Sunday, February 26, 2017

Monday February 27 2017 Housing and Economic stories

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Dallas Police Pension Board Approves Benefit Cuts; Asks For More Taxpayer Money To Avoid Collapse - ( For the past several months we've warned that the taxpayers of the City of Dallas, despite all of the tough talk coming out of their elected city council members, would ultimately be forced to bail out the failing Dallas Police and Fire Pension (DPFP) system.  And just last night the DPFP board voted 9-0 to approve a plan that would do just that.  The plan to save the DPFP was proposed by Dan Flynn, chair of the pensions committee in the Texas House of Representatives, and calls for Dallas taxpayers to contribute 34.5% of police and firefighter salaries each year into the failing pension system, up from 27% in 2015, plus an incremental $11 million per year.  In total, the adopted plan will cost Dallas taxpayers an extra $22 million per year.

So Who’s Pumping Up this “New Normal” Housing Market? - ( “A housing recovery that is highly dependent on real estate investors is a bit of a double-edged sword,” explained Daren Blomquist, senior VP at ATTOM Data Solutions. “Rapidly rising home values have been good for homeowner equity, but also have caused an affordability crunch for the first-time homebuyers the housing market typically relies on for sustained, long-term growth.” So the housing market is “starkly different than a decade ago,” said Alex Villacorta, VP of research and analytics at Clear Capital. “As such, it’s imperative for all market participants to understand the nuances of the New Normal Real Estate Market.”

Bundesbank Prepares For Record Losses Once ECB Starts Hiking Rates – ( Germany's central bank reported its smallest profit in more than a decade in 2016 after setting aside a record amount of provisions against future losses on the bonds it is buying as part of the ECB's stimulus program, its annual report showed on Thursday. "It is fair to ask ... when we can take our foot off the monetary policy pedal," Bundesbank President Jens Weidmann said while presenting the report. The Bundesbank recorded a net profit of 399 million euros (£337 million), the lowest since 2004 and far below the the €3.2 billion profit it booked in 2015. The fall was largely due to higher provisions against paper bought as part of the ECB's asset buying, which since June includes corporate bonds, and against cheap loans extended to banks.

As an Age of Nationalism Dawns, a Multinational Deal Collapses - ( Kraft Heinz’s $143 billion bid for Unilever would have been the biggest cross-border deal in nearly two decades. But instead of being a triumph of global capitalism, it induced only whiplash as the offer was withdrawn just days after its disclosure. The short life span of the deal can be blamed in large part on national barriers — which are likely to rise even further as a new mercantilism emerges. Kraft Heinz is controlled by the crafty Brazilian deal makers of 3G Capital. There’s no doubt the company and its advisers were well aware that it would be forced to come out with a public statement if word of its approach to Unilever got out.

It’s Like the Financial Crisis Never Happened...  - ( It’s 10 years since the U.S. subprime crisis began, and everything’s wonderful on Wall Street. A decade after the world began to notice the losses on derivatives linked to the toxic waste of structured subprime mortgages, American stocks have produced such big returns that the biggest crash in generations barely registers. The 10-year average compound return on U.S. shares was 4.9% a year above inflation at the start of 2016, only slightly below the average for world stocks since the end of the Gilded Age in 1900, according to calculations for Credit Suisse by Elroy Dimson, Paul Marsh and Mike Staunton of London Business School. The same isn’t true for the rest of the world. British stocks made only 3% above inflation, including dividends, in the past decade, while real Japanese returns were barely positive and French shares delivered less than 2%. German stocks weren’t quite so bad thanks to its export powerhouses, and their 4.3% return over inflation is in line with the very long-term return from the world outside the U.S.

ETF Investors Miss Out on the Best Commodity Trade of the Year - (
Dallas Police and Fire Pension Backs Cutbacks to Avoid Collapse
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Hedge Funds Can't Sue Over Investments in Fannie and Freddie
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Thursday, February 23, 2017

Friday February 24 2017 Housing and Economic stories

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This is Why World Trade is the Weakest Since 2009 - ( World Trade has been on our worry-list for a while, most recently in December [World Trade Falls to 2014 Level, just in Time for a “Trade War”]. Why has world trade refused to boom recently? And it wasn’t just last year. But last year was particularly crummy. Lackluster global demand gets blamed. But that’s using a broad brush to sketch a troublesome development. Now the alarmed World Bank, in its report, Trade Developments in 2016 (PDF), barely blames the usual suspects for this lackluster global demand, but identifies a new and dominant one: “policy uncertainty.” It points out that 2016 was the fifth year in a row of “sluggish trade growth.” 2015 had already been the weakest year since 2009, when global trade collapsed as a result of the Financial Crisis. But 2016 was even worse than 2015.

