Monday, August 3, 2015

Tuesday August 4 Housing and Economic stories


Moody’s Says Low Oil Price Here to Stay as Russia Bleeds Capital - (www.bloomberg.com) Low oil prices are just the tip of what ails Russia, according to Moody’s Investors Service. With its dependence on commodities and a slump in investment, Russia will have a hard time recovering from its record economic slump as global oil prices are bound toremain lower for a long time, Yves Lemay, managing director in the sovereign risk group at Moody’s in London, said in an interview on Wednesday. As much as a quarter of Russia’s gross domestic product and two-thirds of its exports are linked to the energy industry, according to the rating company. “Our assessment is that low oil prices are here to stay,” Lemay said. “Without major investment in the infrastructure, modernizing the equipment, oil production in Russia is unlikely to rise and may slowly decline in the coming years.”

Greece Extends Market Shutdown to Fifth Week as Traders Trapped - (www.bloomberg.com) A decision on when and under what conditions Greek financial markets will reopen was deferred to next week. That leaves them shut at least through Monday, a government official told reporters on Thursday, asking not to be named in line with policy. The Athens Stock Exchange, multilateral trading facility and electronic secondary market for bonds have been closed since June 29, when the government issued a decree imposing capital controls and a forced bank holiday. Greek officials setting the ground rules for a reopening of the Athens exchange need todecide whether to exempt investors from capital controls and risk more money heading for the exit, or safeguard scarce liquidity and get further isolated from global markets. MSCI Inc. is considering a downgrade of the country and FTSE will decide whether to keep Greek securities its its global indexes on Friday.

4 Things That Are Happening Today That Indicate That A Deflationary Financial Collapse Is Imminent - (www.infowars.com) When financial markets crash, they do not do so in a vacuum.  There are always patterns, signs and indicators that tell us that something is about to happen.  In this article, I am going to share with you four patterns that are happening right now that also happened just prior to the great financial crisis of 2008.  These four signs are very strong evidence that a deflationary financial collapse is right around the corner.  Instead of the hyperinflationary crisis that so many have warned about, what we are about to experience is a collapse in asset prices, a massive credit crunch and a brief period of absolutely crippling deflation.  The response by national governments and global central banks to this horrific financial crisis will cause tremendous inflation down the road, but that comes later.  What comes first is a crisis that will initially look a lot like 2008, but will ultimately prove to be much worse.  The following are 4 things that are happening right now that indicate that a deflationary financial collapse is imminent…

Regulators could be responsible for next financial crash - (www.telegraph.co.uk)  Tighter bank regulation may end up destabilising financial markets and trigger a larger crisis than the 2008 crash, a report has warned. Researchers at the Systemic Risk Centre (SRC) at the London School of Economics said that regulation forcing banks to take the same approach to risk may end up making financial markets less safe. Financial institutions have been made to adopt the same models to forecast risk, which the report’s authors said relied on the false belief “that there is one knowable and correct model” to foresee the future. The report said: “If the authorities pick one modelling approach over another, they may just as easily be backing the wrong horse, a model that is less accurate.”

Jerry Brown hops private plane to Rome to discuss Climate Change - (www.sacbee.com) Gov. Jerry Brown arrived in Rome for climate talks this week with the smallest of entourages – three – and the most comfortable of accommodations. Brown, who typically flies Southwest Airlines in California, flew to Italy with real estate developer George Marcus and his wife, Judy, in their private plane. Brown is combining his trip to a conference here with a vacation with those friends. Brown has also found a free place to bunk, at the residence of John Phillips, the U.S. ambassador to Italy. Both Marcus and Phillips, a former Los Angeles and Washington, D.C., lawyer, have contributed to Brown’s campaigns. When the Democratic governor traveled to Mexico last year, he was accompanied by roughly 90 people with business ties. The fees they paid subsidized Brown’s expenses. A trip to China the previous year was of similar size and included a similar funding arrangement.




Sunday, August 2, 2015

Monday August 3 Housing and Economic stories


Spanish ghost airport costing 1B euros attracts offer of just 10,000 euros - (www.cnbc.com)  One of the most infamous chapters of Spain's economic crisis on Friday appeared to be drawing to a farcical conclusion, after a Chinese investor bid just 10,000 euros in an auction to buy the ghost airport of Ciudad Real. The Chinese group was the only bidder for the vast-but-vacant airport built in the thinly populated Castilla-La Mancha region of southern Spain for a reported 1 billion euros. Ciudad Real boasts a 4km runway — long enough to handle an Airbus A380m, the world's largest passenger jet — and a terminal building designed to accommodate 10 million customers a year.

