Not a Dime

Rahm is sticking to his story:

• Mayor Rahm Emanuel is reassuring Chicago taxpayers that they won’t be stuck with the bill for all the activity, security and disruptions that will occur around the NATO Summit the weekend of May 19.

  [...] But Mayor Emanuel says Chicagoans will not be footing the bill directly for the summit.

  “First of all, taxpayers will not pay anything for the summit, and that’s why we raised private money and I secured federal money – so that’s number one,” Emanuel said. “And yes, I do feel like we’re going to be able to meet our budget.”

As an astute reader pointed out, the feds don't just print money to pay for these things. And we certainly recall having sent in a tax return this year, so if there's federal money involved, we've already paid for it somewhere down the line.

This is funny though - an actual person with an economics background says the city isn't going to make diddly squat:

• University of Chicago economist Allen Sanderson says the actual economic benefits often turn out to be about 10 percent of what the boosters predict.

  “Look, anytime an organization conducts an economic impact study, there is a weak link quality to it; you’re going to produce a report that’s very favorable to whatever activity you want to do,” Sanderson said.

  In this case, Sanderson says NATO would bring at the most a $25 million economic benefit, and far less than that if things get out of hand.

An economist from the University of Chicago? That department has won something like 8 or 10 Nobel Prizes over the years. In fact, at one point the Nobel people were just going retire the award to the U of C and stop giving it out since everyone knew where it was headed year after year.

If he's saying Rahm is full of crap, people ought to sit up and take notice.

How Shortshanks Screwed All

The Tribune continues to write like they just found the key to the safety deposit box with their balls in it. Another broadside at the Daley years:

• Two years into his reign as Chicago's longest-serving mayor,Richard M. Daleytook advantage of the state's convoluted pension system to significantly increase his potential payout while saving $400,000 in contributions, a Tribune/WGN-TV investigation has found.
  
  Daley, a former state senator, made it happen by briefly rejoining the legislative pension plan in 1991. He stayed there just one month before returning to Chicago's municipal pension fund, but the switches made him eligible for benefits worth 85 percent of his mayoral salary — a better rate than all other city employees receive.
  
  He was just 49 years old at the time. Even if Daley had never won another election, he could have started collecting a public pension at age 55 of $97,750 a year. Without the steps he took, his public pension benefits at that age would have been worth just $20,686.

But remember, it's those evil police, firefighters and teachers bankrupting the funds.

I Said What?

Dementia? Or Fed-heimer disease?

• Lengthening the school day at Chicago public schools is a key part of Mayor Rahm Emanuel’s agenda, but his predecessor doesn’t think it’s the answer to
  providing a better education.

  “At first I thought it was, but I don’t think so,” former Mayor Richard M. Daley said in an interview Monday night on WLS-Channel 7 News. “To me, to take a fourth-grader or a sixth-grader or a high school student, and say you’re going to stay more than six hours — we need quality instructions.”

Whatever it is, he's certainly trying to rewrite the historical record.

Contrary Indicator Alert: Greenspan Says U.S. Stocks ‘Very Cheap,’ Likely to Rise

Bloomberg authors By Steve Matthews and Tom Keene report Greenspan Says U.S. Stocks ‘Very Cheap,’ Likely to Rise

Former Federal Reserve Chairman Alan Greenspan said U.S. stocks offer good value and are likely to rise as corporate earnings increase over time.

“Stocks are very cheap,” Greenspan said today at the Bloomberg Washington Summit hosted by Bloomberg Link, citing “a very low price-earnings ratio.”

“There is no place for earnings to grow except into stock prices,” said Greenspan, who served as Fed chairman from August 1987 to January 2006.

Another valuation metric, known as the Fed model because it was derived from a July 1997 report from the central bank, shows U.S. equities are close to the cheapest level ever relative to debt. The technique compares the earnings yield for stocks with Treasury rates.

Fed Model Idiocy

The Fed Model has been discredited so many times and in so many places, that Matthews and Keene should both know better than bring it up. For a discussion, please see Why Is Bad Advice So Common?

The general idea that stocks are "cheap" offers more further ground for intelligent debate, but I strongly disagree and said so recently in Misty Water-Colored Memories, Dirt-Cheap Stocks, and Patient Opportunism

Finally, history shows Greenspan to be one of the biggest contrarian indicators in history.

Greenspan is a Contrary Indicator

After warning about irrational exuberance in 1996, Greenspan embraced the "productivity miracle" and "dotcom revolution" in 1999. Mid-summer of 2000 Greenspan fell in love with his own analysis and was worried about inflation risks. Shortly thereafter the Greenspan Fed embarked on an incredible campaign slashing interest rates to 1% in panic over deflation.

Greenspan is now trumping up the idea that credit conditions are like 1998. I talked about this in No Greenspan, Conditions are NOT Like 1998.

On May 21,2006 Greenspan said housing prices won't fall nationally. That prompted me to write Greenspan Predicts Housing Bust.

History shows Greenspan was worried about Y2K problems (slashing interest rates and adding fuel to the dotcom bubble). Y2K went off without even minor glitches.

In 2001 Greenspan pleaded with Congress to adopt Bush's $1.35 trillion tax cut. Greenspan's rationale was the government would run huge $5.6 trillion surpluses over the subsequent decade after the cuts. It's right here in the Testimony of Chairman Alan Greenspan Before the Committee on the Budget, U.S. Senate January 25, 2001.

In 2007 Greenspan was worried about inflation. How did that work out?

Greenspan on the Daily Show



Towards the end of that Interview with Jon Stewart Greenspan admits he and the Fed did not know what they were doing and blamed it on "human nature".