Millennium Tower homeowners association to sue developer, nearby project - (  The two instances of legal action taken on behalf of some or all of the tower’s condo owners join a civil suit filed against the developer in November by San Francisco City Attorney Dennis Herrera alleging that it knew the tower was sinking but sold units anyway, failing to let buyers know of the structural concerns. City officials began investigating the tower this summer and amped up their efforts following an anonymous citizen call to the city’s 311 line in August. Initially, the developer claimed the settling was due to water drainage from construction activity on a neighboring $4.5 billion transit center project site. Transit officials, however, have since said that the sinking is due to foundation piles failing to reach bedrock. Homeowners likely face a protracted battle to resolve the issue after it emerged earlier this month that the insurance policies held by the developer and other project team members may not fully cover the cost to remedy damages caused by the sinking in addition to the measures required to prevent further settling.

Billions Wasted: Structures Built For 2016 Olympics In Brazil Are Now In Ruins – ( Like many others, the government ignored the economic realities of the country, betting on inflation and cronyism in order to throw an unforgettable party. The 2016 Summer Olympics in Brazil cost Brazilian taxpayers $4.6 billion, conservative estimates show. But once related expenses covered by the Brazilian government are factored in, the overall costs hit the $12 billion mark, which equates to about 0.72 percent of Brazil’s national budget. Prior to the Olympics, however, the Brazilian government had already spent BR$39.5 billion on infrastructure, or about $12 billion. Stadiums and urban projects designed to ensure the country was ready for the sports event were built, but aside from the events scheduled for 2014 and 2016, there seemed to be little to no demand for such public investments, which prompted the country to wonder whether the expenses were worth the trouble.

Banks back off multifamily financing as apartment market cools - (  News that banks are getting cold feet over multifamily projects further underlines a softening in the apartments category as developers bring more schemes online than there are demand for. The slowdown is being seen acutely in country's biggest metros, with rents in San Francisco and New York dipping in February while rents nationwide inched up slightly. Much of the oversupply and subsequent price reduction is occurring at the upper end of the market. MPF Research reported last month that the luxury apartment market is weakening due to oversupply. In New York alone, 85% of the 30,000 new apartments set to be delivered in 2017 will be on the high end of the market. Nationwide, roughly the same share of the 189,100 units added from the fourth quarter of 2015 to the fourth quarter of 2016 were luxury.

HSBC Plunges After Missing Profit Estimates on Revenue Drop - ( HSBC Holdings Plc dropped the most in 18 months in London trading after reporting fourth-quarter profit that missed estimates on a surprise drop in revenue, which it warned could fall again this year. HSBC reported a $3.4 billion pretax loss for the quarter that it blamed on slowing growth in its core markets of Hong Kong and the U.K., while its adjusted profit fell $1.2 billion short of analyst estimates. The lender said it will buy back $1 billion of stock in the first half and signaled it may repurchase more later this year. Chief Executive Officer Stuart Gulliver is battling to reverse five years of declining revenue as he pares back HSBC’s sprawling global footprint and reduces expenses. 

Wednesday, February 22, 2017

Thursday February 23 2017 Housing and Economic stories

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Philadelphia Soda Tax Leads To 30-50% Plunge In Sales, Mass Layoffs - ( When Philadelphia became the first US city to pass a soda tax last summer, city officials were eagerly looking forward to the surplus-tax funded windfall to plug gaping budget deficits (and, since this is Philadelphia, the occasional embezzlement scheme). Then, one month ago, after the tax went into effect on January 1st we showed the tax applied in practice: a receipt for a 10 pack of flavored water carried a 51% beverage tax. And since  PA has a sales tax of 6% and Philly already charges another 2%, the total sales tax was 8%. In other words, a purchase which until last year came to $6.47 had overnight become $9.75. Two months into Philadelphia's soda tax, supermarkets and distributors are reporting a 30% to 50% plunge in beverage sales, preparing for a legal fight with city hall, and are planning for mass layoffs.

Is the US Restaurant Recession Becoming Structural? - ( National restaurant data and anecdotal evidence has been piling up. “T Vogel,” a commenter on WOLF STREET, put it this way: My wife and I make almost 30k more than the median family income in my town (northern CA) with no kids. Our rent just went up by 1k a month – landlord selling – starter houses are selling at 500k. We are not spending a dime more than needed. I plan to skip our weekly night eating out now. They’re not the only ones to skip restaurants. Costs are going up, not just of restaurant meals, but of life in general. Incomes are lagging behind. And consumers are adjusting…. That’s what a Reuters/Ipsos opinion poll of more than 4,200 U.S. adults confirmed today.