Puerto Rico Default Recovery Rates as Low as 35%, Moody’s Says - (www.bloomberg.com) Investors may receive as little as 35 cents on the dollar under a restructuring of Puerto Rico debt if the commonwealth defaults, Moody’s Investors Service said. Debt sold by the island’s Government Development Bank, Highways and Transportation Authority, Infrastructure Finance Authority and Municipal Finance Authority is among the $26 billion with the lowest recovery rates, Moody’s estimated Wednesday in a report. The debt is ranked Ca, the second-lowest rating from the New York-based company. “We believe that the probability of default is approaching 100 percent, and that losses given default are substantial,” Moody’s analysts wrote. “Bondholder recoveries will be lowest on securities lacking explicit contractual or other legal protections.”

Stock Downturn Hits Chinese Investors in the Heart, Not Just the Wallet - (www.nytimes.com) Farmers turned village community centers into makeshift trading floors. Young workers quit low-paying jobs to play the market full time. Retirees started investment clubs, counseling one another on stock picks. China fell under the spell of the stock market over the last year, as millions of factory owners, university students, wheat growers and other investors jumped at a chance to strike it rich. “When we eat breakfast, we think of the stock market. When we sleep, we see flashing red and green screens,” said Elizabeth Xu, 37, a customer service supervisor at an electronics company in Shanghai, who invested $2,500 last fall. “This is our new sport.” But with the market stumbling in recent weeks, investors are now engaged in a national game where the risks are increasingly outweighing the rewards.

Brazil Bank Said to Lose $2 Billion on Junk-Rated Loans - (www.bloomberg.com) Brazil's national development bank lost out on an estimated $2 billion by setting interest rates too low on loans to junk-rated countries and builders facing corruption allegations, said the federal prosecutor leading an investigation into the lender. The prosecutor, who is assigned to Brazil’s budget watchdog, said the losses are tied to $12 billion of loans from a workers fund that the state bank known as BNDES shouldn’t have made because the rates trailed inflation. More than two-thirds of that cash funded projects from Angola to Venezuela by builder Odebrecht SA, whose chief executive officer was indicted this week as part of a separate corruption probe at state-run Petroleo Brasileiro SA. “We’re questioning the real social benefits of these loans,” federal prosecutor Marinus Marsico, who led the nine-month preliminary inquiry into the bank, said in an interview. “If BNDES’s goal is to promote national development, why is the bank allocating scarce funds to a couple of private companies overseas?”

Puerto Rico Left Adrift by Washington as Bankruptcy Bills Stall - (www.bloomberg.com)  As California risked being locked out of the credit markets during the recession, officials sought federal loan guarantees to avert deep spending cuts that threatened to cascade through the biggest U.S. state. Washington turned them away. Six years later, as a Puerto Rico agency veers toward a default as soon as Aug. 1, federal officials in the nation’s capital have echoed a refrain heard during recent state and local fiscal crises: Fix the problem on your own. President Barack Obama’s administration and the Federal Reserve have said it’s up toCongress to decide how to assist the island as it struggles with $72 billion of debt. Yet on Capitol Hill, Puerto Rico’s push to allow some agencies to file for bankruptcy has stalled. Efforts to find a Republican to co-sponsor the legislation haven’t borne fruit. “Federal authorities seem to be taking the position that the only possible options are the extremes of a bailout or nothing at all,” said Arturo Estrella, a former Federal Reserve Bank of New York economist.



Thursday, July 30, 2015

Friday July 31 Housing and Economic stories


The "Energy" Cash Flow Alarm Is Back: Chesapeake Suspends Dividends, Stock Plunges To 12 Year Low - (www.zerohedge.com) Back in January, the panic surrounding the energy space and specifically the collapse in industry cash flows as a result of the collapse in oil prices, peaked when one after another company announced they would halt dividend payments and all other distributions to shareholders to conserve cash, culminating with the dramatic announcement on January 30 when one of the giants in the space, energy major Chevron, suspended its stock buybacks. Subsequently, oil experienced a brief oily (but dead) cat bounce, with WTI and Brent both making it briefly into the $60 price range and have since resumed their decline with WTI sliding back under $50 yesterday, and as a result all the attention is once again back on energy companies. And as if to confirm just that, earlier today one of Icahn's favorite energy names (you won't find him tweeting about this one much thought) Chesapeake Energy, the second-largest US natural gas producer, announced it too is now scrambling to conserve cash (in this case $240 million per year) by suspending its $0.35/share dividend payment.

