Wednesday, July 23, 2014

Thursday July 24 Housing and Economic stories


Student loan forgiveness may be coming - (www.cnbc.com) The new entitled class - Government workers.  For many members of the class of 2014 who borrowed money to attend college, the clock is ticking on what is likely to be their biggest expense after graduation. They'll have to start paying back their federal student loans in November or December—as the six-month grace period that lenders give new grads comes to an end. But depending on their income—or lack of income, if they're still looking for work—some borrowers may be eligible for much lower payments than they'd anticipated. And eventually they could have their federal loans forgiven altogether. "If total student debt exceeds one's annual income, then you will likely qualify for some sort of payment plan and receive a financial benefit from participation" in an income-driven repayment plan, said Mark Kantrowitz, senior vice president and publisher of Edvisors.com, a website that provides information, advice and tools for helping families plan and pay for college.

Italy delays repayment of commercial debts - (www.reuters.com)  Italy will settle the debt arrears it owes to private sector suppliers by the end of this year, Economy Minister Pier Carlo Padoan said in a newspaper interview on Sunday, pushing back previous commitments. The Italian state owes some 75 billion euros ($102 billion)to private suppliers, according to the most recent data from the Bank of Italy. The unpaid bills have starved companies of cash and triggered layoffs, factory closures and bankruptcies. "We will ensure that the arrears are paid off by the end of the year," Padoan told Corriere della Sera daily. Prime Minister Matteo Renzi promised in March to pay back all the debt arrears by July. Within a week he put back the target date to September. The government is finding it hard to tackle the problem because of public financeconstraints, inefficiency, uncertainty over exactly how much is owed and a reluctance on the part of some public bodies to acknowledge their debts.

Argentina gets set for debt talks by calling U.S. judge biased - (www.bloomberg.com) Argentina on Friday accused a U.S. judge of being biased in favor of hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York next week. A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy. The government of President Christina Fernandez denounces the funds as vultures bent on crippling Argentina, Latin America's third largest economy, for the sake of profit. "A lot of officials in the United States say its judicial branch is independent," Argentine cabinet chief Jorge Capitanich said. "But it is not independent of the vulture funds because its decisions show clear partiality." The legal fight stems from Argentina's 2002 default on about $100 billion in bonds. The financial crisis thrust millions of middle-class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls.

France hits out at dollar hegemony in global deals Financial Times - (www.cnbc.com) France's political and business establishment has hit out against the hegemony of the dollar in international transactions after U.S. authorities fined BNP Paribas $9 billion for helping countries avoid sanctions. Michel Sapin, the French finance minister, called for a "rebalancing" of the currencies used for global payments, saying the BNP Paribas case should "make us realize the necessity of using a variety of currencies". He said, in an interview with the Financial Times on the sidelines of a weekend economics conference: "We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don't think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade." Christophe de Margerie, the chief executive of Total, France's biggest company by market capitalization, said he saw no reason for oil purchases to be made in dollars, even if the benchmark price in dollars was likely to remain.

Bond Anxiety Grows in $1.6 Trillion Repo Market as Failures Soar - (www.bloomberg.com) In the relative calm that is the market for U.S. Treasuries, a sense of unease over a vital cog in the financial system’s plumbing is beginning to rise. The Federal Reserve’s bond purchases combined with demand from banks to meet tightened regulatory requirements is making it harder for traders to easily borrow and lend certain desired securities in the $1.6 trillion-a-day market for repurchase agreements. That’s causing such trades to go uncompleted at some of the highest rates since the financial crisis. Disruptions in so-called repos, which Wall Street’s biggest banks rely on for their day-to-day financing needs, are another unintended consequence of extraordinary central-bank policies that pulled the economy out of the worst financial crisis since the Great Depression. They also belie the stability projected by bond yields at about record lows. “You have a little bit of a perfect storm here,” said Stanley Sun, a New York-based interest-rate strategist at Nomura Holdings Inc., one of the 22 primary dealers that bid at Treasury auctions, in a telephone interview June 30. A smoothly functioning repo market is vital to the health of markets. The fall of Bear Stearns Cos., which was taken over by JPMorgan Chase & Co. in 2008 after an emergency bailout orchestrated by the Fed, and collapse of Lehman Brothers Holdings Inc., whose bankruptcy in September of that year plunged markets into a crisis, was hastened after they lost access to such financing.





Tuesday, July 22, 2014

Wednesday July 23 Housing and Economic stories


Why the world is choking on debt: Nouriel Roubini - (www.cnbc.com) Like individuals, corporations, and other private firms that rely on bankruptcy procedures to reduce an excessive debt burden, countries sometimes need orderly debt restructuring or reduction. But the ongoing legal saga of Argentina's fight with holdout creditors shows that the international system for orderly sovereign-debt restructuring may be broken. Individuals, firms, or governments may end up with too much debt because of bad luck, bad decisions, or a combination of the two. If you get a mortgage but then lose your job, you have bad luck. If your debt becomes unsustainable because you borrowed too much to take long vacations or buy expensive appliances, your bad behavior is to blame. The same applies to corporate firms: some have bad luck and their business plans fail, while others borrow too much to pay their mediocre managers excessively.

The last time the market did this, serious problems ensued - (finance.yahoo.com) According to data from Thomson Reuters, the mergers and acquisitions market saw nearly $1.77 trillion in deals announced for the first half of this year. And, the second quarter of 2014 saw over $1 trillion in deals announced, the highest since the second quarter of 2007. And, we all know what happened after that. But, does that mean we’ll see a repeat of seven years ago? “If you look back in history, big merger waves definitely precede precipitous drops in the equity market,” said Gina Sanchez, founder of Chantico Global.  “As you have extraordinary valuations in your own stock, you can use it to buy up all sorts of things. So, there’s a reason these tend to happen at the top.” But trying to use M&A as a signal comes with its own peril, warns Sanchez, a CNBC contributor. “The problem with M&A as a timing tool is it’s not particularly precise,” she said. “It could go on for a while before it actually proceeds that drop. So, it’s not terribly exact. But what we do know is, when we see enormous waves of M&A, you can expect a precipitous decline to come after that.”

Gas Prices Wallop Wallets - (online.wsj.com) As Americans drive to barbecues and the beach in coming days, they will be paying more for gas than on any Independence Day weekend since the record highs of 2008. A gallon of unleaded gasoline cost an average of $3.67 Wednesday, almost 20 cents above last year's price, according to automobile club AAA. In California, drivers have been paying well over $4 a gallon for weeks. Prices at the pump are tracking a sharp rise in oil prices over the past month, after Islamist militants took control of several cities in Iraq. Investors and traders have worried that the spreading insurgency poses a threat to the country's oil production. Oil prices have given up some of their gains in recent days, but it will take some time for those declines to be reflected in the cost of gasoline.

Pimco's Gross: Bank loans starting to look 'bubbly' - (www.cnbc.com) Pimco founder and CIO, Bill Gross said he sees bubbly pockets in the market. "There's bubbly aspects in terms of the terms and conditions, for instance, in terms of bank loans. There can be tight conditions which restrict a company in terms of their ability to lever going forward," Gross said in an interview on CNBC Wednesday. "...There can be easy types of covenants and restrictions and certainly the Fed see's, and we see as well, that over the past 12 to 18 months that those standards have been eased and perhaps are a little bit bubbly," he explained. In terms of spreads themselves and the prices of risk assets, Gross said he sees them on a "normal level if the new neutral stays low at 2 percent." Pimco Total Return fund posted $4.5 billion in net outflows for June, logging its 14th straight month of investor withdrawals despite an improving performance, according to data from Morningstar data. 

Gov. Christie: Fix pension system or it will eat us alive - (www.news.yahoo.com) From revenue shortfalls to a pinched pension system, the fiscal woes facing the state of New Jersey are so serious that if not dealt with swiftly, it could "eat us alive," Gov. Chris Christie told CNBC on Tuesday. The Republican governor appeared on "Squawk Box" the day after signing the state's budget, in which he vetoed more than $1 billion in tax increases that he said would only serve to drive families and businesses out of the state. "I have a constitutional requirement to balance the budget and I have a state that's already high-taxed and I'm not going to raise taxes on the people in the state of New Jersey and drive more people out," said Christie.




Monday, July 21, 2014

Tuesday July 22 Housing and Economic stories



Vacant-House Fakery Reborn as Cleveland to Camden Fight Blight - (www.bloomberg.com) Camden, New Jersey, one of the poorest and most crime-ridden U.S. cities, has awaited rebirth for a generation. For now, it has Christopher Toepfer and his paintbrush. Ten feet up a ladder, Toepfer, a 51-year-old artist, is turning a rotting factory’s plywood-covered windows from a mess of gang graffiti into a railroad mural. The spruce-up, though it won’t cure the neighborhood’s ills of poverty and violence, will make a bright spot of the biggest blight on Federal Street. Thirty years after New York City Mayor Ed Koch drew scorn for gussying up uninhabitable Bronx tenements with decals of curtained windows, urban fakery is spreading in U.S. cities where the recession’s wave of foreclosures added to decades-long decay. 

Argentina Seen Breaking Vows as Fernandez Legacy at Risk - (www.bloomberg.com) Argentina’s President Cristina Fernandez de Kirchner has less than a month to choose between two unpalatable options: fulfilling a vow never to pay off creditor hedge funds, or negotiating with them to avoid a rerun of the 2001 debt crisis that forced a predecessor to flee the presidential palace in a helicopter. With the economy contracting and foreign currency reserves near an eight-year low, she is likely to decide that a deal to pay off the $1.5 billion the funds are demanding is the least bad choice, said Claudio Loser, the head of research firm Centennial Group Latin America. “A catastrophic situation in the economy would be worse” for Fernandez than any backtracking on her promises, Loser, a former International Monetary Fund director, said by phone from Washington. The government “is very fearful that they could be kicked out or the last year of their term is a disaster.”

Russia Delivers 2nd Batch of Jets To Iraq As USA Unloads 4000 Hellfire Missiles - (www.zerohedge.com) The battle for favoritism among the 'apparent' leaders in Iraq continues. Russia just delivered the second batch of Sukhoi fighter jets (which will be flown by Iraqi pilots and "are ready to provide air support to the armed forces"), and the US unloaded 4,000 additional Hellfire missiles to support Iraq's fight against the Islamist insurgents. While this morning the intelligentsia of mainstream media proclaimed "the situation in Iraq is calming down" predicated on the fact that oil prices were lower and stocks at record highs, we suspect the additional war material  to Iraq will do nothing but increase the determination of the "Islamic State" to increase its Caliphate.

Feud Between Oligarchs Seen as Cause of Bank Run in Bulgaria - (www.nytimes.com) Even in an Eastern European country with a history of financial panics and political intrigue, it was an alarming picture. Thousands of fearful depositors lined up outside one of Bulgaria’s three largest banks. In a matter of hours on Friday, they withdrew the equivalent of nearly $550 million. The lines had dwindled by Monday after European and Bulgarian authorities took emergency measures. But questions remained about how a country could be plunged into crisis by what the authorities described as nothing more than a digital rumormongering campaign that may have been linked to animosity among rival business tycoons with political ties. The banking crisis coincides with acute political instability in Bulgaria, a country of 7.3 million. The Socialist-led government of Prime Minister Plamen Oresharski is expected to resign soon, after an agreement among the country’s main political parties to hold elections on Oct. 5.




Sunday, July 20, 2014

Monday July 21 Housing and Economic stories


China Developers Offering Home Buybacks in Weakest Markets - (www.bloomberg.com) Property developers in two ofChina’s weakest housing markets are offering to buy back homes above the purchase price to boost sales as demand slows. In Hangzhou, where home prices fell the most in May among 70 Chinese cities watched by the government, Shanheng Real Estate Group is giving homebuyers an option to sell back their apartments in five years for 40 percent above the purchase price. In Wenzhou, DoThink Group is offering to repurchase homes at three of its projects for 120 percent of the purchase price after three years. The offers are the latest strategy by developers across China, including reducing prices, delaying project launches and offering incentives to potential buyers, as they seek to maintain sales targets. Prices of new homes fell in May from April in half the 70 cities tracked by the government, the largest proportion since May 2012, according to government data. A more persistent and sharper downturn in the property sector is the biggest risk for China’s economy in the next couple of years, according to UBS AG.

Puerto Rico’s Downgrade Shows Debt Law Can’t Contain Rot - (www.bloomberg.com) A law allowing some Puerto Rico government entities to restructure debt outside bankruptcy failed to contain a crisis as its credit rating was cut three levels, imperiling the U.S. commonwealth’s ability to finance itself. The island’s electric authority, which could shed some of its $8.6 billion in debt by making creditors accept losses, said yesterday after the market’s close it had paid off maturing bonds in full. That was only after Moody’s Investors Service sent Puerto Rico’s rating on $14.4 billion of general-obligation debt to B2 from Ba2, and reduced sales-tax debt to speculative grade. The cuts and the restructuring measure restrict Puerto Rico’s ability to borrow, said Peter Hayes, head of municipal debt at BlackRock Inc. “With these ratings and this legislation, that access to the market is gone,” said Hayes, whose New-York based firm oversees $108 billion of munis. Little is certain about what has grown to become a $73 billion obligation for the commonwealth and its agencies. Most of the debt is tax free, held in 66 percent of U.S. muni mutual funds as the yield created by risk made it a mainstay of U.S. municipal finance. The downgrade now leaves those investments in danger and the poverty-ravaged island with few options to borrow money.

Anti-immigration protesters block undocumented migrants in California - (www.reuters.com) Protesters shouting anti-immigration slogans blocked the arrival of three buses carrying undocumented Central American families to a U.S. Border Patrol station on Tuesday after they were flown to San Diego from Texas. The migrants, a group of around 140 adults and children, were sent to California to be assigned case numbers and undergo background checks before most were likely to be released under limited supervision to await deportation proceedings, U.S. immigration officials said. But plans to bring the immigrants to a Border Patrol outpost in Murrieta, 60 miles (100 km) north of San Diego, sparked an outcry from town mayor Alan Long, who said the migrants posed a public safety threat to his community.

Medical staff warned: Keep your mouths shut about illegal immigrants or face arrest - (www.foxnews.com) A government-contracted security force threatened to arrest doctors and nurses if they divulged any information about the contagion threat at a refugee camp housing illegal alien children at Lackland Air Force Base in San Antonio, Texas, sources say. In spite of the threat, several former camp workers broke their confidentiality agreements and shared exclusive details with me about the dangerous conditions at the camp. They said taxpayers deserve to know about the contagious diseases and the risks the children pose to Americans. I have agreed to not to disclose their identities because they fear retaliation and prosecution. “There were several of us who wanted to talk about the camps, but the agents made it clear we would be arrested,” a psychiatric counselor told me. “We were under orders not to say anything.”

Sarkozy Charged With Influence Peddling After Questioning  - (www.bloomberg.com) Former French President Nicolas Sarkozy was charged withinfluence peddling, threatening to upend his political ambitions. Television footage showed Sarkozy leaving the courthouse in Nanterre this morning after being questioned by a special team of anti-corruption magistrates. The charge follows 15 hours of questioning centered on whether some judges were keeping Sarkozy and his lawyer Thierry Herzog informed about the state of play in probes into the former president’s campaign financing. Herzog was detained this week as part of the same investigations. “I believe in the innocence of Nicolas Sarkozy,” Jerome Chartier, a lawmaker in Sarkozy’s UMP party, said on the i-tele TV channel. Chartier said he doesn’t want Sarkozy to lead the party into the next election.




Thursday, July 17, 2014

Friday July 18 Housing and Economic stories


Corinthian College Students Await Their Fate as Breakup Looms - (www.bloomberg.com) Corinthian Colleges Inc. (COCO)’s 72,000 students will soon be swept into the biggest collapse the U.S. for-profit education industry has ever seen. Jessica Arellano, 30, a medical assistant student at Corinthian’s Everest College in West Los Angeles, said on Friday that she wasn’t aware of the company’s situation and that she received a confusing e-mail last week assuring her that classes and student aid would continue as usual. “I’m going to ask some questions now, ” said Arellano, of Culver City, California. Corinthian, which also owns the Heald and WyoTech career schools, as well as an online university, is scheduled to present a plan to the Education Department today to sell most of its 107 campuses and close others. The wind-down comes after the U.S. Department of Education cut Corinthian’s access to student aid following more than a decade of complaints.

Pennsylvania Governor Won’t Sign Budget, Citing Pensions - (www.bloomberg.com) Pennsylvania Governor Tom Corbett refused to sign a $29.1 billion budget for the fiscal year beginning today because it doesn’t reduce pension costs. Corbett, a 65-year-old Republican, said he would work with the legislature his party leads on “meaningful pension reform,” in a statement released yesterday after both chambers voted on the spending plan. “I am withholding signing the budget passed by the General Assembly while I deliberate its impact on the people of Pennsylvania,” he said. Pennsylvania’s government remains open as there’s no immediate impact from a lack of a budget at the beginning of the fiscal year. Financing retiree benefits is a deepening challenge for localities nationwide as they recover from the 18-month recession that ended in 2009. Governments last year paid more for pensions, 83 percent of their required annual contributions, up from 81 percent a year before, while the systems had about 72 percent of the money needed to meet retirement obligations, unchanged from the year before, the Center for Retirement Research at Boston College said.

EU Backs State Aid for Bulgarian Banks as Lender Targeted - (www.bloomberg.com) The European Union gave Bulgaria authority to provide 3.3 billion lev ($2.3 billion) in state aid for lenders after police there arrested men they said triggered a run on deposits of the third-largest bank. The central bank overcame a run on deposits caused by an “organized criminal attack” against several banks, it said in a statement today. Earlier, queues formed outside some Sofia branches of First Investment Bank AD, which paid 800 million lev to clients on June 27. Bulgaria asked the European Commission to support the credit line a week after the central bank put fourth-largest Corporate Commercial Bank AD under administration after a big depositor withdrew funds. “Last week, it transpired that certain individuals have been targeting the third-largest bank, urging customers to withdraw their deposits,” the European Commission said in an e-mailed statement. “This created concerns about the liquidity of the bank in question and risked spilling over to some other institutions, despite the fact that the Bulgarian banking system is well capitalized and has high levels of liquidity.”

Puerto Rico’s Default Plan May Spread Pain Beyond Utility - (www.bloomberg.com) The U.S. municipal-bond market begins the week wondering whether the Puerto Rico Electric Power Authority, the commonwealth’s sole provider of electricity, will pay bondholders tomorrow after lawmakers last week enacted debt-restructuring legislation. If the utility known as Prepa fails to act, the blow would be the latest absorbed by investors buffeted by bankruptcies in Jefferson County, Alabama, and Detroit. The defaults call into question the underpinnings of the $3.7 trillion market. “Puerto Rico has crossed the Rubicon; it’s crossed the line,” Richard Larkin, director of credit at Fairfield, Connecticut, investment firm Herbert J. Sims & Co., said from his office in Boca Raton,Florida. “This is absolutely a big deal and bigger than Detroit and bigger than Jefferson County because there’s more money involved.”

Puerto Rico Swap Cost at Record High Before Bond Payments - (www.bloomberg.com) Investor confidence in Puerto Rico’s ability to repay debt is sinking as the cost to protect commonwealth bonds against default has more than doubled since June 12 to the highest ever. Puerto Rico Electric Power Authority bondholders are awaiting payment today on maturing debt after legislators last week enacted a law meant to allow some government entities to restructure outside bankruptcy. A revision of Prepa’s $8.6 billion in debt would be the largest ever in the $3.7 trillion municipal-bond market. Prices on some Prepa bonds increased today, data compiled by Bloomberg show.