Chinese Banks' Off-Book Wealth Products Exceed $3.8 Trillion - ( Chinese banks had more than 26 trillion yuan ($3.8 trillion) of wealth-management products held off their balance sheets at the end of December, a 30 percent increase from a year earlier, according to the central bank. The expansion of this form of shadow banking, with money eventually being diverted to quasi-loans and bonds, outpaced the 10 percent growth for normal lending during the same period, raising risks for the broader economy and undermining the country’s “deleveraging” efforts, the People’s Bank of China said Friday in its quarterly monetary policy report.

Greek Bond Drama Meets Realpolitik - ( Monday’s meeting of European finance ministers looks like the last chance for some form of agreement on the next leg of Greece's 86 billion euro ($91.4 billion) bailout, before Dutch and French election complicate negotiations. Anything can still go wrong with seemingly unsolvable differences between the European authorities, the International Monetary Fund, and the Greeks. The worries are certainly reflected in the sharp selloff of Greece's 2 billion euro bond maturing July 2017. As befits a serious credit event, Greece's yield curve has inverted, where soon-to-mature debt yields rise above those for longer-dated bonds, reflecting the view that if Greece can make it past the next couple of years it is more likely to make it in the longer term.

Schaeuble denies 'Grexit' threat, says Greece on right path - ( German Finance Minister Wolfgang Schaeuble denied on Sunday that he had said Greece would have to leave the euro zone if it failed to implement economic reforms. Schaeuble said in an ARD television interview that Greece would not have problems if it implemented agreed reforms, but would if it fails to carry these out. "I never made any ('Grexit') threats," Schaeuble told ARD's Bericht aus Berlin program just before the network played recent comments in which he said Greece was "not yet over the hill" and the "pressure needed to stay on" Greece or it "couldn't stay in the currency union".

Tuesday, February 21, 2017

Wednesday February 22 2017 Housing and Economic stories

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Miami condo flippers are getting hit hard by losses - ( Andrew Stearns, CEO of StatFunding, tracks the Miami-Dade market for preconstruction condos along with the money that is being made, or lost, in those transactions; and he tracks the condo units that developers have been unable to sell. He notes in his January report: From 2012 to mid-2015, Miami developers sold all units in each project within months of completion of the project. The inflection points of previous condo cycles have been marked by developers getting stuck with unsold developer units. And that’s now happening. Of nine large projects completed since late 2015, ranging from 90 to 390 units per project, with a total of 2,080 units, developers are still sitting on 400 unsold units, or 19% of the total. Of them, 327 are listed for sale on the MLS.

Biggest Gasoline Glut In 27 Years Could Crash Oil Markets - ( It would be one thing if crude stocks were rising, perhaps because refiners were going offline for maintenance. But if that were the case, then gasoline stocks would draw down on lower refining runs. But if both crude and refined product inventories are going up at the same time, then there should be some reasons for worry. In fact, the glut of gasoline is now the worst in 27 years. At 259 million barrels, U.S. gasoline storage levels are now at their highest level since the EIA began tracking the data back in 1990.

The Unthinkable Just Happened in Spain - ( Untouchable. Inviolable. Immunity. Impunity. These are the sort of words and expressions that are often associated with senior central bankers, who are, by law, able to operate more or less above the law of the jurisdictions in which they operate. Rarely heard in association with senior central bankers are words or expressions like “accused”, “charged” or “under investigation.” But in Spain this week a court broke with that tradition, in emphatic style. As part of the epic, multi-year criminal investigation into the doomed IPO of Spain’s frankenbank Bankia – which had been assembled from the festering corpses of seven already defunct saving banks – Spain’s national court called to testify six current and former directors of the Bank of Spain, including its former governor, Miguel Ángel Fernández Ordóñez, and its former deputy governor (and current head of the Bank of International Settlements’ Financial Stability Institute), Fernando Restoy. 

Defaults Slash Returns for Online Loan Investors - ( For online lenders, 2016 was an grueling assemblage blemished by layoffs, chief departures and dropping deal prices. For the assets that purchased their loans, it wasn’t such better. Two of the maximal assets managers in the sector, LendingClub Corp. supplementary LC Advisors and Colchis Capital Management, reportable the minimal returns in their important assets since each launched in 2011, according to investor documents reviewed by The Wall Street Journal. Publicly listed funds that buy online loans, such as P2P Global Investments are trading at deep discounts to their net asset value. At LC Advisors, the Broad Based Consumer Credit (Q) Fund returned 1.83% in 2016, down from 5.76% in 2015 and 8.02% in 2014, according to the investor documents. That was worse than the 2.65% return of the Bloomberg Barclays U.S. Aggregate Index, a broad measure of performance of various fixed-income securities that LC Advisors uses as a benchmark.