Elderly Crime Rate Skyrockets as Japan's Grandmas and Grandpas Reduced To Shoplifting - (www.washingtonpost.com)  New Japanese government data revealed for the first time that crime was higher among the country's elderly than teenage youth. According to the Kyodo News Agency, police authorities reported on Thursday that "the number of people aged 65 or older subject to police action reached 23,656 between January and June, compared to 19,670 for those aged 14-19." It's the first time the elderly have exceeded the young in crime data since 1989, when Japan started keeping tabs of crimes by age group. It's a sign, Kyodo reports, of "Japan's graying society." For quite some time, there's been a considerable focus on Japan's aging, shrinking population and the potential effects of its steady demographic slide. Some projections suggest Tokyo's population will halve by the end of the century; the Japanese capital is one of the few major urban centers in the world that is shrinking rather than expanding.

U.S. banks prepare for oil and gas company loans to worsen - (www.reuters.com)  U.S. banks are setting aside more money to cover bad loans to energy companies after oil prices plunged over the last year, raising the possibility that deteriorating loans could start to weigh on their earnings, some analysts said. Loan credit quality for U.S. banks has been improving since the financial crisis. In the first quarter, 2.49 percent of loans on banks' books were delinquent, the lowest level since the fourth quarter of 2007, according to the Federal Reserve, which hasn't released second quarter data. The rate peaked at 7.4 percent in the first quarter of 2010. Weakness among energy company loans could be a sign that overall credit quality among U.S. banks has little room to improve, analysts said. Executives from both JPMorgan Chase & Co. and Wells Fargo & Co. told investors last week, when posting earnings, that they were increasingly concerned about loans to oil and gas companies.

Toshiba Executives Resign Over $1.2 Billion Accounting Scandal - (www.bloomberg.com)  Toshiba Corp. President Hisao Tanaka and his two predecessors quit after investigators found that the Japanese conglomerate inflated earnings by at least $1.2 billion since the global financial crisis. Along with Tanaka, Vice Chairman Norio Sasaki and adviser Atsutoshi Nishida also resigned to take responsibility for accounting irregularities that occurred under their watch. The Tokyo-based company said Tuesday it will correct earnings by at least 152 billion yen, based on the results of an independent investigation of its books stretching back about six years. “For the company to rebuild there needs to be a renewal of the management structure,” Tanaka, a 42-year veteran, said during a briefing in which he, Chairman Masashi Muromachi and Vice President Keizo Maeda all bowed in apology.

Wall Street Lenders Growing Impatient With U.S. Shale Revolution - (www.bloomberg.com)  Halcon Resources Corp. almost ran into trouble with its banks in June 2013. And again in March 2014. And in February 2015. Each time, the shale driller came close to violating debt limits set by its lenders, endangering a credit line that provided as much as $1.05 billion in much-needed cash. Each time, Halcon’s banks, led by JPMorgan Chase & Co. and Wells Fargo & Co., loosened their restrictions, allowing Halcon to keep borrowing. That kind of patience may be coming to an end. Bank regulators have issued warningson the risks involved in lending to U.S. drillers, threatening a cash crunch in an industry that’s more dependent than ever on other people’s money. Wall Street has been one of the biggest allies of the shale revolution, bankrolling thousands of wells from Texas to North Dakota. The question is how that will change with oil prices down by half since last year to about $50.64 a barrel. “Lenders in general are increasing pressure on oil companies either to raise more equity or do some sort of transaction to pay down their credit lines and free up extra cash,” said Jimmy Vallee, a partner in the energy mergers and acquisitions practice at law firm Paul Hastings LLP in Houston.




