The Haiku of Finance for 02/07/15

Refinery strike
Steelworkers claim unfairness
Back to the table

The Haiku of Finance for 10/20/13

Arrest BART strikers
High-cost racket shut transit
Indict the union

Arrest Striking BART Workers, Indict BART Unions, Replace with Symphony Losers

I am sick and tired of stupid losers ruining the Bay Area's economy.  BART's unionized pea-brain workers have shut down the region's train system for the second time this year.  They demanded pay increases that exceed the CPI, pension plan contributions lower than what the rest of us pay into social Security, and health insurance premiums lower than what subsidized low-income earners would pay under the ACA exchanges.  I am totally disgusted with the arrogance of semi-literate button pushers and ticket takers who believe they are indispensable.  They are no such thing.  They are instead leeches and parasites who hold productive citizens hostage.  This demands a legal remedy.  Our elected leaders are too cowardly to do anything other than run their mouths.  I have a much more robust action plan in mind.

BART management should petition the federal court system to issue a back-to-work order.  If the striking union idiots refuse the order, management should immediately terminate them for insubordination.  Terminated employees lose the right to loiter on their employers' property, so BART management should have their police arrest any union slobs still picketing at BART stations.  Management should continue their campaign for justice by turning over all of the negotiation materials they received from the union reps to federal prosecutors.  I believe a case exists under the RICO Act to indict, convict, and shutter all of the BART employee unions that have obstructed productive negotiations and sought extortionate concessions from BART.  I'm pretty sure the NLRB would be cool with this action.  Remember that a "racket" is a fraudulent solution to a nonexistent problem.  Demanding high pay for low-value labor IMHO constitutes a racket.  Remember also that BART is a publicly-chartered institution and is supported by both ridership revenues and tax revenues.  Every work stoppage that delays scheduled maintenance puts the taxpayer on the hook for costs that rider revenues can't cover while trains aren't running.

This mass termination and prosecution would demand a new workforce.  I have the perfect candidates in mind.  The San Francisco Symphony losers in AFM Musicians Union Local Six went on strike earlier this year and were forced to back down when they realized they had zero public support and no realistic chance of obtaining their demands.  The stupidity they exhibited makes them perfect candidates for employees in public transit.  Union musicians can presumably follow simple instructions and show up on time, which is all that is required of menial labor.  Since classical musicians are so upset with what are already extremely high compensation levels, they should jump at the chance to pocket some extra coin during daylight hours from a real job.  They might even gain some appreciation for the livelihoods of people who work for a living.  Read my outstanding analysis of the San Francisco Symphony union losers from March 2013 to discover how much they need to learn.

Replacing BART workers with classical musicians will not help the system's long-term performance but it will at least take lots of snobs down a few pegs in both groups.  These stinking union bottom-feeders have no idea how good they have it, and how little they deserve for what they do.  

Eminent Domain as Nightmare Fulfillment of Unfunded Public Pensions

Detroit's bankruptcy filing is making many other municipalities nervous about their unfunded liabilities for retiree pensions and benefits.  A drawn-out bankruptcy fight will be a nightmare for politicians who stake their reputations on good governance and successful turnarounds.  Government retirees are still a potent political force and will fight in court for what they think they deserve, regardless of the fiscal harm they cause.  States will sell assets to settle their debts if public employee unions do not willingly take cuts in promised benefits.

I do not know whether the Michigan State judge's injunction against Detroit for filing bankruptcy will be overturned by a federal court.  Bankruptcy law is rarely exercised for municipalities so any new case law will set clear precedents for whatever bankruptcy wave is coming.  There is plenty of precedent for one extreme measure that municipalities may consider if their backs are against a fiscal wall.  That would be the seizure of private assets under eminent domain whose resale will make municipal bondholders and pension recipients whole.

This nightmare scenario could easily unfold if state and local politicians believe fighting public employee unions in court will harm their re-election prospects.  The US Constitution prohibits the government from taking private property without just compensation but legal history leaves the definition of "just compensation" to state and local governments.  Consider also that property owners who endure a taking under eminent domain may be compensated in the form of a "condemnation award."  I'm not an attorney, but I'm under no impression at present that such an award absolutely must be in the form of cash or in-kind property.  My nightmare is that private property owners in Detroit or elsewhere may see their land seized and businesses condemned with their only "just compensation" as some new non-marketable junior security issued by a broke municipality just for such an occasion.  The IOU would of course be worthless but the property seized would be sold to other parties (presumably with political connections) and the proceeds used to fund pension liabilities.

Consider also that the people charged with enforcing this confiscatory doctrine - police, judges, government clerks - are all beneficiaries of this process if they depend on defined benefit pensions.  Their interests would theoretically align with fulfillment of a strict interpretation of contractual obligations outside of federal bankruptcy proceedings and against the interests of taxpayers and private property owners.  Finally, consider that legal precedent also allows the taking of personal property and intangible property.  I do not see any legal barrier to the confiscation of privately held liquid investments such as brokerage accounts or bank accounts.

This is a thought piece that I very much want to be invalidated.  I truly want Detroit to have a successful restructuring through federal bankruptcy proceedings that are unencumbered by state-level judicial maneuvers.  I do not at all look forward to the depressing prospect of desperate politicians, backed up by destitute law enforcement officers and government functionaries, confiscating private assets under eminent domain just to placate some very vocal unions.  I want to be wrong about this prospect.  I would like bankruptcy attorneys and legal scholars to debate this scenario in the public sphere and prove my concerns to be unfounded.  

The Haiku of Finance for 07/03/13

Striking BART unions
Lust for even more money
Take them off the trains

Fire All Striking BART Workers Now!

The unionized employees of BART are on strike.  They are under the delusion that their skills are irreplaceable.  I've got news for them.  They are as irreplaceable as this hole I just punched in the air with my fist.

The skill required to drive a BART train is about as elementary as it gets.  I've peeked inside the BART train control cabin several times in my many years of riding the trains around the Bay Area.  You know something?  I'm convinced I could drive the train myself with a couple of hours' worth of instruction.  It's nowhere near as difficult as driving a two-axle, four-tire, single unit automobile, which any teenager can do after passing a written test and a few minutes of live evaluation.  The BART train operator has a couple of buttons to push and a speed control.  That's about it.  Oh yeah, they have to look out the window briefly while approaching or leaving a platform to ensure some crazy idiot doesn't jump onto the tracks seeking martyrdom.  That is not a six-figure job by any stretch of the imagination.

The mechanics do not deserve to make six figures either.  Armored vehicle mechanics in the military work on systems much more complex than an electric train, making a fraction of the salary.  If the spoiled union mechanics don't want their jobs, there are plenty of ambitious military veterans who would love to take those jobs.  How unpatriotic of those striking union slobs to stand in the way of veterans' development, and on the cusp of our nation's Independence Day no less.

Here's a searchable database of BART employee compensation.  Look at these wasteful pay levels.  It's bad enough to see station agents making $62K for an entry-level job requiring no skill beyond pushing a couple of buttons.  It's totally abhorrent to see "assistant managers" making $200K for pushing paper.  Perhaps the out-of-control stupidity on pay isn't entirely the union's fault if the greed starts at the top.  Across-the-board pay cuts for managers and workers would solve that in a jiffy.

Here's the very generous retirement plan available to BART employees.  They get both a deferred compensation plan and a money purchase plan (i.e., much like a 401(k) plan).  That is comparable to the plans available to highly-compensated professionals in financial services whose occupations are far more intellectually demanding than running trains.

Every day this strike continues causes enormous disruption to the Bay Area's economy.  People need to get to work, for crying out loud.  The taxes levied on the private sector pay these BART idiots' salaries.

These striking transit workers make me sick to my stomach.  None of them deserve jack squat.  Fire them all immediately.  They can then have the life-enhancing experience of finding productive jobs with no cushy breaks.  They deserve no more sympathy for their union-induced greed than the union musicians of the San Francisco Symphony whom I so rightfully took to task during their own strike.  Both of these groups serve the public.  Both of them have widely held skill sets that are easily replicable.  Neither of them have garnered any public sympathy with their immature tantrums.  Neither of them deserve to be rewarded with employment for their greed.

The Slow-Motion Financial Implosion of Detroit

I wrote about Detroit's financial problems three years ago when the city's leadership had a viable plan to fix the city by downsizing its infrastructure.  The Detroit Works Project had a blueprint for renewal in 2010.  The city has since squandered the time and money it could have committed to that plan and is now facing imminent bankruptcy.  This disaster was a long time in the making.

Read Detroit's financial statements.  The CAFR for FY 2012 has the bottom line up front on page 2, with an accumulated deficit of $326.6M from several years of operating deficits.  The CAFR itself is ironically interspersed with happy photos of fun things going on in Detroit.  Maybe next year's CAFR can show the Mayor and his state-appointed emergency financial managers turning shovels on bare dirt where their offices used to sit.  The Single Audit Report is even worse, with up-front warnings of material weaknesses in Detroit's internal controls over financial reporting.  The federal government has every right to cease funding programs in Detroit given these weaknesses, but politics means more than financial sense.

Detroit's credit rating at Moody's has seen almost nothing but downgrades and downgrade reviews since 2010, with the exception of February to December of that year when credit facilities backed by the State of Michigan stabilized Detroit's outlook.  The city had that window of opportunity (during which I wrote my blog article on Detroit's potential for unbuilding) to quickly begin its downsizing.  The city instead has been paralyzed by public employee unions whose members have enjoyed generous pay and benefits for years and are still resisting fiscally responsible cuts to benefits.

I think Detroit had the right intention to downsize itself but picked the wrong means to execute.  Reviewing the Detroit Works Project's strategic framework reveals color-coded maps of the city's center.  The city designated much of its inner core as blighted where no redevelopment would be allowed and tried to pigeonhole specific industries into specific neighborhoods.  That's micromanagement, and it's dumb.  Detroit is in no position to pick and choose which companies it will allow to move in.  Contrast this approach with San Francisco, which has given tax breaks to several digital media companies that came to The City regardless of the neighborhood where they chose to settle.

Detroit's detailed plan for renewal is probably going to come undone out of necessity if receivership forces it to move faster.  Farms and ranches will sprout again within city limits and former unionized workers had better learn how to plant rows of corn.  City managers should radically and immediately liberalize their approach to zoning.

The lessons of Detroit for the state of California are obvious.  Sacramento policymakers are committed to more of what hasn't worked:  more spending on underperforming public schools, more taxes on high income earners, more regulations on business, and more protection for public employee benefits.  None of that is going to work in Detroit now that Motor City is crossing an event horizon on its way to collapsing into a singularity.

Fire All Striking San Francisco Symphony Musicians

The unionized musicians of the San Francisco Symphony have gone on strike over compensation.  They claim they should be paid as much as other big-city musicians and have declared a work stoppage until they get what they demand.  This shuts down many of the in-house performances scheduled for Davies Symphony Hall and jeopardizes the performances of visiting artists who expect at least partial accompaniment from the Symphony.  It also forced cancellation of the Symphony's tour of the East Coast, including a performance at Carnegie Hall.  I was under the impression that every true artist in the world aspired to play at Carnegie Hall.  A pianist who happens to share my surname once played there as a child prodigy.

The reputation of one of the world's greatest performing arts ensembles is at risk because these union thugs in tuxedos are unsatisfied with a base salary of $141,700.  That is far above the San Francisco median household income of $72,947.  Consider that the median national income from that same Census source is $61,632; San Francisco's median is thus 18.36% higher.  It follows that a fair comparison for symphony musicians is not to the base salaries of other symphonies held hostage by collective bargaining but to nationwide statistics for musicians.  The BLS reports that the nationwide hourly mean wage for musicians and singers in performing arts companies (NAICS 711100) is $34.85.  The annualized equivalent, assuming a 40-hour workweek and 52 work weeks per year would be $72,488.  I will allow that employment terms offer vacation time, overtime, sick days, health benefits, and other adjustments to total compensation but a gross figure is useful in comparative analysis.  Let's apply the San Francisco premium I calculated above as 18.36% to this national figure, admitting some methodological imperfection because it is from a median set of figures and I'm applying it to a mean set of figures.  This premium gives us an adjusted annual income of $85,797.  Check my math if you'd like and I'll correct any errors.

Making over $85K per year to do something a talented high school musician can do for free is pretty generous.  Simple statistics tells us that's pretty much all a professional musician in San Francisco deserves.  Anything higher is a sum the market cannot bear for long without a return to a lower equilibrium through fewer ticket sales and lower ticket prices.  Music promoters and non-marquee acts figure that out pretty quickly because they operate in a free market.  San Francisco Symphony's unionized extortionists are unable to figure it out because their greed blinds them to market realities.  The Symphony's Board has a much better grasp on reality because it includes business professionals who must make a profit in the real world outside of collective bargaining.  The Board must close a four-year old operating deficit or there will be no future at all for this Symphony.  Math is a harsh mistress.