Global Economy Weekahead: How do you say deja vu in Greek? - ( It seems as if we have been here before: the euro zone fretting that a crisis with Greece will balloon out of all proportion while the government in Athens says it will not impose one euro more in cuts on its austerity-battered public. Cue a euro zone finance ministers meeting in Brussels. There are differences this time from two years ago when a battery of "last chance" meetings over a new bailout brought Greece to the brink of bankruptcy and default - and threatened the euro zone with its first dropout. When the ministers have their regular meeting on Monday there will be little brinkmanship or fear of failure. For one thing, a bailout is already in place - the argument this time is about compliance and future targets in order to get another tranche of money.

Monday, February 20, 2017

Tuesday February 21 2017 Housing and Economic stories

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Fed Frets about Commercial Real Estate Bubble & its $2 Trillion in Loans Mostly at “Smaller Banks” - ( The fear of what Fed Chair Janet Yellen on Tuesday – and other Fed governors earlier – called “waiting too long” before raising interest rates is increasingly inserting itself into Fed pronouncements. One of the aspects – and this is getting articulated with increasing intensity – is commercial real estate (CRE) and its impact on banks whose nearly $2 trillion in CRE loans are backed by collateral whose boom-prices are known to crash periodically in phenomenal busts. Or is it the fear of “having already waited too long?” Boom and bust: that’s the material CRE is made of. We had seven years of boom, and now the Fed is worried about the bust. Yellen didn’t mention CRE in her prepared testimony on Tuesday before the Senate Committee on Banking, Housing, and Urban Affairs. But it featured in the twice-yearly report that the Fed delivered to Congress in support of Yellen’s testimony.

Och Ziff In Trouble: AUM Plunges After A Record $4.8 Billion In January Redemptions - ( One of the world's largest, public hedge funds, Och Ziff, gave active managers around the globel more reasons for concern this morning, when it reported results today which showed distributable earnings of $7.5 million, or one cent a share, in the quarter compared to a loss of $36.1 million, or 7 cents, a year earlier. For the full year, the company reported a loss of $121.3 million from a profit of $251.9 million in 2015. Revenue tumbled from $342.8mm to $281.3mm. However, the flashing red headline is just how much AUM the recent underperformance and legal problems by Daniel Och's investment vehicle have cost him.

Americans Just Broke the Psychologists’ Stress Record - ( A national survey of anxiety finds a statistically significant increase for the first time since it was launched in 2007. If misery loves company, it should be thrilled: Americans left and right are under so much stress it's now registering on the American Psychological Association's anxiety meter.  For 10 years, the APA has been running its "Stress in America" survey, usually finding that stress is caused by three primary factors—money, work, and the economy. Those factors clearly play a role in the current national mood. Younger Americans are worried about college debt, older ones about retirement, and everyone, it seems, about the economic prospects of the next generation. In the study, respondents with incomes below $50,000 reported higher stress levels than those with higher incomes. 

A $30 Million Golden Parachute Courtesy of Junk-Bond Market - ( When a silicon producer controlled by one-time Spanish finance minister Juan-Miguel Villar Mir came to the U.S. junk-bond market last week, the deal had one curious provision. Ferroglobe Plc earmarked a piece of the bond sale to help fund most of a roughly $30 million payment to Alan Kestenbaum, the former executive chairman who resigned a year after merging his North America-focused Globe Specialty Metals Inc. with billionaire Villar Mir’s Spanish conglomerate. Issuers typically don’t turn to debt investors to fund golden parachutes, and companies this size don’t often have a cash commitment this big for an executive headed out the door. In this case, the award is in addition to the 5 percent stake that Kestenbaum already owns in Ferroglobe. What’s more, the company is expected to post an annual loss for the calendar year.

Mortgage Delinquencies Rise Most In 7 Years As Rates Spike - ( For the first time since Q1 2013, mortgage delinquencies rose QoQ in Q4. The jump from 4.52% (of total loans) to 4.80% is the largest since Q1 2010 and hit as mortgage rates spiked following President Trump's election and Fed Chair Yellen's jawboning and rate-hike. Of course, levels remain 'low' relative to the extreme highs of the financial crisis. One word springs to mind - "contained". For the first time since Q1 2013, mortgage delinquencies rose QoQ in Q4. The jump from 4.52% (of total loans) to 4.80% is the largest since Q1 2010 and hit as mortgage rates spiked following President Trump's election and Fed Chair Yellen's jawboning and rate-hike. Of course, levels remain 'low' relative to the extreme highs of the financial crisis. One word springs to mind - "contained"