Strategies: The Greater the Turmoil, the Stronger the Dollar. Again.

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Detroit’s Creditors Are Asked to Accept Pennies on the Dollar

Presenting a grim take on the city’s fiscal standing in a closed-door meeting, the emergency manager, Kevyn Orr, a bankruptcy lawyer from Washington who was appointed in March, made a case to dozens of bondholders and union leaders that deep cuts alone cannot save Detroit. He said that painful sacrifices must be shared.

“This is not meant to be a hostile act,” Mr. Orr said at a news conference in which he discussed the session. “It isn’t meant to be combative. It is meant to be an acknowledgment and recognition of the realities that we can no longer deal with.”

The proposal includes an offer that amounts to less than 10 cents on the dollar on some of the city’s unfinanced debt obligations like unsecured bonds and a portion of unfunded pension liabilities, which together total more than $11 billion. He will hold another meeting next week with labor leaders and retirees for further discussions on the plan, which also includes a proposal to reduce health care benefits for retired city workers.

To save money, Mr. Orr announced he would stop making some of Detroit’s debt payments, including $39 million that was due to creditors on Friday. “What the average Detroiter needs to understand is that we’re tapped out,” he said.

On Thursday, the rating agency Moody’s downgraded several of Detroit’s debt obligations, and after Friday’s session it raised the prospect of further action.

“We also believe the city’s risk of bankruptcy has increased over the last six months,” Moody’s said in a statement. “All of Detroit’s ratings remain under review for possible downgrade as we analyze the ongoing discussion between the city and its creditors and stakeholders.”

Friday’s gathering, and the talks that are expected to follow in the weeks ahead, are moving the city to a moment of truth. Some government restructuring experts speculate that it may not be long before Detroit becomes the largest municipality in the nation to file for Chapter 9 protection. Mr. Orr said the odds were 50-50.

Since he took the job, Mr. Orr has painted an ominous portrait of severe cash flow shortages, junk credit ratings and at least $17 billion in long-term obligations that, if left unchecked, would eat up about 65 percent of the city’s total revenue by 2017. City operations are in desperate need of mending, he has said, including an overhaul of public services for the 700,000 residents now living in a city that once was home to 1.8 million.

The proposal presented to creditors on Friday would spend about $1.25 billion over the next 10 years on reinvestment in city services and crumbling infrastructure, including public safety and fixing city operations. Detroit has already started negotiations with its surrounding counties over a possible deal to sell its water system to an independent authority, Mr. Orr said.

City and state leaders have said bankruptcy is a last resort. It is unclear whether the mere threat will be sufficient to persuade enough creditors and union officials, some of whom feel Mr. Orr is exaggerating the problems, to embrace voluntary cuts.

Patrick Darby, a lawyer who has been advising Jefferson County, Ala., as it navigates the country’s largest municipal bankruptcy to date, said about Chapter 9 cases in general, “I think it’s possible that a lot of people will convince themselves that the threat is not serious.”

Such a move for Detroit would be unusual because of the city’s size, said James E. Spiotto, a bankruptcy specialist at the law firm of Chapman & Cutler in Chicago.

Since 1954, Mr. Spiotto said, more than 60 cities, towns, villages or counties have filed for Chapter 9. Of those, 29 were dismissed or resolved before reaching a final plan of debt adjustment.

Large cities in financial trouble — like New York and Cleveland in the 1970s and Philadelphia in the 1990s — have found other paths outside of bankruptcy court, he said, noting the stigma, legal costs and unknown market repercussions that bankruptcy might bring.

“We don’t know with a municipality that size and that much debt what effect, if any, it will have,” Mr. Spiotto said, suggesting the uncertainty might be enough to scare lenders into a compromise. “It would be a change from what historically has happened, and we can’t rule out that there might be consequences.”

Several creditors declined to comment as they walked out of the meeting on Friday. They are expected to take a couple of weeks to digest the proposal before it will be clear whether an out-of-court agreement is within reach.

Labor leaders said they had much to discuss with Mr. Orr next week, though some were not sure they would ever feel comfortable with the plan, arguing that retirees have worked hard for their pensions and should not be treated the same as creditors.

“This is on their balance sheets,” said Delia Enright, president of a local union that represents civilian police workers like 911 operators. “But this is on our lives.”

European and Japanese Central Banks Pledge Support, Boosting Shares and the Dollar

ECB Executive Board member Joerg Asmussen said on Monday the policy would stay as long as necessary. On Tuesday, BOJ board member Ryuzo Miyao said it was vital to keep long- and short-term interest rates stable.

Yields on U.S. Treasuries surged to their highest levels in over a year as prices skidded. A strong consumer confidence report underscored the notion that the Federal Reserve could soon trim its bond-buying program.

"The vicious selling once again materialized after the much-stronger-than-expected consumer confidence report," said Cantor, Fitzgerald Treasury strategist Justin Lederer.

Yields have jumped since Fed Chairman Ben Bernanke said on Wednesday that the U.S. central bank may decide to decrease its bond purchases gradually in the next few policy meetings if data shows the economy is gaining steam.

"The path of least resistance is higher yields," said Sean Simko, portfolio manager at SEI Investments.

Benchmark 10-year notes fell more than a point to 96-7/32 while their yields, which move inversely to price, soared to 2.17 percent from 2.01 percent on Friday. Ten-year yields have surged from 1.61 percent at the beginning of May as optimism about the economy has grown.

Thirty-year bonds fell more than two points in price while their yields rose to 3.33 percent, the highest level since March, and up from 3.18 percent on Friday.

Both the 10-year notes and 30-year bonds are on track for their worst monthly loss since December 2009.

U.S. STOCKS, DOLLAR RECOVER

U.S. stocks recovered from recent weakness, propelling the Dow to finish at yet another record closing high.

The Dow Jones industrial average gained 106.29 points, or 0.69 percent, to end at a record 15,409.39. The Standard & Poor's 500 Index rose 10.46 points, or 0.63 percent, to 1,660.06. The Nasdaq Composite Index climbed 29.74 points, or 0.86 percent, to close at 3,488.89.

The dollar rebounded against the euro and yen after data on U.S. consumer confidence and home prices suggested the world's largest economy was on a steady road to recovery.

The Fed's stimulus program is viewed as negative for the greenback because it floods the market with dollars.

A measure of U.S. consumer confidence rose in May to its highest level in more than five years. That private-sector report followed data showing single-family home prices rose in March, with their best annual gain in nearly seven years.

Higher Treasury yields have also boosted the appeal of dollar-denominated investments.

DOLLAR RISES AGAINST YEN AND EURO

The U.S. dollar rallied against the euro and yen as the stronger-than-expected U.S. economic data underscored views the Fed could reduce its bond purchases in coming months.

Against the yen, which tumbled broadly, the dollar rose 1.2 percent to 102.09 yen, rebounding from a two-week low of 100.68 set on Friday. The dollar rose to a 4-1/2-year high of 103.73 yen last week.

The euro rose 0.6 percent to 131.24 yen, pulling away from Thursday's trough of 129.94 yen.

The safe-haven Swiss franc fell, down 1.1 percent against the dollar at 0.9740 franc and down 0.6 percent against the euro at 1.2533 francs.

Currencies such as the yen and the Swiss franc, which rose sharply last week after a recent sell-off in stock markets, typically gain in times of financial uncertainty.

The dollar index, which measures the greenback versus a basket of currencies, rose 0.6 percent to 84.172.

Gold fell 1 percent as the stock market rally diminished bullion's safe-haven appeal. Strong buying of physical bullion, however, briefly reversed gold's fall.

Spot gold was down 1 percent to $1,380.81 an ounce by 3:25 p.m. EDT (8:25 p.m. British time), after trading as low as $1,373.14.

U.S. Comex gold futures for June delivery settled down $7.70 at $1,378.90 an ounce.

Among other precious metals, silver was down 1.7 percent to $22.25 an ounce. Platinum rose 0.6 percent to $1,455.74 an ounce, while palladium gained 2.1 percent to $751.22 an ounce.

Brent crude oil rose on increased Middle East risk and as stocks rallied. Brent crude oil for July rose $1.61 to $104.23 per barrel while U.S. crude rose $0.95 to $95.10 per barrel.

The promise of monetary support from the European and Japanese central banks was reinforced as French, German and Italian governments urged action to tackle youth unemployment. [ID:nL5N0E911M] Youth unemployment in countries like Greece and Spain has risen to 60 percent. [ID:nL3N0DY1IW]

In Europe, the broad FTSE Eurofirst 300 index closed up 1.3 percent at 1,246.44, while MSCI's world equity index rose 0.5 percent, reversing four days of losses.