If the Symphony needs a scab player for the triangle or tambourine to help break the strike, then I volunteer to perform for free.  I've had no musical education at all but those instruments don't look that difficult.  I am even willing to solo "O Mio Babbino Caro" on a kazoo if Renee Fleming can't elbow her way through the union's picket line.  I'm pretty sure I could pick up the tempo if someone in the Davies front office would hum a few bars.

The greed of the Symphony's professional musicians is disgusting.  I would like to see the SF Symphony's Board of Governors and renowned music director immediately terminate the employment of every single one of the Symphony's striking musicians.  Replace them with the numerous musicians who compete for the small number of open spots in the company when they are available   Musicians who fancy themselves irreplaceable remind me of the federal air traffic controllers who were justifiably fired in 1981 when they arrogantly broke federal law.  The nation thanked President Reagan and even the leadership of the Soviet Union was impressed.  San Francisco is in dire need of such bold, decisive action.

The SF Symphony can do without the greed of Musicians Union Local 6 corrupting its performing artists.  Performing classical works in one of the greatest cities in the world is an honor and privilege that countless musicians dream of having.  The spoiled union brats on strike for exorbitant pay no longer deserve such an honor.  Their selfish action denies music to fans and brings shame to The City.

Addendum 03/22/13:  I shall state for the record that I am not in any way speaking on behalf of any party to this labor dispute.  No one involved in this dispute induced me to make this statement.  I do not stand to gain anything at all from any resolution of this dispute.  I speak only for myself in my capacity as a music fan exercising my First Amendment right to freedom of speech.

Financial Sarcasm Roundup for 12/26/12

It's one day after Christmas and I'm not any less sarcastic than I was yesterday.

The fiscal cliff is approaching and the relevant parties just can't stop launching trial balloons to impress the folks back home.  Both parties want to lower corporate tax rates in the name of competitiveness.  There's no way such a complicated reform will get done this year but that won't stop the preening and posturing.  Lowering the corporate tax rate while eliminating deductions probably won't raise revenue but it will make CFOs' jobs easier, so maybe some grateful corporate treasuries will step up their giving to super-PACs.

Japan is going nuts.  Their ruling political coalition has voted specifically to destroy the yen with monetary stimulus.  That's like putting some anemic patient on a cocaine diet in the hope that it will accelerate their metabolism.  Forget about structural reforms.  I'm so glad I don't own Japanese stocks or yen.

Some New Jersey union pension fund is suing to block the NYSE-ICE merger.  Come on already.  They should be grateful anyone wants to buy an American exchange at what is likely the high point of the U.S. equity market.  That means ICE is probably at its high-water mark too, and competition from dark pools and internal crossing networks make this merger all the more fortuitous for both exchanges' shareholders.

Here comes the mother of all re-fis.  The Administration is considering a refinancing handout to even more borrowers, along with nationalizing the rest of the secondary mortgage market.  I knew all along that Washington was going for it but it's still thrilling to see my suspicions confirmed in print.  I invite my readers to search my blog articles throughout 2011 and 2012.  You'll find several articles where I propose that large-scale mortgage modification programs would be a transmission mechanism for a wage-price spiral if the federal government flooded them with cash.  If this latest policy boondoggle is enacted, the necessary mechanism to launch hyperinflation will be in place.

The primary Treasury dealers are dumber than ever.  They're hoarding bonds and reducing sales to the Fed. This is the wrong thing for a dealer to do with the U.S. bond market at an all-time high.  The smart thing to do is unload winning positions onto the last sucker in the room - the Fed, of course - and shift the bank's business lines into things like non-dollar debt from emerging markets.

Shoppers didn't come through for retailers this year.  I've been waiting for a downturn in retail activity and this one's been a long time in coming.  Better late than never.  The average American probably has enough unused stuff in their closets and storage sheds to equip several emerging market households, and yet buying more stuff is in our cultural DNA.  The silver lining to any hyperinflationary period is that ordinary folks will be cured of their impulse to consume with abandon.

Finally, the SEC gets my Alfidi Capital award of the day (okay, there's no such thing but it sounds generous) for innovation.  The agency charged with regulating our capital markets is finally acquiring a system that allows it to watch the capital markets.  Funny, I've been using ordinary financial websites and online brokerages for almost two decades.  In true government contracting fashion, they bought a complete system rather than subscribe to terminals and feeds from Bloomberg and Dow Jones.  I recall reading during the financial crisis of 2008 that the Treasury Secretary had the ability to monitor credit markets in real time from his desk.  I don't have to name the Wall Street players who have a vested interest in the keeping the SEC blinded, in exchange for future private employment for the agency's top investigators.  In that context, I expect the SEC's new market monitoring system to work exactly as intended, especially since initial access to the system will be limited to a handful of people.  Read between those lines.

Financial Sarcasm Roundup for 12/25/12

The capital markets are closed for Christmas but Alfidi Capital never sleeps.  The holidays are a perfect time to get sarcastic.

The stealth nationalization of health care payments will really get going in 2013 with new tax increases.  I fully expect employer-sponsored health insurance plans to be taxed as the equivalent of income.  I admit the principle of taxing a benefit makes sense; after all, if cash compensation from employment were higher then workers could pay for health insurance out of pocket.  Employees really don't know the difference because this tax break encourages companies to enroll their workers in plans.  The health insurance sector will love this tax but most small businesses will hate it.  I also expect small businesses to accelerate the transformation of full-time positions into part-time jobs to avoid providing health care and paying this tax.  The insurance sector has begun its sea change toward a system with the federal government as single payer.  You will be forced to pay a premium for routine access to an overstressed system because the government isn't the least bit interested in controlling costs.

Unionized labor is about to deliver a very unwelcome post-holiday gift to the economy.  Stupid ILA dockworkers are about to launch a Maine-to-Texas strike that will curtail or shut down shipping at every East Coast and Gulf port for weeks.  Even dumber, the ILWU is threatening to strike at Northwest grain ports.  Midwestern farmers ought to be up in arms about the prospect of their grain being shut out of Asian markets.  The National Retail Federation isn't taking the ILA threat lying down; they urge the Administration to force workers to stay on the job under Taft-Hartley.  Fat chance.  This Administration is a big friend of organized labor and is not at all inclined to use the law as it was intended.  I expect a strike, and a big hit to the stock prices of carriers transporting containerized cargo.

It's hard to ignore the scary headlines about no fiscal deal forthcoming in Washington.  Hitting the fiscal cliff would be good for America so we can all get the shock of living within our means and living with reduced benefits from our government.  Politicians don't want that to happen but don't want to explain anything to folks back home.  The real deal will still get done in a couple of days, just like the last debt-ceiling emergency, and everything will be fine until the bond market boycotts a U.S. Treasury auction.

I hope you're all enjoying this year's winter solstice. That's what Christmas used to be before Emperor Constantine foisted monotheism upon the Roman Empire and politically appointed clergy began appropriating pagan holidays.  I celebrate today with the original intent in mind, devoid of late-Roman innovations.

The Limerick of Finance for 11/18/12

Wal-Mart just did something I like
Warns union to go take a hike
Shoppers will stay away
Walkouts hurt workers' pay
Black Friday is no time to strike

The Haiku of Finance or 11/16/12

Hostess is bankrupt
No more Twinkies for a while
Brand liquidation

Financial Sarcasm Roundup for 09/10/12

I love it when I'm right, especially when I'm ahead of the rest of Wall Street.  I wrote a few days ago about the danger to the U.S. economy from the looming ILA strike at East Coast and Gulf Coast ports, and said strike now looks very likely.  I am not alone in noting the severity of what we can expect; Asian shippers are getting very concerned.  The financial analyst community needs to take a serious look at how re-routing container ships to the Port of Oakland leaves the U.S. economy exposed to a shutdown from as little as a few hundred Occupy Oakland idiot activists.  I do not feel sorry for any hedge fund managers who insist on ignoring fundamentals just to pick up nickels in front of this steamroller.  I want professional money managers to keep doing exactly what they're doing now, piling on one bad call after another by following each other in a herd over a cliff.

One thing I don't need cluttering my workspace is yet another prediction of monetary easing from the Fed.  These Captain Obvious statements are pointless in the face of Helicopter Ben's repeated statements of intent, plus the proclivity of every academic to spend their entire careers justifying a PhD thesis (go read Ben's "printing press" speech and his Princeton work).  Anyway, those economists are correct about further stimulus doing nothing but they're missing one thing.  Money velocity is at rock bottom.  Steroid injections go nowhere if blood isn't circulating.  That can all change in a heartbeat if politicians force banks to lend.  I am still convinced that some form of forced lending, like the HAMP mortgage modification program but much larger, will be one of the transmission mechanisms for a wage-price spiral into serious inflation.

