Wednesday, April 16, 2014

Thursday April 17 Housing and Economic stories


Bad loan writedowns soar at China banks - ( China’s biggest banks more than doubled the level of bad loans they wrote off last year, in a sign that financial strains are mounting as growth in the world’s second-largest economy slows. The five biggest Chinese banks, which account for more than half of all loans in the country, removed Rmb59bn ($9.5bn) from their books in debts that could not be collected, according to their 2013 results. That was up 127 per cent from 2012, and the highest since the banks were rescued from insolvency, recapitalised and publicly listed over the past decade. The sharp acceleration in write-offs is the latest indication of the turbulence now buffeting China’s financial system. The bond market suffered its first true default in March, two high-profile shadow bank investment products were spared from collapse by last-minute bailouts earlier this year, and a small rural lender suffered a brief bank run last week. Data also point to a deeper economic downturn in the first quarter than expected, putting China on track this year for its slowest growth since 1990. The deterioration has fuelled expectations that Beijing will act soon to shore up the economy. “Increasing downward pressure on the economy should not be neglected,” Li Keqiang, China’s premier, said last week. “We have policies in store to counter economic volatility.”

Biggest ETF Exodus From Treasuries Since ’10 Signals Higher Rate - ( Investors of exchange-traded funds that buy U.S. government debt are signaling their conviction theFederal Reserve is intent on raising interest rates sooner rather than later. After pouring into the ETFs to start the year, investors pulled $10.3 billion in March, the biggest exodus since December 2010, data compiled by Bloomberg show. The $7.86 billion iShares 1-3 Year Treasury Bond ETF alone lost a third of its assets from withdrawals, the most of any fixed-income fund this month. The retreat shows how quickly ETF investors recalibrated expectations as Fed Chair Janet Yellensaid March 19 that a strengthening U.S. economy may prompt the central bank to lift its benchmark rate six months after it stops buying bonds. While Treasuries have confounded forecasters by outperforming this year, ETF investors are shifting money into riskier assets such as junk loans and small-cap stocks to capture greater returns. “When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” Thomas Higgins, global macro strategist at Standish Mellon Asset Management Co., which oversees $167 billion of fixed-income assets, said in a telephone interview from Boston. “With the Fed signaling rate hikes and the economy slowly but steadily humming along there is less and less value in Treasuries.”

Abe Bliss Broken as Foreigners Flee Topix in Biggest Drop - ( In just one quarter, the developed world’s biggest stock rally has given way to its worst slump. Japan’s Topix index, up 51 percent last year, fell 8.9 percent this quarter through March 28, almost twice as much as the next-worst market, Hong Kong. The retreat is emboldening short sellers, whose trades made up as much as 36 percent of dailyTokyo Stock Exchange volume this month. Foreign investors sold 975 billion yen ($9.5 billion) of Japanese shares in one week in March, the most since the crash of 1987. While equities struggled around the world in the first quarter, declines were worse in Japan, where the euphoria created by Prime Minister Shinzo Abe and the central bank’s steps to beat deflation showed signs of wearing off. An appreciating yen and concern about tomorrow’s sales-tax increase punished shares more than the rest of the world at a time whenChina’s slowdown, Russia’s annexation of Crimea and worry that the U.S. will raise interest rates sooner than anticipated made gains harder to come by.

Dashed Ikea Dreams in Ukraine Show Decades Lost to Corruption - ( Almost half of Ukrainians say they desire Ikea products more than any other global brand, yet the largest home-furnishings retailer hasn’t been able to crack the market in a decade of trying. The reason: it won’t pay a bribe. As Prime Minister Arseniy Yatsenyuk’s government rushes to fend off Russia’s expansion and raise the $35 billion it says it needs to avoid default, the country of 45 million faces the more basic problem of rampant graft that no leader has been able to tackle in 23 years of independence. Stuck between the European Union and its former imperial master Russia, Ukraine has emerged as the most corrupt country on the continent, according to Transparency International. That and “incompetent” leadership are the reason a nation endowed with most of the ingredients needed to create a vibrant economy fell so far behind its peers, according to analysts including Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London.

 ‘Cement Shen’ Detained Spurs Scavenging as China Developer Fails - ( Amid the cluster of half-built brick townhouses surrounded by budding peach groves on the outskirts of Fenghua city, south of Shanghai, workers last week could be seen taking down metal scaffolding and hauling away steel plates. They had heard the news about “Cement Shen,” the nickname of the developer whose Zhejiang Xingrun Real Estate Co. became insolvent this month with 3.5 billion yuan($563 million) in debt, according to an official in the eastern Chinese city of Fenghua, 120 miles (190 kilometers) from Shanghai. Authorities detained founder Shen Caixing and his son for illegal fundraising, Xu Mengting, director of the government information office, said in a March 21 interview. “The developer owed us hundreds of thousands of yuan” for scaffolding and steel, said workers Xie and Wang, who would only give their surnames as they collected dozens of long metal plates. “We are taking these materials back for now, because there’s no work here.”

Tuesday, April 15, 2014

Wednesday April 16 Housing and Economic stories

China’s Developers Face Shakeout as Easy Money Ends: Mortgages  - ( The collapse of a Chinese developer in a city south ofShanghai foreshadows a shakeout among the nation’s almost 90,000 real estate companies as the government reins in credit and the housing market slows. Zhejiang Xingrun Real Estate Co., a closely held developer based in Fenghua, is insolvent, with 3.5 billion yuan ($562 million) of debt. Its residential projects have been halted and authorities have detained its largest shareholder and his son, according to the city’s government. Developers have proliferated since China began allowing private home ownership in 1998, causing a surge in demand and a rally in residential prices. For years, homebuilders binged on easy credit from banks and shadow financing from non-banks at higher interest rates. Now many developers are struggling with debt as thousands of apartment buildings across the country sit empty and the government abstains from providing further stimulus for the economy.

Banks Lending Like It’s 2007 Belied by $10 Trillion Hoard - ( For all the warnings from theFederal Reserve over excessive risk-taking as loan growth soars to levels last seen just before the crisis, bankers still have 10 trillion reasons to lend. That’s the dollar amount that banks hold in deposits in the U.S., which exceeded the value of all loans by a record $2.5 trillion last month. Banks are amassing more cash even as lending to U.S. companies this quarter is poised to increase by the most since 2007, according to data compiled by the Fed. The lending surge reflects confidence among the nation’s banks to extend credit as the Fed scales back its monetary support of the U.S. economy, while the cash cushion may temper the concerns of regulators who in recent months have warned that excesses may be emerging in riskier parts of the loan markets. Seven years ago, when banks were lending at a faster pace, the amount that was lent outstripped cash deposits.

Georgia teen spends $31K mistakenly deposited into account, now bank wants it back – ( Ten days after the extravagant mistake was reportedly made, the banking victim inquired about his missing money but the teen had already withdrawn $20,000 cash and spent $5,000 with his ATM card. He was confronted when returning to the bank to make another withdrawal. Here's hoping he can still afford a good lawyer. A Georgia teen whose bank mistakenly deposited $31,000 into his account has been told to return the money or face legal action. Unfortunately for him, he had 10 days to spend it and most of it appears to be gone. The extravagant blunder reportedly began on March 7 when a Madison County man made the five-figure deposit into his First Citizen Bank account, but a teller dropped it into the wrong account bearing his same name of Steven Fields, according to an incident report.

GM halts most Chevy Cruze sales - ( General Motors has halted the sale of most of the Chevrolet Cruzes now on dealer lots. The Cruze is GM's best-selling car model in the United States, and is also widely distributed internationally. Spokesman Alan Adler confirmed that the automaker has ordered a halt to sales of models with the 1.4-liter turbo engine, the most popular version of the compact car. Adler did not know the reason for the halt, and said there has not been a recall issued on cars already sold. The news comes as GM contends with a damaging recall of 1.6 million small cars worldwide due to an ignition switch flaw that has been linked to at least 12 deaths. This stop order is minor in comparison to that recall, but comes at a bad time, as Congress and federal prosecutors probe why GM did not recall the cars for a decade after it discovered the problem. GM CEO Mary Barra, who has apologized repeatedly for the delays in the recall, is due to testify before Congresson Tuesday and Wednesday next week.

Failing Stress Test Is Another Stumble for Citigroup - ( Something didn’t quite seem right to Citigroup earlier this week. The banking behemoth could show that it had enough capital to ride out an economic storm, but a regulator was refusing to approve its plan to increase dividends and stock buybacks, steps intended to please shareholders and build confidence in the bank’s turnaround. Inside Citigroup, board members and senior executives expressed bafflement and anger as they prepared for the rejection to be announced by the Federal Reserve Wednesday afternoon, people briefed on the matter said. Was the Fed punishing Citigroup for a costly fraud last month at its Mexican unit? Was the regulator trying to look tough? Or was the Fed subtly pressing for a breakup of the bank — a goal of some regulators, investors and analysts for years? A day after Citigroup’s capital plan failed the Fed’s stress test for the second time in three years, bank executives were still struggling to understand the decision and how best to respond, these people said.

Monday, April 14, 2014

Tuesday April 15 Housing and Economic stories


Get ready for stocks to drop 25 percent: Pro - ( Once the Fed begins to truly reduce its massive bond buying program later this year, markets could see a quarter of their value wiped off the books, a private equity pro told CNBC on Friday. Jay Jordan, founder of the Jordan Company, issued the dire warning during an interview on CNBC's "Squawk Box," saying a 25 percent drop could extend to all asset classes. He blames the monetary policies of former Fed chair Ben Bernanke for artificially inflating asset prices through super-low interest rates. Lawrence Bossidy, former CEO of Honeywell, agreed with the basis of Jordan's warning, but not the numbers. He called Jordan's forecast an "alarm." "I question the depth of the decline," Bossidy said on "Squawk Box." "I don't think we're going to go down 25 percent."

Minimum wage hike's unexpected drawback for the poor - ( For most of us, the prospect of a 40 percent raise in pay would probably be pretty exciting. It would mean a big jump in disposable income, and would probably make it possible to do some things—take that vacation, replace that old car—that weren't really in the cards before. The current push to increase the federal minimum wage from $7.25 per hour to $10.10, however, while it would constitute a nearly 40 percent pay raise for minimum wage workers, would almost certainly not translate into a similar increase in their economic wellbeing. For simplicity's sake, consider a minimum wage worker who regularly works 40 hours per week, 52 weeks per year. This worker would earn $15,080 per year at $7.25 per hour, and $21,008 at $10.10. That is, unquestionably, a substantial increase. But because of the way programs to aid the poor in the U.S. are structured, that shift would cause federal benefit payments to many minimum wage workers to be significantly reduced. Assistance program for the poor are, by definition, income-based, so as income rises, the payments are either reduced or, in some cases, cut off entirely.

Spooked by defaults, China banks begin retreat from risk - (  Some of China's struggling firms are finally getting the reception that regulators have been hoping for - a cold shoulder from banks in the form of smaller and costlier loans. Reuters has contacted over 80 companies with elevated debt ratios or problems with overcapacity. Interviews with 15 that agreed to discuss their funding showed that more discriminate lending, long a missing ingredient of China's economic transformation, has become a reality. Up against a cooling Chinese economy and signs that authorities will not step in every time a loan goes bad, banks are becoming more hard-nosed and selective about whom they lend to. There are signs that even state-owned firms, in the past fawned over by lenders for their government connections, have to contend with higher rates, lower lending limits and more onerous checks by banks.

Turkey calls Syria security leak 'villainous,' blocks YouTube - (  Turkish Prime Minister Tayyip Erdogan on Thursday denounced as "villainous" the leaking of a recording of top security officials discussing possible military action in Syria to the video-sharing site YouTube. Turkish authorities ordered the shutdown of the site. Erdogan's foreign minister Ahmet Davutoglu called the posting a "declaration of war," an apparent reference to an escalating power struggle between Erdogan and rivals. The anonymous posting was an audio file with photographs of the officials involved. It followed similar releases on social media in recent weeks that Erdogan has cast as a plot by his political enemies, particularly a Turkish Islamic cleric based in the United States, to unseat him ahead of March 30 elections. The posting took the campaign to a higher level, impinging on a highly sensitive top-level meeting of security officials.

Japan to Speed Up Spending as Consumers Flash Warning: Economy - ( Japan will speed up deployment of government cash in coming months as a surprise drop in consumer spending in February triggered concern the nation’s long-awaited inflation is now damaging purchasing power. Finance Minister Taro Aso told reporters that data showing a slump in household expenditure two months before the first sales-tax increase since 1997 was a problem, and Prime Minister Shinzo Abe’s administration will pour 40 percent of outlays for the next fiscal year into the April-June quarter. He’d already pledged to fast-track stimulus spending. Data today also showed inflationary pressures are spreading even before the 3 percentage-point sales-tax increase take effect on April 1, as the price of durable goods soared the most since the early 1980s. With officials striving to prevent a repeat of the recession that followed the rise in the levy 17 years ago, the central bank also may face calls for action.

Sunday, April 13, 2014

Monday April 14 Housing and Economic stories


$1 trillion student loan debt widens US wealth gap - ( Every month that Gregory Zbylut pays $1,300 toward his law school loans is another month of not qualifying for a decent mortgage. Every payment toward their student loans is $900 Dr. Nida Degesys and her husband aren't putting in their retirement savings account. They believe they'll eventually climb from debt and begin using their earnings to build assets rather than fill holes. But, like the roughly 37 million others in the U.S. saddled with $1 trillion in student debt, they may never catch up with wealthy peers who began life after college free from the burden. The disparity, experts say, is contributing to the widening of the gap between rich and everyone else in the country.

Brookstone plans bankruptcy filing: Report - ( Specialty retailer Brookstone is preparing to file for bankruptcy as early as Sunday with a plan in place to be bought by another specialty retailer, theWall Street Journal reported, citing people familiar with the matter. Spencer Spirit Holdings, which owns the retail chain Spencer's and costume retailer Spirit, has been in discussions with Brookstone for weeks, and both retailers are looking to finalize sale paperwork over the weekend leading up to a bankruptcy filing, the report said. Brookstone could not be contacted by Reuters outside regular U.S. business hours. Brookstone sells products ranging from massage chairs to bathroom slippers and operates more than 300 stores throughout the United States and Puerto Rico.

Exclusive: U.S. to require casinos to vet high rollers' funds - sources - ( U.S. casinos may soon have to vet where their high rollers' funds come from under a requirement being developed by the U.S. Treasury Department, according to two people familiar with the matter. The move is part of a push to address longstanding regulatory and law enforcement concerns that criminals can use casinos, which have not historically been as closely monitored as banks for compliance with anti-money laundering laws, to convert proceeds of crime into money that appears clean. Under current law, casinos are required to report suspicious activity. A customer who used a large sum of cash to buy chips, gambled briefly, and then asked to cash out with a casino check, for example, would likely get reported to authorities.

'Very painful': World heading for bust 'unlike any other', says Jeremy Grantham - ( Mr. Grantham -- the cofounder and chief investment strategist at the $US112 billion ($123 billion) Boston-based fund manager GMO --said he wouldn't invest his clients' money in US stocks for at least the next seven years because of the Fed's ''misguided policies''. Mr Grantham has an impeccable track record, having called both the internet bubble and then the US housing bubble. In November he said he believed the US sharemarket could rise another 30 per cent, although he believed it was overvalued, before crashing again.''...  ''Over the next seven years we think the market will have negative returns. The next bust will be unlike any other because the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before.

Pending home sales fall to lowest level since October 2011 - ( The number of contracts to buy previously-owned U.S. homes fell in February to the lowest level in more than two years, a sign the housing sector has yet to shake off the impact of higher interest rates and a harsh winter. The National Association of Realtors said on Thursday its pending home sales index, based on contracts signed last month, fell 0.8 percent to 93.9 in February. That was the lowest level since October 2011. Interest rates on 30-year fixed-rate mortgages have risen about a percentage point since May, while much of the United States has experienced an unusually cold and snowy winter. Lawrence Yun, chief economist for the realtors group, said the drag from bad weather was likely to reverse itself soon.

Thursday, April 10, 2014

Friday April 11 Housing and Economic stories

A whistleblower's worst nightmare  - ( Winston, 62, is a mild-mannered Ph.D. and a veteran leadership executive who has held top jobs at elite corporations such as McDonnell Douglas, Motorola and Merrill Lynch. After taking time off to nurse his ailing parents, Winston was recruited by Countrywide Financial to help polish their corporate Image. He was quickly promoted -- twice -- and had a team of 200 employees. It's almost unheard of for a top-tier executive turning whistleblower, but that's what Winston became after he noticed many of his staff were sickened by noxious air in their Simi Valley, California, office. When the company failed to fix the problem, Winston picked up the phone and called Cal-OSHA to investigate. Retaliation was immediate. Winston's budget was cut and most of his staff was reassigned. Several months later, Winston says he refused Countrywide's request to travel to New York and, basically, lie to the credit ratings agency Moody's about corporate structure and practices. That was the death knell for Winston's stellar 30-year-long career. When Countrywide was bought out by Bank of America in 2008 -- following Countrywide's widely reported lead role in the sub-prime mortgage fiasco that caused the collapse of the U.S. housing market -- Winston was out of a job. In early 2011, after a month-long trial, a jury overwhelmingly found that Winston had been wrongfully terminated and awarded him nearly $4 million. Lawyers for Bank of America (which had assumed all Countrywide liabilities) immediately asked the judge to overturn the verdict. Judge Bert Gennon Jr. denied the request saying, "There was a great deal of evidence that was provided to the jury in making their decision, and they went about it very carefully." Winston and his lawyer maintain they won despite repeated and egregious perjury by the opposition. Winston never saw a dime of his award, and nearly two years later, B of A appealed. In February 2013, the Court of Appeal issued a stunning reversal of the verdict. The court declared Winston had failed to make his case.

Ukraine to hike domestic gas prices by 50% - ( Ukraine is raising the price of gas for domestic consumers by more than 50 per cent from May 1 and will implement further rises under a fixed timetable until 2018, an official of state energy company Naftogaz said on Wednesday. The step, which will be widely unpopular with ordinary Ukrainians who have grown used to subsidized gas prices from the Soviet era, were taken in response to demands by the International Monetary Fund. The interim government of Arseny Yatseniuk is in the final stages of talks with the Fund to secure $15-20 billion in a new aid package.

Investors get over 'Crush'; King bloodied post-IPO - ( King Digital Entertainment officially began life as a publicly traded company on Wednesday, but plunged below its initial pricing levels on the New York Stock Exchange, after weeks of breathless publicity.On Tuesday, the maker of the addictive mobile game "Candy Crush" priced its shares at $22.50 after the U.S. markets closed. The gaming company, listed as "KING" on the Big Board, issued 22.2 million shares, giving the initial public offering (IPO) an initial value of just under $500 million. Yet just hours after pricing, investors appeared to lose their sweet tooth. The game maker, which first rose to prominence as a Facebook application, saw its stock open on the NYSE at $20.50—but quickly swan-dived by 12 percent as buzz over the hotly awaited IPO began to fade. In heavy midday volume, the stock tumbled as low as $19 per share.

Credit Suisse Helped The Nazis Steal In Europe Now They’re Trying To Steal From Jamaicans In NY - ( A “Ghetto Loan” is a subprime loan specifically targeting homeowners of African descent who may not know that they qualify for a low cost and low interest loan. In most cases the banks played on the homeowner’s lack of knowledge about finance to set the homeowner up to fail with high cost loans in order to get them to continually refinance. Many banks and brokers did this for the pursuit of profit. Gary soon learned that he wasn’t alone in his fight with Greenpoint Mortgage Funding. He learned that between 2004-2006, Greenpoint under the ownership of Capital One had put nearly 3200 Black and Latino homeowners in Ghetto Loans. There were so many homeowners affected by Greenpoint Mortgage Funding’s Ghetto Loans that then New York Attorney General Andrew Cuomo who used his previous experience as Secretary of HUD, to successfully sue Greenpoint Mortgage Funding and Capital One for lending discrimination. Contrary to the sweet and sexy image Swiss Miss, Swiss bankers have a history of being hostile to non-white people in the U.S. and around the world. Within 60 days after Cuomo successfully sued Capital One and Greenpoint Mortgage Funding, Capital One shut down Greenpoint Mortgage Funding, sold the loans to to an mortgage backed securities trust and the servicing rights to Select Portfolio Servicing a division the Swiss bank, Credit Suisse.

Scores of Puerto Rico Trades Below $100,000 Canceled by Dealers - ( Scores of trades in bonds Puerto Rico issued this month have been canceled by dealers, including some that were under the $100,000 minimum transaction level stipulated in deal documents, data compiled by Bloomberg show. The self-governing U.S. territory sold $3.5 billion of debt March 11, in the biggest-ever high-yield offering for the $3.7 trillion municipal market. The issue gave the island, which was cut to junk last month, cash to pay bills through June 2015, as officials try to revive a shrinking economy. Hedge funds bought the majority of the bonds at issue. Dealers report voided transactions to the Municipal Securities Rulemaking Board, said Ernesto Lanza, deputy executive director at the Alexandria, Virginia-based self-regulatory organization. The group removes such trades from its Electronic Municipal Market Access website, though regulatory authorities have access to the trading history, he said in an interview.