Wednesday, July 29, 2015

Thursday July 30 Housing and Economic stories


Commodity Rout Extends Toward 13-Year Low as Gold Shunned on Fed - (www.bloomberg.com) The rout in commodities deepened with prices touching the lowest since 2002 as the prospect of higher U.S. interest rates sent gold tumbling. Raw materials are losing favor with investors as the dollar gains amid signals from Federal Reserve Chair Janet Yellen that the central bank may raise rates this year on the back of an improving U.S. economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities. The Bloomberg Commodity Index dropped as much as 1.4 percent, falling for a fifth day in the longest stretch of declines since March. Gold futures sank to the weakest in more than five years while industrial metals, grains, Brent crude and U.S. natural gas also slid as a measure of the dollar climbed to the highest since April 13.

Uber just threw down the gauntlet - (www.businessinsider.com)  De Blasio and the city council have proposed a freeze on growth for for-hire vehicle companies, including Uber and Lyft. The city is conducting a study about congestion, traffic, and pollution, which it says Uber may be contributing to. If it were to become a law, the measure could stunt Uber's growth in New York. This could significantly hurt the company as New York is one of the company's largest and most mature markets and the company is generating hundreds of millions of dollars of revenue there. Under the proposed bill, for-hire vehicle companies that have bases with 500 cars or more — which includes Uber — would only be able to increase their number of vehicles by 1% every year. For Uber, this would mean adding just 201 new drivers for the next year. In a city where Uber says it's adding 25,000 new users every week, it's easy to see how this could affect Uber.

Puerto Rico Says Services Come Before Agency Debt Payment - (www.bloomberg.com) Puerto Rico’s budget director ratcheted up the risk of a default on some agency securities, saying cash from the commonwealth’s operating budget won’t be redirected to make debt payments due next month. The comments from Luis Cruz, director of the Office of Management and Budget, come as Standard & Poor’s slashed its rating on the Public Finance Corp.’s bonds to CC from CCC-, calling an Aug. 1 default on the securities a “virtual certainty.” Puerto Rico said last week the agency failed to transfer $36.3 million to a trustee to cover the Aug. 1 debt payment because the legislature didn’t appropriate the funds. Governor Alejandro Garcia Padilla last month directed island officials to create a debt-restructuring plan by Aug. 30, saying the commonwealth can’t sustain its $72 billion debt burden. “We all know the difficult situation we are facing in terms of cash flow,” Cruz said during a press conference Monday in San Juan. “And we have to decide how we handle that cash flow and our priority is to provide services to citizens: health, safety, education.”

Uber's nightmare scenario: Here's what a huge, expensive pain it would be to turn thousands of drivers into employees - (www.businessinsider.com)  Last month, the California Labor Commission made a ruling against Uber that could have big implications for the $50 billion ride-hailing company. A San Francisco driver, Barbara Ann Berwick, filed a federal class-action claim against Uber saying she should be considered an Uber employee, not a contract worker. The California Labor Commission agreed with Berwick because it deemed Uber drivers are "involved in every aspect of the operation." Uber argues that the class-action part of the suit should be dropped and is appealing the ruling. But if Uber doesn't get its way, the lawsuit could seriously impact Uber's business model. In a worst-case scenario for Uber, it would have to reclassify all of its California drivers as W-2 employees, as opposed to independent contractors, which would be expensive.

Puerto Rico on the Brink Owes Investors $5 Billion in Next Year - (www.bloomberg.com) Puerto Rico faces $5.4 billion of bond payments over the next 12 months, showing the pressure on the Caribbean island as it moves closer toward defaulting on its debt. Puerto Rico and its agencies are on the hook for $635 million in August, the largest monthly bill for the rest of 2015, JPMorgan Chase & Co. said in a July 17 report, citing data from Bloomberg and Standard & Poor’s. That includes a $36.3 million payment due Aug. 1 from the Public Finance Corp., which may not be made because the legislature failed to appropriate the funds. The schedule illustrates the costs ahead for the cash-strapped commonwealth, where Governor Alejandro Garcia Padilla is pushing to restructure a $72 billion debt load he says the island can’t afford. The payments approach $1 billion in January and about $2 billion in July 2016, JPMorgan said. Puerto Rico has a $9.8 billion budget for the year through next June. “If we use dollars to make debt payments, we may not have the cash to pay for government services,” Luis Cruz, the commonwealth’s budget director, told reporters Monday in San Juan. He said officials are looking at “all options” for honoring its obligations.




