Monday, October 24, 2016

Tuesday October 25 20916 Housing and Economic stories

China House Price Bubble Soars Most Ever, Government Freaks out, Preannounces Plunge - ( As a consequence of a dizzying buying frenzy in September, the average price of new homes in China soared 11.2% from a year ago, after a 9.2% jump in August, the National Bureau of Statistics reported today. It was the 12th month in a row of year-over-year gains, and the largest increase on record. The average price of new homes rose in 63 of the 70 cities in the index. It dropped in six cities and remained flat in one. But all heck broke lose in tier-one cities: In Beijing, the average price skyrocketed 27.8%, in Shanghai 32.7%. This comes after authorities have unleashed a tsunami of liquidity that triggered a record borrowing binge. In response to the prior deflation of China’s house price bubble, and the social unrest it began to entail as folks saw their life savings evaporate, the People’s Bank of China cut interest rates six times in the eleven months leading up to October 2015. The benchmark mortgage rate dropped to a historic low of 4.9%. Last month, the medium- and long-term loans to households, mostly mortgages, ballooned by 571 billion yuan, as the total value of new homes sold (a function of price and volume), according to Bloomberg calculations, soared 61% year-over-year, nearly double the increase in August.

Head Of Democratic Party Makes Stunning Admission: "The People Are In Despair About How Things Are" - ( While readers may be used to tin-foil-hat-wearing digitial dickweeds and alt-right bloggers seeing through the veil of ignorance and media hype that hides a considerably uglier economic reality than The White House (and the stock market) might suggest, many Democrats may be shocked to discover that none other than now-acting chair of the Democratic National Committee Donna Brazile agrees...
In an email to Clinton campaign chair John Podesta from February 2016, released Friday by WikiLeaks... Donna Brazile (who has had a tough week trying to defend her cheating allegations for giving Hillary debate questions) admits... “I think people are more in despair about how things are - yes new jobs but they are low wage jobs... HOUSING is a huge issue. Most people pay half of what they make to rent,” Such honesty from such a vocal and public cheerleader for the Obama administration is sure to embarrass the White House, and, as Lifezette notes, contradicts the official Democratic Party line that Obama is some sort of economy-saving superhero.

Germany’s Long-Suffering Savers Have Real Cause to Complain – ( In Germany, fretting about inflation is a political currency that never seems to lose its value. In the past week, for example, at least three national newspapers have run prominent articles telling the populace that their savings -- denied the magic of compound interest by the European Central Bank’s low-rate policies -- are in for a renewed onslaught from accelerating consumer prices. The Bundesbank forecasts average inflation of 1.5 percent next year, whereas rates will likely be around zero. Business daily Handelsblatt, which in March ran a mocked-up front-page picture of ECB President Mario Draghi burning up a 100-euro note with a cigar wedged in his mouth, published a cover headline on Friday proclaiming that Germany is about to get caught in an “inflation trap.”

Is Chicago’s Housing Market Next?  - ( Is Chicago’s Housing Market Next? The smart money tries to cash out at the peak, no? Does it always start at the top? Because there’s just no letup in dismal tidbits piling up about big-city high-end condo market: Manhattan, San Francisco, Miami – and now Chicago too? Just last year, things were still so good on the Magnificent Mile, those tony 13 blocks of Michigan Avenue from the Chicago River north to Oak Street, of landmark towers, shops and restaurants – rents rank among the most expensive in the country – museums, hotels, and high-end condos. April last year, the 65th-floor penthouse at the Park Tower on 800 N. Michigan Ave sold for $18.75 million, “to a firm with ties to ‘Star Wars’ creator George Lucas and wife Mellody Hobson, president of a Chicago investment firm,” the Chicago Tribune speculated. It was an all-time record. The real estate business was ecstatic. But it might have marked the peak. Now another penthouse at the Park Tower – a 4,000 sq. ft. two-bedroom – is for sale, asking $12 million, according to the Financial Times. A $7.5 million four-bedroom three-bathroom condo is for sale at the Art Deco Palmolive Building at the north end of the Mag Mile. Other lesser condos are for sale galore in the area.

WikiLeaks: Hillary Wants ObamaCare to 'Unravel' - Fox Nation - ( An email leaked by WikiLeaks Tuesday appears to suggest that Hillary Clinton wants the Affordable Care Act to fail — presumably as a pretense for implementing single-payer, government-controlled health care. In a chain between Clinton and her senior policy adviser Ann O’Leary titled “Memo on Cadillac Tax for HRC,” Clinton said she’s open to changing her position on the Cadillac Tax — but that the Republican plan to repeal it must pass.

Sunday, October 23, 2016

Monday October 24 20916 Housing and Economic stories

Nearly half of city 911 call takers on leave, sparking OT problem - ( Chicago’s 911 emergency center is still struggling to get a handle on runaway overtime because 49 percent of call takers are on “some type of” absence tied to the Family and Medical Leave Act, aldermen were told Wednesday. Testifying at City Council budget hearings, Alicia Tate-Nadeau, executive director of the city’s Office of Emergency Management and Communications, said the hiring of 48 additional call takers has reduced overtime by 28,000 hours over the same period last year. That should reduce overtime spending to $9.9 million, down $1 million from a year ago, she said. But, rampant use of the leave act is still costing the city big-time. “We have approximately 44 people every single day that call off. That’s about 49 percent of all of the 911 operators we have [who] are on some type of intermittent FMLA. Clearly, this number is much larger than it should be,” Tate-Nadeau said.

Hedge Fund Managers Expect ‘Massive’ 34% Pay Cut, Survey Says - ( Portfolio managers at hedge funds, facing an exodus of investors frustrated with high fees, are about to feel the pain from an estimated 34 percent reduction in their compensation. While fund managers may take the biggest pay cut in the industry, professionals with seven or more years of experience see their total compensation declining by 14 percent on average for 2016, recruiter Odyssey Search Partners said in a report this week following a September survey of 500 hedge fund professionals. “2016 should prove to be a belt-tightening year,” according to the report. “This pessimistic viewpoint is justified, given the poor industry performance.”

To Some, it “Feels More Like a Crash”  - ( “There’s enormous risk in public markets because that’s the one that central banks have distorted to the greatest extent,” El-Erian, chief economic adviser at Allianz SE, told Bloomberg TV, in reference to stock and bond markets. He confessed to the heresy of holding 30% of his portfolio in cash. “It’s very hard to say I’m going to buy a basket of public equities and go to sleep for the next five to 10 years and feel good about the returns. Similarly with bonds,” he said. These “public markets” are not the only markets that central banks have totally distorted and larded with “enormous risks.” Practically everything that is an asset has been inflated, including residential and commercial real estate in much of the country, and assets that are the objects of admiration of the wealthy: collector cars and art.

Hedge Fund Investors Withdrew $28.2 Billion in Third Quarter - ( Hedge fund investors pulled $28.2 billion from the industry in the third quarter, the most since the aftermath of the global financial crisis, according to Hedge Fund Research Inc. The net outflows, which amount to 0.9 percent of the industry, are the largest since the second quarter of 2009, the firm said Thursday. Investors redeemed $51.5 billion in the first nine months of the year, even as industry assets rose to a record $2.97 trillion, it said. Hedge funds have been under pressure from investors critical of high fees and uninspired performance. 

When retirement savings goals seem hopelessly unrealistic  - ( A recent Nerdwallet study said that if investment returns drop from their historical averages as many experts predict, Millennials may need to save 22% of pay a year to build a nest egg large enough to support them in retirement. That's right, 22%!... Throw in even a modest Social Security benefit that assumes payments will drop considerably from today's levels, and I estimate the savings target drops to about 15% a year (which, granted, many people may still consider a challenge).

Thursday, October 20, 2016

Friday October 21 20916 Housing and Economic stories

It Starts: Shutdowns, Production Cuts, Layoffs at Auto Plants - (  It’s been years since we’ve heard about production cuts by automakers, but here they come. After a record-breaking 2015, the hot air is audibly hissing out of the auto industry. September sales were down 0.5% from a year ago. Year-to-date sales were about flat. Some individual models got clobbered. Inventories are piling up on dealer lots. Automakers lavished incentives on the market. Nothing worked. Yet, auto production in September had jumped 7.3% year-over-year, according to the industrial production report this morning. In my article earlier today on this phenomenon [Is this Why US Industrial Companies Don’t Invest?], I explained: “Something has to give: either a miraculous jump in sales or a cut in production.”

