less than 48 hours since McTootMyOwnHorn gave his Channel 2 interview.  How about maybe Garry solves some of these?  Not one person is in custody for any of these crimes.

          Hello? BGA?

          Is it true that since switching to the new and improved color coded bread for prisoners, the Chicago Police Department is paying THREE TIMES the previous amount for sandwich makings?

          The Better Government Association could file FOIA requests for the contract, determine who is greasing whose palm and figure out the cost to taxpayers while Rahm is raising rates, increasing spending and cutting services, couldn't they?

          And then figure out why some toady at City Hall just couldn't run over to the Butternut people or Holsum outlet stores and get some of the "not quite perfect" loaves of bread for a buck.

          Mafia? What Mafia?

          • Reputed Outfit lieutenant Rudy Fratto, nicknamed “the Chin,” was sentenced to about 1 year in prison today for a bid-rigging scheme at McCormick Place.

            Fratto’s family was visibly relieved when U.S. District Judge Harry Leinenweber announced the sentence.


            Federal sentencing guidelines called for Fratto to be sentenced to up to 2 years in prison, but federal prosecutors sought an even stiffer prison term, arguing Fratto used his association with organized crime to further the scheme. He is an alleged member of the Outfit’s Elmwood Park street crew.


            But Leinenweber ruled the evidence was unclear that Fratto was a made member of the mob and he couldn’t make a connection between Fratto’s wrongdoing and organized crime. He also noted Fratto’s age of 68.
          Whoops!  Pay no attention to that Outift behind duh curtain.  Nuttin' to see here.  We wuz just gatherin' posies.

          Is China Burning? Shanghai Stock Index Breaks 2000 For First Time Since 2009; Reflections on Sentiment

          Today the Shanghai stock index, $SSEC, dipped below the 2000 level for the first time since 2009.

          Stockcharts does not have intraday charts of ADRs so here are a couple of charts from yesterday to consider.

          $SSEC Daily Chart



          The following monthly chart puts things in better perspective.

          $SSEC Monthly Chart



          Shanghai Rout is On

          Misguided China bulls shorting the dollar and buying Chinese stocks have gotten their heads handed to them on a platter.

          Those aware of the fraud, corruption, and simple sustainability of economic growth in China either stayed away completely or were short China like Jim Chanos.

          Bloomberg reports Shanghai Rout Sinks ADRs
          Chinese stocks in New York slid to a two-week low as the Shanghai Composite Index’s slump below a key level for the first time in three years stoked concern government efforts to avert a slowdown won’t be sufficient.

          The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. dropped for a third day, losing 0.7 percent to 90.18 by 12:44 p.m. in New York. The decline followed the Shanghai Composite Index’s descent below 2,000 for the first time since 2009. Mobile-chip designer Spreadtrum Communications Inc. (SPRD) sank after its stock rating was cut.
          Is China Burning?

          Forbes columnist Gordon Chang asks the question, Is China Burning?
          Chinese streets were quiet today after anti-Japan protests, many of them violent, rocked more than a 100 cities last week.  Large demonstrations continued through Tuesday, the 81st anniversary of Japan’s invasion of Manchuria.

          The disturbances, triggered by a territorial dispute over the Senkaku Islands in the East China Sea, are commonly described as the worst anti-Japan riots to hit the country since at least 2005, and they may have even been more destructive than that.

          In any event, the damage to Japan’s business interests in China was substantial.  More than a dozen Japanese companies halted operations in the country as fire bombings, sabotage, and looting took their toll.  Manufacturers Honda, Nissan, Toyota, Mazda, Mitsubishi, Yamaha, Komatsu, Hitachi, and Canon shuttered plants.  Panasonic locked the doors of a factory after employees broke windows, ruined equipment, and set fires.  Retailers Aeon, Fast Retailing, Ryohin Keikaku, and Seven & I closed stores.

          Japanese tourists are canceling trips to China, and hard-hit Panasonic is, not surprisingly, reducing business trips from Japan to the country.  As a result, Japan Airlines reduced flights to and from Chinese destinations.  It halved Tokyo-Beijing and Osaka-Shanghai flights, for example.  All Nippon Airways reported an increase in cancellations on its flights from China to Japan.  And it is not only Japanese carriers that have been hurt.  China Eastern, China’s second-biggest airline, is delaying the October 18 start of its Shanghai-Sendai route due to insufficient bookings.

          the Chinese economy is in obvious distress, with fewer analysts buying Beijing’s claims that the country is growing in the high single digits.  Charles Dumas of Lombard Street Research, for example, thinks China’s growth rate is only 1.6%, and it could even be lower than that.  In this environment, even minor disruptions could have a “tipping point” effect.

          Moreover, the prospects for Japanese companies will be even worse than it is for others.  Who in China is going to buy a Toyota when last Saturday, in an incident now well-known throughout the country, a 51-year-old Chinese man in Xian was savagely beaten—he is now paralyzed and mostly unable to speak—because he was driving a white Corolla?  And don’t think this affects only Japanese companies.  China’s new ultra-nationalism, on display this past week, can also affect brands from other countries.

          And we should not think the Chinese are limiting their anger to the Japanese.  Last week’s events have been compared, in their intensity and their aims, to the anti-foreigner Boxer Rebellion, which began just at the end of the 19th century.

          That, unfortunately, is a historical parallel we should remember.  Rioters on Tuesday attacked and damaged the car of American ambassador Gary Locke while he was in it.

          China at the moment is unstable, and that puts foreign businesses there—not to mention the Chinese economy—at risk.
          Reflections on Sentiment

          A few years ago nearly everyone was a China bull.

          China, China, China was all I heard at gold and natural resources conferences. My calls pointing out the unsustainability of Chinese growth fell mostly on deaf ears.

          Remember how in the 1980s everyone thought Japan would soon rule the world. That's what many thought about China, and still do. I did not buy into it, nor did Michael Pettis at China Financial Markets.

          Here are a few posts to consider.


          The idea that China was going to rule the world by the end of the decade was complete silliness. Exponential math, as well as energy constraints said it would not happen. Malinvestments and fraud were simply icing on the absurdly-bullish cake.

          That said, as compared to a few years ago, or even earlier this year, sentiment on China has soured remarkably.

          The fundamentals did not change, just the sentiment. Indeed, sentiment is now so sour on China that a nice rally may happen at any time.

          This is not a recommendation that people buy into China, rather it's a suggestion that sentiment is now moving towards extreme pessimism. Reversals from such extremes can lead to powerful rallies. However, timing the reversal is problematic as the four percent rally quickly taken back shows.

          Mike "Mish" Shedlock
          http://globaleconomicanalysis.blogspot.com
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