Japan's Nikkei stock index, which last week reached a 5-1/2-year high before dropping 7.3 percent on Thursday, steadied on Tuesday, ending 1.2 percent higher.

(Additional reporting by Karen Brettell, Gertrude Chavez-Dreyfuss, Ryan Vlastelica and Frank Tang; Editing by Nick Zieminski and Dan Grebler)

New Service Helps Put a Dollar Value on Lawyers' Social Media Efforts

Do tweets and Facebook posts add up to billable hours?

Now that the Internet has displaced the Yellow Pages, many lawyers use social media to try to build their businesses, but few know whether the outreach is effective, legal consultants say.

"The reality is that the vast majority of lawyers just aren't keeping track," said Adrian Dayton, a consultant who helps law firms devise strategies for social media.

Avvo Ignite, a new service offered by the legal directory and forum Avvo, aims to change that by letting lawyers see how many inquiries originate from their presences on and offline -- and how many yield new clients.

Without monitoring what works and what doesn't, lawyers struggle to make the most of the new outlets available to them online, said Avvo executive Sachin Bhatia, who researched lawyers' social media habits before launching the service in November. Rather than sealing the deal, some lawyers spend too much time qualifying clients, he said. Many do not have a sound system for logging their prospects. And some do not get many leads from social media, he noted.

"We saw lawyers spending money to market in places when clients weren't even there," said Bhatia, who is vice president of products at Avvo Inc.

The Avvo Ignite Suite is supposed to help attorneys avoid that fate by documenting how each prospect found the firm and then facilitating communication and payment to bring clients on board. Another edition, Avvo Ignite Starter, creates basic websites and monthly activity reports and can be accessed on mobile devices. The Starter edition costs $199 per month with a $499 setup fee that can be waived with a yearlong contract.

Most who have signed up so far are lawyers at small to midsize firms and solo practitioners, Bhatia said. Social media can neutralize the reputational advantage enjoyed by Big Law, consultants note.

"It costs a fortune to launch an ad campaign in The New York Times or The Wall Street Journal, but not on social media," law firm consultant Peter Zeughauser said. "Social media levels the playing field for smaller firms."

And yet some lawyers -- particularly those who did not grow up with the Internet -- remain skeptical about social media, Zeughauser said. Lewis Rosenblum, an Orange County, Calif.-based criminal defense attorney, once questioned how much he stood to gain through the channels. When he launched his own office four years ago, he relied on the contacts that he made in 29 years as a prosecutor to generate business. Answering questions on Avvo showed him that there were clients to be found online. He now has accounts on Google Plus and Yahoo as well.

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DealBook: After Multi-Billion Dollar Loss, JPMorgan Continues to Revamp

Jonathan Ernst/ReutersBarry Zubrow, who runs the JPMorgan’s regulatory affairs, is expected to cede his position by January.

Two senior executives at JPMorgan Chase are expected to leave by the end of the year, in the latest round of management reshuffling after the bank’s multibillion-dollar trading loss.

Irene Tse — who headed up the North American arm of the chief investment office, the powerful but previously little known unit at the center of the trading mishap — is leaving to start her own hedge fund. Barry Zubrow, who currently runs the bank’s regulatory affairs, is expected to cede his current position by January, according to several current and former executives with knowledge of the move.

The exits come in the aftermath of trading blunder, which stemmed from a soured credit bet. The losses have been a rare black eye for Jamie Dimon, JPMorgan’s chief executive, once considered among the most skilled risk managers on Wall Street.

As chief risk officer at the bank from 2007 to January 2012, Mr. Zubrow has been associated with the trading losses. Ms. Tse, meanwhile, joined the bank in early 2011 from hedge fund Duquesne Capital Management to take over as head of the North American trading desk.

News of Mr. Zubrow’s move was previously reported by the Wall Street Journal.

As it works to move beyond the trading losses and reassure skittish investors, JPMorgan has revamped parts of its organization.

The bank has appointed a new head of the chief investment unit to succeed Ina Drew, one of the most notable casualties of the trading mess. The bank has also promoted a number of younger executives, including Mike Cavanagh and Daniel Pinto to head up a united corporate and investment bank. Mr. Cavanagh is leading the cleanup operation.

During Mr. Dimon’s nearly six-year reign, the bank has undergone a number of management shuffles. Few of the executives who made up Mr. Dimon’s inner circle during the financial crisis – including Bill Winters, Steve Black and Heidi Miller – remain.

A spokesman for the bank declined to comment.