Hedge Fund Startups Plummet in Asia Amid Low Returns, High Fees - ( Asia hedge funds are opening at the slowest pace since the turn of the century. Just 27 new funds started trading in Asia in the first nine months of this year, the fewest since 2000 when 56 funds opened, according to Eurekahedge. It’s the third straight year of declines, and down from 83 new funds last year. Lackluster returns and high fees in the $2.9 trillion global hedge fund industry have discouraged investors from allocating money to new funds, said Mohammad Hassan, senior analyst at the Singapore-based data provider. Investors have chosen to go with larger, more established managers, typically with assets of at least $500 million, which has hurt newcomers, he said.

How One Goldman Sachs Trader Made More Than $100 Million - ( One junk-bond trader at Goldman Sachs Group Inc. earned more than $100 million in trading profits for the firm earlier this year, an unusual gain at a time when new regulations have pushed Wall Street to take fewer risks. The gains were the work of Tom Malafronte, a managing director on the bank’s high-yield-bond desk in New York. The 34-year-old trader bought billions of dollars in junk corporate debt on the cheapstarting in January, then locked in profits as prices recovered, according to people familiar with the matter. The windfall is a throwback to a previous era on Wall Street, when big banks were more eager to step in as markets turned and bond traders took bigger risks. Those bets have become less common since the crisis. Hoping to make the financial system safer, Congress passed rules that curbed banks’ ability to wager with their own money and required them to hold more capital.

FHA Rumored to Cut Insurance Premiums by 25 Basis Points – ( There’s been speculation pretty much ever since the last cut that the FHA would lower insurance premiums once more. And the rumor mill has been really busy the past few weeks, signaling a possible cut in the next month or so. The latest rumor comes via a bulletin from Inside Mortgage Finance, which revealed that industry chatter points to a 25 basis point cut in FHA premiums after the presidential election in early November. That means the typical FHA borrower who puts down 3.5% and takes out a 30-year fixed mortgage will pay an annual MIP of 0.60%. The decrease would return annual premiums to just above their pre-crisis levels of 0.55%, which would make perfect sense given the fact that we are now well beyond the most recent crisis and back to square one for the most part.

10-Trillion-Dollar Bye-Bye - The Calm Before The Storm - ( "We don’t expect the current situation to end well for investors who insist on taking larger investment exposures than they’re actually willing to hold, with discipline, through a period of severe market losses. From present valuation extremes, a 40-55% market loss would represent a fairly run-of-the-mill resolution to the current market cycle... By the completion of the current cycle, I expect over $10 trillion of what investors count as paper “wealth” in U.S. equities to disappear without a trace."

Wednesday, October 19, 2016

Thursday October 20 20916 Housing and Economic stories

A federal solution to Chicago's public pension mess - Chicago Tribune - ( The Center for Pension Integrity has a proposed solution for a comprehensive settlement to rectify this mess, and it's a federal one. The relief would not be a bailout. Instead, it would legally allow state and local governments with plans that have funding levels below 50 percent to modify plan provisions and benefits, and ultimately freeze and terminate the troubled plans. At the same time, local taxes would be raised to fund the restructured plans completely because beneficiaries shouldn't give up benefits unless they get complete security for what is left. Because the plans would be terminated, taxpayers would be able to see their way out of this crushing problem. The plans would be restructured so that pension benefits would commence at age 65 no matter when an employee retires. There would be a cap on overall public employment pension benefits of 150 percent of the local median income — no more automatic cost-of-living adjustments. 

US Freight Volume Drops to Lowest Level since 2009, “Industrial Recession” Hits Full Stride, Overcapacity Crushes Rates - ( The Cass Freight Index, tracking US shipment volumes by all modes of transportation, fell 3.1% in September from a year ago, the 19th month in a row of year-over-year declines, and the worst September since 2009. Donald Broughton, Chief Market Strategist at Avondale Partners, wrote in the report: After offering a glimmer of “less bad” hope in August [the index was down “only” 1.1% year-over-year], the Cass Freight Index shipments data in September disappointed, providing hindsight that August only gave us “false hope.” September data is once again signaling that overall shipment volumes (and pricing) continued to be weak in most modes, with increased levels of volatility, as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels.

BlackRock CEO sees 'hostile' climate as index funds reel in cash  - ( BlackRock Inc (BLK.N), the world's largest asset manager, reported better-than-expected quarterly profits on Tuesday, showing resilience in what has been a punishing market for fund managers. CEO Larry Fink nonetheless told Reuters his industry faces a "hostile" environment as investors migrate to products like index funds, which typically carry lower fees than actively managed funds. Even as BlackRock absorbed $55.1 billion in cash in its core products, revenue fell 2.5 percent due to lower performance fees. A favorable tax rate and income from non-core investments helped the company beat analyst forecasts.

