Goldeneye Morning Paddle – 11/19/2009
Good Morning! Here’s a few items of interest on our morning paddle through the news:
Barry Ritzholtz compares the 1982 bull market with the 2009 rally.
Detroit shafted by Wall Street fine print. BusinessWeek reports on the woes of the Motor City and other major U.S. metropolises faced with breakup fees on derivative deals gone bad.
Against that bleak backdrop, Wall Street is squeezing one of America’s weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city’s credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That’s precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.
One place where inflation is already off to the races: government waste. CNN.com notes the 37.5% y/y increase in improper payments made by the feds in fiscal 2009. A new executive order (and more federal funds) is apparently right around the corner to combat the problem.