Sunday, July 21, 2013

The Sign of The Times: Predicting the Demise of Detroit

Updated: 07.26.2013

In a past post, some members of the Compass360 Consulting group predicted the bankruptcy of Detroit. It was not a magnanimous call.  Based on our understanding of the Big Tangible Picture, we identified a certain pattern and performed a process of skip logic. ... To us, it was quite obvious.   

We would not be surprised that many of the smart Wall Street Insiders knew that this occurrence was coming.   ...  Including us, many of the Wall Street Insiders were waiting for a certain sequence of events  to unravel. 

The Domino Factor
Moody  started the ball running by downgrading the credit rating of Chicago.  

"On Wednesday, Moody's Investors Service slashed its credit rating for Chicago, the third-largest U.S. city, by three notches to A3, citing concerns about growing pension liabilities, a problem faced by thousands of municipalities across the country.   ..."  -

It  immediately influenced the state's financial manager (for the city of Detroit) to file for bankruptcy.  However, the public unions were going to sue the state to prevent the financial manager from filing for bankruptcy, for the purpose of preserving their pensions. The filing happened just hours before the unions were ready to file their lawsuit.

A state court judge immediately stopped it under the reason of unconstitutional. We surmised if there was a possibility that there was a political motive behind it. 

The After Effects, The Possible Blowbacks and The Potential Next Moves
The after-effects also affected the muni-bond market.  Click here for a WSJ view of it.

If  the Detroit bankruptcy becomes the bellwether for some of the various financially troubled cities across the United States. in terms of dealing with certain public sector unions. They might be in ruins. 

Side note: Earlier 2013, the California city of Stockton filed bankruptcy.

We have not taken some time to perform the next stage of scenario modeling.  Click here for another person's presumption of Detroit's next challenge. 

Comments From the Compass Desk
We presumed that the chief decision makers on both sides (the state of Michigan and the unions) have performed some level of scenario modeling.   

At this moment, the probability of this  "blue" city will be receiving financial assistance from their brethem in the Fed government is minimum.  Even their state governor agreed with it.  ...

The Compass Solution
One anticipates by studying the configuration of one's terrain, the order of factors and the structure that integrates the key factors.  Then, plan ahead,  wait and drink some tea. 

In the information economy, the successful strategists are always aware of the Dao of their grand setting and beyond.  They are capable of anticipating by comprehending the matrix of connectivity behind their setting.

While the neophytes are always looking at the trees and the average strategists are moderately focused on the forest.  Other than viewing the forest,  the successful strategists are always focused  on the tides that affect their situation, not the waves. 

The secret is how one focuses on the current state of the situation while being mindfully aware of the next possible change. 

The Compass Prediction
It is only a matter of time where the law enforcement for certain cities will be privatized (at least 60%) 

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