Shadow Banks, No-Down-Payment Subprime Mortgages in Canada’s House Price Bubble - ( The new policies – covering mortgages that qualify for the government-guarantee program and the lower rates that come with it – elicited pronouncements of being everything from “somewhat overdue,” from Toronto Dominion Bank chief Ed Clark, to “premature,” from Gary Mauris, president and CEO of Dominion Lending Centres. The latter is a mortgage broker that negotiates with “shadow banks.” These mortgage finance companies, that include the less-regulated private lenders or mortgage investment corporations, offer a variety of loans, including for low-ratio refinancing, jumbo mortgages, long-term amortizations, and investment or rental properties. These “alternative” mortgages include subprime mortgages.

The Chicago Pension Scandal: $100,000+ Teacher Pensions Costing Taxpayers $1 Billion - ( As we've known for quite some time now, Illinois is completely insolvent, and in large part due to enormous pension liabilities which as of December were underfunded to the tune of $111 billion. Not only is the state insolvent, its millionaires can't get out fast enough to avoid the massive tax hikes that will be coming in what is sure to be a failed effort to plug budget holes, as well as the soaring criminality in cities such as Chicago which recently just passed the historic milestone of 1,000 gunshot victims in the fastest time in decades. Citing unfunded pension plans, Moody's downgraded Illinois to Baa1, and gave it a negative outlook back in October. The issue with the pension funds (aside for the massive shortfall in funding) is that per the Illinois Supreme Court, benefits cannot be altered. In a ruling last year, the state's Supreme Court overturned a 2013 law that tried to ease the burden of what was then a $105 billion funding gap. "Crisis is not an excuse to abandon the rule of law. It is a summons to defend it." the supreme court said in its ruling.

Tuesday, October 18, 2016

Wednesday October 19 20916 Housing and Economic stories

Illinois lawmaker pushes to ban post-retirement bonuses for educators - ( Suburban Chicago lawmaker is pushing to ban the cash bonuses that some school districts give to retired educators, a practice that costs local taxpayers thousands of dollars. State Rep. David McSweeney, R-Barrington Hills, said he wasn't aware of the so-called post-retirement bonuses until the Tribune last month highlighted the little-noticed payouts that are tucked into teacher and administrator contracts. McSweeney filed legislation Friday that would prohibit suburban and downstate school districts from including post-retirement bonuses in contracts.

Hedge Funds Cost N.Y. Pension Plan $3.8 Billion, Report Says - ( The New York state comptroller’s decision to stick with hedge funds despite their poor returns has cost the Common Retirement Fund $3.8 billion in fees and underperformance, according to a critical report by the Department of Financial Services. The state comptroller, who invests $181 billion for two systems covering local employees, police and fire personnel, "has over relied on so-called ‘active’ management by outside hedge fund managers," the department said Monday in the 20-page report. "For years the State Comptroller has been frozen in place, letting outside managers rake in millions of dollars in fees regardless of hedge fund performance." Spokeswoman Jennifer Freeman defended the office of comptroller Thomas DiNapoli, accusing the department of harboring political motives.

China Property Boom Spurs Fear of Bubble’s Burst - ( Zheng Ruizhen counted herself among the last holdouts on Lufeng Road. Even as high-rises sprang up in recent years to surround her dilapidated home, Ms. Zheng, a 50-year-old schoolteacher, and her husband, Sun Guojian, held firm. He grew up there. Her school was a 20-minute bicycle ride away. They raised their son there, though he eventually grew so tall that his head grazed the ceiling of his cramped room. When city officials pushed them to sell, they said no. Then came China’s latest property bubble — a frothy surge in prices that could have global repercussions if it pops. In August, an unremarkable piece of land around the corner from Ms. Zheng sold for nearly $2,000 a square foot, a national record and nearly three times the average land price in Manhattan. Local officials grew more insistent and threatened to tear down their bathroom.

Hong Kong Stocks Slump as Casinos Plunge After Crown Detentions - ( Hong Kong stocks extended last week’s slump as casino operators declined after Chinese authorities detained employees from billionaire James Packer’s Crown Resorts Ltd., while property developers paced losses by financial shares. The Hang Seng Index fell 0.8 percent at the close, after dropping 2.6 percent last week. Sands China Ltd. and Galaxy Entertainment Group Ltd. retreated as the detentions, which include the head of Crown’s VIP International team, highlight the industry’s vulnerability to Chinese crackdowns. A gauge of real estate companies closed at its lowest since Aug. 4. A measure of U.S. dollar-denominated shares traded in Shanghai tumbled the most in nine months.

Deutsche Bank's options to solve capital dilemma seen to be limited – ( Deutsche Bank needs to move quickly to boost capital and deliver healthy profits if it is to restore investor confidence, but its room for maneuver appears limited, bankers, analysts and investors say. When John Cryan took over as chief executive last year, he announced steps to cut staff and overheads and to sell off non-core businesses. But a $14 billion fine sought by the U.S. Department of Justice (DOJ) for the bank's mis-selling of mortgage securities has exposed a potential capital shortfall of between 5 to 10 billion euros, while progress in implementing Cryan's strategy has been slow. The bank has no solvency or liquidity problems and it says it currently has no plans for a capital increase and that it is meeting all its regulatory requirements.

Monday, October 17, 2016

Tuesday October 18 20916 Housing and Economic stories

Restaurant Chains Get Burned by Overexpansion, New Rivals - ( Glut of eateries, competitors offering prepared meals-to-go create pileup of business casualties. The U.S. is having one of its biggest restaurant shakeouts in years, as an oversupply of eateries and new rivals offering prepared meals to go claim what is expected to be a growing number of casualties. In one recent week alone, three restaurant companies filed for chapter 11 bankruptcy protection, including Così Inc.; Rita Restaurant Corp., parent of the Don Pablo chain, and Garden Fresh Corp., which operates Souplantation and Sweet Tomatoes. At least five other restaurant operators have filed for court protection this year, with restructuring plans that call for restaurant closures.

Why Italy’s Banking Crisis is Spiraling to Heck - ( Things have got so serious in Italy that the only two things propping up the country’s crumbling banking sector — apart from the last few remaining crumbs of public faith in the system — are two inadequately capitalized bad bank funds, Atlante I and the imaginatively named Atlante II. Both funds are operated by a deeply opaque Luxembourg-based private firm called Quaestio SGR. The firm is a wholly owned subsidiary of Quaestio Holding S.A, which is itself jointly owned by a bizarre mishmash of organizations, including Fondazione Cariplo (37.65%), an influential “charitable” banking foundation; Fondazione Cassa dei Risparmi di Forlì (6.75%), a regional savings bank; Cassa Italiana di Previdenza e Assistenza dei Geometri liberi professionisti (18%), a bank for professional freelance surveyors (no, seriously); Locke S.r.l. (22%), an obscure Milan-based holding company; and Direzione Generale Opere Don Bosco (15.60%), a Roman Catholic religious institute. No surprises there.

Greece's lenders to launch new review as Athens digs in on debt relief - ( Greece and its creditors start a fresh round of talks this week on reforming its labor market, a tricky task for a leftist government sliding in opinion polls but needed if the recession-hit state can ever win debt relief. Prime Minister Alexis Tsipras was re-elected a year ago promising to fight to revive collective bargaining and resist reforms that may lower the minimum wage. But he also needs a swift conclusion of the review to achieve Athens's primary goal of restructuring a mountain of debt, the highest in the euro zone, and mollifying an increasingly jaded public worn by years of austerity and unemployment. Some opinion polls show Tsipras trailing opposition conservatives by up to 10 points, so the pressure is on for him to deliver.

Ecuador cuts Julian Assange's internet access: WikiLeaks - ( Anti-secrecy group WikiLeaks said on Monday that its founder Julian Assange's internet was shut down by the government of Ecuador, deflecting blame from the U.S. or British governments which have sparred with Assange for releasing sensitive material. "We can confirm Ecuador cut off Assange's internet access Saturday, 5 pm GMT, shortly after publication of (Hillary) Clinton's Goldman Sachs speechs (sic)," the statement from WikiLeaks said. Assange has lived and worked in Ecuador's London embassy since June 2012, having been granted asylum there after a British court ordered him extradited to Sweden to face questioning in a sexual molestation case involving two female WikiLeaks supporters.

Market Myth Shattered: Ned Davis Warns "There's No More Cash On The Sidelines" - ( While the "cash on the sidelines" myth has infuriated many, it remains a staple excuse for why there's always a buying opportunity in stocks when the market dips. However, as Ned Davis Research warns "we can't find much cash on the sidelines... and when we do it seems mostly offset by debt/liabilities," crushing yet another pillar of strength for stocks.