Germany still wants to put the kibosh on the ECB's newfound willingness to destroy that country's credit rating with unlimited sovereign bond buying.  The German constitutional court may vote to block German contributions to European rescue funds.  That court needs to read Mario Draghi's speeches again, paying particular attention to the enormous caveats he put in about the austerity criteria any destitute country has to meet before getting a bailout.  No way are Greece, Spain, and Italy going to meet those criteria with their economies already in austerity-driven death spirals.  No way will they get more than token bailouts that temporarily prop up European stocks.  No way is the ECB going to save the euro.  

Trouble Pulls Into Port If ILA Strikes

Those of you awaiting the remainder of my commentary from last weekend's Money Show need to wait one more day.  I'd like to take this opportunity to mention how a likely slowdown in port activity is about to put the final nail in the coffin tipping the U.S. economy back into recession.

The ILA is about to authorize a strike by its port workers.  The specific port where the strike starts isn't relevant because of the ILA's reach across the East and Gulf Coasts.  This is very bad news for retailers who need to stock up on inventory prior to the Christmas shopping season.  Union greed is once again putting America's international trade in a headlock.

The lesson of a similar strike in 2002 on the West Coast was that shipping traffic could be diverted from West Coast ports to the East and Gulf.  Port operators in the West plan to reverse that flow this time around but they shouldn't count their chickens before they're hatched.  Remember the Occupy movement's success in shutting down the Port of Oakland?  This is a national election year and Occupy hasn't gone away.  The two busiest West Coast ports are Oakland and Long Beach but California's electoral votes are not going to be seriously contested this time (it's a lock for the incumbent).  That won't matter much to Occupiers.  The movement still has heavy union support and can easily be mobilized again to send a political message.

A union hand in an Occupy glove remains a risk to the U.S. retail supply chain.  It can easily metastasize into a live threat.  An ILA East/Gulf strike combined with West Coast port agitation could mean a very "blue Christmas" for retailers.

YRC Worldwide's Q2 2012 Loss Is Still A Loss

YRC Worldwide managed to survive another quarter of losing money.  Its most recent financial results show that the LTL trucker continues to post negative net income despite its first operating profit since its debt restructuring.  There's a lesson here for CFOs.  Losses per share can be dressed up as an improvement through the issuance of massively diluted new shares.

Meanwhile, the more ominous news for the company is the 0.5% decline in top-line revenue.  This could imply that YRCW's much-ballyhooed market position may be eroding.  The increase in revenue per hundredweight is odd, something normally associated with a firm that can maintain its pricing power.  I'm not sure which customers still insist on paying a premium for a fat, smelly, Teamster driver to give them an attitude.  Those customers are welcome to contact me to explain their reasoning.

Full disclosure:  No position in YRCW, ever.

Stockton Is Stuck On Stupid

I am grateful to be a resident of San Francisco, where the city's leaders at least try to balance the budget and  prevent city employee compensation from getting out of control.  I feel sorry for poor old Stockton, which has been run into bankruptcy after a couple of decades' worth of unsupportable promises to city government employees and retirees.  Read that linked article all the way to the end to find a retired city employee demanding the termination of the current city manager.  The city manager inherited the problem driven by the greedy demands made by people like her for many years, but she wants to fire the guy for trying to solve the problem and save the whole town.  Americans are enthralled with their entitlements.  Letting go will be loud and painful.

Stockton's pain is just beginning.  The city's 2011-2012 annual budget proposed a deficit of $161M, with only a $5M reduction from the previous year.  It's right there on page 2 so we can't miss it.  This meager stab at a return to solvency wasn't going to cut the mustard.  The numbers describing the city's inability to meet its obligations were in plain sight for any city government employee to see.

Stockton was a nice little farm town before the housing boom paved over its best acreage with unneeded McMansions.  I've driven through it several times. The city has a decent downtown, waterfront, and working port.  All it needs to do now is take a page out of Detroit's playbook and launch a de-urbanization program. Use eminent domain to bulldoze the suburbs built since 2003 and return Stockton to a level of physical infrastructure that its tax base can support.

The state government can theoretically bail out a city or county government but the folks in Sacramento are having a tough time balancing the state's budget (again).  I allowed the last of my California municipal bonds to mature this month and I won't buy any more.  The state can't default on its bonds unless a referendum or the Legislature amends the state Constitution.  That's not a good enough reason for me to buy Cal munis with the U.S. dollar facing devaluation from Fed QE and potential abandonment from international bond investors.  

