This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Panic in Detroit

NEW YORK ( TheStreet) -- My apologies to David Bowie for borrowing the title of one of his songs for this article. However, there is no better way to encapsulate the financial emergency facing this bankrupt shell.

What is a "panic"? It's when people behave irrationally in a crisis, generally due to either being in a state of shock, succumbing to some form of (mindless) "herd behavior" or both. In the case of Detroit, we are clearly dealing with the latter condition.

What makes Detroit such a significant case study here is not simply its size, but rather because it is well-known that the city is (was) a one-industry town. Specifically, "Motor City" got its nickname for being the hub of the once-thriving U.S. auto industry.

More importantly, as the city teeters on the brink of formal bankruptcy, we know what got the city to this state of ultimate crisis: the loss of its tax base. We can establish this point not only on an individual basis, but also on a collective basis.

Individually, we have what has already been pointed out: the collapse of one industry in a one-industry town (state). More generally, however, when the financial collapse of Detroit is examined more closely, we see the same phrase crop up that we see in the chronologies of every U.S. city/state/municipality with serious financial problems: "overly optimistic revenue estimates."

The same governments who used to be able to make accurate revenue projections have not only seemingly and suddenly lost the capacity to perform this function. They all suffer from precisely the same (wildly) optimistic bias.

What is the more rational conclusion for us to draw in assessing this situation? Is it more plausible that once-sober bureaucrats from all across the U.S. all suddenly and simultaneously morphed into cock-eyed optimists? Or is it more likely that the data they have been given on which to base their calculations has become severely flawed? Garbage in; garbage out.

Specifically, the macroeconomic "statistics" being passed off on Americans (and the world) by the U.S. government have been demonstrated to be nothing but fantasy numbers. The mythical "job-creation" numbers from the Bureau of Labor Statistics can be proven to be fraudulent on many bases; however, the most absolute proof was supplied by the corporate media itself: Job and wage numbers supplied by the BLS grossly overstate what the U.S. government is actually taking in with tax receipts. The jobs don't exist.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,882.89 +78.09 0.44%
S&P 500 2,070.36 -0.29 -0.01%
NASDAQ 4,766.2920 +0.9120 0.02%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs