Just how messed up is Stockton, California?
Before Detroit sought protection from its creditors, Stockton had been the largest city in the U.S. to file for bankruptcy protection. The situation there is getting uglier. From the San Francisco Chronicle: “The state controller's office added to Stockton's bankruptcy pain Monday by issuing a scathing report saying the city is unorganized financially, mixing up accounts improperly and managing its affairs so badly it has missed out on millions of dollars in state and federal grants. Stockton City Manager Bob Deis responded with an equally scathing letter accusing the controller's office of exaggerating the troubles and being `just another political operative that bayonets the wounded after the battle has been fought to repair a distressed city.’" Who would have thought it was possible to exaggerate the financial troubles of Stockton? Way to win friends in Sacramento.
Europe’s summer calm can’t last
So writes Mohamed El-Erian, Pimco’s chief executive officer and co-chief investment officer, in a commentary titled “Europe’s Fake Normal.” He sees “a sad reality for Europe. Despite hopeful blips in an economic indicator here and there, too many countries lack both immediate growth and longer-term growth engines. As a result, debt overhangs will remain problematic. Owners of private capital that could be allocated to productive investment will remain hesitant. And societies will continue to lack the jobs and capital investment that are essential for durable prosperity and general well-being.” Meantime, there are August vacations to be had and German elections to be held, after which Europe’s leaders can find other more imaginative excuses for doing nothing constructive.
Citizen Bezos comes to the rescue
Amazon.com founder Jeff Bezos’s $250 million purchase of the Washington Post can’t be explained by the economics of the business alone. The price, which includes some smaller papers, was exceedingly generous given the Post’s awful financial performance. And it’s a tiny percentage of Bezos’s wealth. The Atlantic’s James Fallows calls the sale “a moment that will define an era’s upheaval in journalism.” For anyone who remembers the old days, it’s still hard to believe an institution once so mighty has become so weak. But that’s the newspaper industry. The Post’s employees and readers are fortunate Bezos came along.
Bernanke retreats to opacity
The Wall Street Journal’s Jim Browning says Federal Reserve Chairman Ben Bernanke “is a man of mystery again.” He writes: “The Fed is in a bit of a bind. Clear communication works great when the news is good. Everyone is happy. But when the news is bad, no amount of clarity can sugarcoat it. The more clearly investors understand that the Fed will soon reduce the monthly bond-buying it uses to stimulate markets, the less happy they will be.”
Bubble of the day alert
The price of a Hong Kong taxi, along with the license to operate it, reached a record HK$7.66 million, or $987,600, in June. Prices have risen more than 80 percent since September 2009. Reasons include cheap financing and expectations of continued gains, write Emma Bi and Sheridan Prasso of Bloomberg News. Locals see a bubble. The inevitable awaits.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)