Full disclosure:  No positions in City of Stockton bonds at this time.  

Machinist Union Strike Bodes Poorly For Lockheed

The machinist union at Lockheed Martin has voted to strike.  The company's offer to line out the defined benefit pension for new hires was a red line the union couldn't cross.  That's too bad, because the future of defense companies like Lockheed depends very much on keeping pension liabilities down in the face of declining defense budgets.

This particular strike will very likely cause a work stoppage at the primary assembly facility for the F-35 fighter, Lockheed's bet-the-company cash cow for the next three decades.  This troubled program somehow survived a Nunn-McCurdy breach that should have caused dramatic changes to the platform.  The plane has already cost at least 50% more than originally planned and now work will be delayed for weeks by this strike.

Multirole fighters were affordable when their structural engineering and avionics were simpler.  Reconfiguring multiple systems several times for the same airframe, including for a VSTOL version, has not proven to be the cost-saving procurement method originally promised.  No one at DOD seems to care.  That's too bad, because the federal government's eventual budget cliff-dive will render it unable to pay for its most coveted legacy weapon systems or backstop the losses of its prime contractors.  The striking machinists need a plan B.

Full disclosure:  No position in LMT at this time.  

Frivolous Lawsuit Bothers Hecla Mining (HL)

Some people just can't take life's setbacks in stride.  Drops in a company's share price are normal and can happen for any reason or no reason at all.  Some shareholders are suing Hecla Mining just because the share price dipped.  They allege the company made statements that overestimated its value.  Numbers from operational results don't support such an allegation.  Hecla is generating decent ROE (about 12%) and margins are extremely healthy.  It helps that the price of silver is at record highs but Hecla has been around for over a century, so somebody there must know what they're doing.  

Accidents happen in mining.  It figures that a union would bring this suit.  Unions just don't get the free market.  It also figures that the source of this irritation is a bricklayers' union.  These particular opportunists must be as dumb as bricks, reflecting unfairly on the vast majority of bricklayers.  The case should be thrown out forthwith for lack of merit.  

Full disclosure:  No position in HL at this time.

Occupy Movement Declares War On West Coast Economy

Shutting down the Port of Oakland wasn't a big enough show of force for the Occupy movement.  Feeling their oats, they've declared their intent to shut down all West Coast ports on Dec. 12.  Their expression of solidarity with Longshoremen is an overstretch, as the Longshoremen's union is now clearly distancing itself from Occupy's call.  The ILWU believes in the rule of law, which requires it to cooperate with the dispute arbitrator's instructions.  Labor and management are perfectly capable of working things out on their own without outside agitators.  Occupy's outreach will only serve to put other potential union supporters on the spot and force them to choose between complying with labor rules or joining Occupy's disruptive actions. 

The Occupy movement lost its focus on financial corruption almost as soon as it first gained notice.  The ports of Oakland, Long Beach, Seattle/Tacoma, and Portland are America's lifeline to the Pacific Rim.  Shutting them causes more than a mild inconvenience.  Occupy is about to do measurable economic harm to independent truck owner-operators, California farmers, and countless businesses that earn a living from Asian trade.  A home-grown insurgency is declaring war on the West Coast's economy.  We will all be poorer if the Occupiers have their way. 

Apple Preps Retail Shops For Union Onslaught

Apple (AAPL) may be concerned that it's not being sensitive enough.  The company is offering internal training to its retail store managers on the effects of union organization.  I find it odd that workers at a tech company would even think about unionizing, but apparently some glorified customer service clerks calling themselves the Apple Retail Workers Union think they deserve more pay, perks, and job security than the highly educated engineers and computer scientists who design Apple's fine products.

I hope Apple includes the following topics in its internal training course.  Labor relations experts have found that operating costs in unionized companies are at least 25% higher than non-unionized companies.  Union negotiating tactics actually harm the ability of employers to retain union jobs.  GM and Chrysler went into government-brokered bankruptcy partly thanks to their high costs of labor and health benefits.  I also hope someone speaks up against unionization at Apple's next shareholder meeting so management gets a warning about what their approach should be. 

Steve Jobs must be rolling over in his grave.  He saved Apple from self-destruction without the help of a unionized workforce.  He advised his successors to "do the right thing."  That means Apple's leadership should resist any and all attempts by unions to organize. 

Full disclosure:  No position in AAPL at this time.