Indeed! And that is why the Fed is always chasing its tail, and why Greenspan is wrong again today.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Bank of Spain Confirms Foreigners Dump Spanish Bonds; Spanish Banks Foolishly Load Up

Anyone with a clue is dumping Spanish bonds, and the investment community in Germany, France, and Italy is doing just that, as Spanish banks foolishly lever up on risk.

Via Google Translate, please consider Bank of Spain confirmed that foreign capital flees Spanish bonds

The weight of foreign capital in the total of Spanish government debt has declined considerably in the first three months of the year, rising from 50.48% at end-2011 to 37.54% last March. At the same time, the Spanish bank increases its exposure to domestic bonds to record highs of more than 170 billion euros.

62 Billion Euro Leakage in Last 3 Months

In the last three months the international portfolio in bonds and letters of the State has suffered a leak of nearly 62 billion euros from 281.439 billion euros down to 219.601 billion euros at March 31.

Spanish banks increased their exposure to a record of 170.611 million euros, 29.16% of the total compared to 16.93% representing the end of December.

Specifically, the weight of the debt portfolio of the state of Spanish banks has six consecutive months of gains, especially since last November with the purchase of more than 100,000 million.

This has been fueled largely soothing the open bar of liquidity held by the European Central Bank (ECB), which granted a trillion euros of credit to a 1% interest that has helped Spanish banks invest in bonds.

LTRO "Helped" Spanish Banks?

Notice that absurd reference to "help" in the last paragraph above. There was "help" alright, help by ECB president Mario Draghi to allow German, French, and Italian banks to dump Spanish debt hand over fist to fools in Spain.

If one thought bureaucrats could think, one might think this was Super Mario's plan from the beginning.

Certified Crackpot Plan

Who should pay for the idiocy of loading up on Spanish debt once it implodes? The answer of course is the banks and the bondholders. But No!

Harvard Economics professor Martin Feldstein has hatched a certified crackpot plan to force risk onto taxpayers. For details, please see Ludicrous Proposal by Harvard Economics Professor to Force Taxpayers to Buy Spanish Bonds; Mish's Five-Point Alternative Proposal

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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The Coming HOLOCAUST in JUNE if PASOK-ND wins the Elections...

1. Abolition of the 13th-14th salary everywhere.
2. New reduction of the minimum wage to Bulgarian levels alongside with whatever reduction occur on wages, unemployment benefit etc.!
3. New lowering of basic and enhanced pensions.
4. Minimising the annual holidays by 10 days.
5. Lowering the added increase for working overtime or on Sunday.
6. Totally flexible labour relations, abolition of labour contracts and rights.
7. Immediate firing of 50,000 public sector workers in 2012 and 200,000 in a three year period.
8. Abolition of pension annuity in the public sector.
9. Gradual abolition of redundancy pay in the private sector either due to being fired or being pensioned off.
10. Total abolition of tax exemptions and all special regimes of taxation. Abolition of interest exemption for mortgages, rents, studies, insurance, hospital visits etc. 11. Increase of the lower band of VAT from 6.5%-13%
12. Abolition of lower rate of VAT on the islands.
13. Placing the farmers on VAT
14. New special tax for alcohol/cigarettes
15. New tax on second hand cars.
16. New increases in road tax.
17. A lowering or abolition of minimum threshold of untaxed income
18. Changing property values every year.
19. Equalising oil based burners for heating with those of cars.
20. Abolition of repossessions of ones first house.
21. Making permanents the housing tax to two alone=unifying the 33 taxes of local government into another.
22. Tax on living in your own home.
23. Abolition of the wages of priests.
24. Emergency taxes after the elections (income taxes, emergency solidarity tax, taxes on property, 2010, 2011 and a special one for 2012) 25. Private tax collectors 26. Selling off national property.

-WE ARE GOING FOR FAKE ELECTIONS _The Opposition is Wanting, below what is required under the current conditions -With the enhanced electoral majority system once again the minority of Quislings are going to Govern. -Organisation and Struggle the Only Road

I'm Swapping Some Gold for Silver

Roughly one year ago (April 27, 2011 to be precise) I wrote Taking Silver Profits - Swapping Silver for Gold

I have held physical silver and gold investments continuously for 5 years, and on and off before that. Today I cashed out of silver, trading it for an equal dollar value of gold.

For the sake of full disclosure, my physical precious metals holdings are now entirely at GoldMoney and I have an affiliate relationship with them.

As a result of that relationship, I will likely be back in silver soon, but in small amounts, and hopefully at decreasing prices. If silver crashes, I will consider switching a considerable percentage of my gold for an equal dollar value of silver.

Given the unstable nature of parabolic and hyperbolic spikes, I believe the price of silver is highly likely to revisit the low $20's at some point.I see no point in chasing silver higher here. Moreover, except for pure speculation, I see little reason to even hold silver in this spike.

Both gold and silver seem susceptible to a pullback, but especially silver because of the unstable nature of its advance. For now, I will take my chances with gold.

Silver never got to the low 20's. Perhaps it does and perhaps it doesn't. Since gold was roughly $1500 and silver roughly $46 at the time I made the swap, It's fair to say I am happy with the trade.

I did about 1/3 of what I would like to do.

Bear in mind this trade is not a recommendation. Indeed, I think I am early. If so, and if silver makes an excursion to the low $20's (perhaps even the mid-20's) I am likely to swap a lot more. If not, and silver blasts higher, I am back in.

As noted above: For the sake of full disclosure, my physical precious metals holdings are now entirely at GoldMoney and I have an affiliate relationship with them.

If anyone wants information about GoldMoney or investing in physical gold and silver in general, please Email Mish

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