Tuesday, July 28, 2015

Wednesday July 29 Housing and Economic stories


Commodities crash could turn Australia into a new Greece – (www.telegraph.co.uk) The commodities boom made Australia the lucky country but rising debt and a slump in Chinese demand for resources signal tough times ahead Down Under. Last month Gina Rinehart, Australia’s richest woman and matriarch of Perth’s Hancock mining dynasty delivered an unwelcome shock to her workers in Western Australia: accept a possible 10pc pay cut or face the risk of future redundancies. Ms Rinehart, whose family have accumulated vast wealth from iron ore mining, has seen her fortune dwindle since commodity prices began their inexorable slide last year. The Australian mining mogul has seen her estimated wealth collapse to around $11bn (£7bn) from a fortune that was thought to be worth around $30bn just three years ago. This colossal collapse in wealth is symptomatic of the wider economic problem now facing Australia, which for years has been known as the lucky country due to its preponderance in natural resources such as iron ore, coal and gold. During the boom years of the so-called commodities “super cycle” when China couldn’t buy enough of everything that Australia dug out of the ground, the country’s economy resembled oil-rich Saudi Arabia.

Greek Banks to Open Monday as Tsipras Prepares for Another Vote - (www.bloomberg.com) Greek banks will reopen for basic services on Monday, three weeks after they were shut to prevent their collapse, as Prime Minister Alexis Tsipras prepares for a second parliamentary vote crucial to securing a bailout. Greeks will regain banking services including the ability to deposit checks and access safe deposit boxes, the government said in a decree yesterday. Although customers will continue to face restrictions on cash withdrawals, the daily limit of 60 euros ($65) will be replaced by a cumulative maximum of 420 euros a week. The Athens Stock Exchange, also closed during the month-long confrontation between Greece and its creditors, will stay shut on Monday, as “further regulation is needed,” a spokeswoman for the bourse said in a text message.

Pension Funds Burn Cities as $1 Trillion Shortfall Set to Grow - (www.bloomberg.com) The cost to American cities for their cash-strapped pension funds is starting to look a lot worse, and it’s not because the stock-market rally may be losing steam. Houston was warned by Moody’s Investors Service this month that it may be downgraded because of mounting retirement bills, the latest municipality put on notice as the company ignores bookkeeping gimmicks that let cities mask the size of their debt for years. The approach foreshadows accounting rules for even top-rated issuers that are poised to cause pension shortfalls to swell as new financial reports are released. “If you’re AAA or AA rated and you’ve got significant and visible unfunded pension obligations, you’ve only got one direction to go in terms of rating, and that’s potentially down,” said Jeff Lipton, head of municipal research in New York at Oppenheimer & Co. “It’s the presentation on the balance sheet that is now going to drive urgency.”

Caving to Government Pressure, Visa and MasterCard Shut Down Payments to Backpage.com  - (www.infowars.com)  Visa and MasterCard confirmed that they have cut off payment services for Backpage.com, an online platform for people to advertise goods and services. This was in response to public pressure from Cook County Sheriff Tom Dart, who wrote to executives at both of the payment processors urging them to cut off transactions to Backpage’s adult services. The two companies responded by quickly shutting down payments for the entire site. Backpage hasn’t violated the law, and so Sheriff Dart can’t use the law to take down the website. Instead he’s using a tactic we’ve seen before, getting major financial services companies to put a chokehold on controversial online content producers like WikiLeaks and independent book publisher Smashwords. We don’t need Visa and MasterCard to play nanny for online speech. Payment processors and banks shouldn’t be in the position of deciding what type of online content is criminal or enforcing morality for the rest of society. For one thing, their businesses haven’t been designed to analyze the legal and societal issues at play in various forms of online expression. Second, these businesses will almost always err on the side of shutting down controversial speech—thereby eliminating a nuisance or public affairs problem—rather than taking a principled stance in support of unpopular speech. That’s why courts, not companies, should determine what type of speech is legal on the Internet.

China’s hunt for short-sellers tests legal boundaries - (www.ft.com) In the wake of the Chinese stock market’s dramatic fall early this month, police and securities regulators announced they had launched an investigation into “malicious short selling” in the equity futures market. The announcement was part of measures intended to stabilise the market after it fell 30 per cent from its peak in mid-June, but it also raised the question: What makes short selling “malicious”? The lurid terminology, coupled with a lack of detail on what behaviour is being targeted, has led critics to suspect that the investigation is an extralegal attempt to intimidate would-be sellers. But lawyers say that bearish bets can be illegal if they are based on inside information or made with the intent to influence prices.