Wednesday, December 17, 2014

Thursday December 18 Housing and Economic stories

Greece's stock market just suffered its worst collapse ever - (  Now this is Greek tragedy. Greece’s Athex Composite GD, -12.78% tanked almost 13% Tuesday — the biggest drop for the index on record, according to FactSet. The renewed jitters came after the government, in a surprise move late Monday, said it would bring forward presidential elections to Dec. 17, potentially, setting the scene for snap elections in early 2015. Here’s why that’s important: Far-left party Syriza currently is leading the early polls and it seems likely they would win a snap election. This is how to think about Syriza:
·         The party has been calling for an end to austerity in Greece
·         Has been campaigning for market-unfriendly measures
·         Is firmly against the international bailout program that helped the country avoid a default during the depths of its financial crisis.
How bad is Greece’s Tuesday collapse? It’s worse than the 9.7% drop the market saw Oct. 24, 2010, at the peak of Greek debt worries. The drop also eclipses the 10% fall Greek markets saw in 1989 during a bout of political turmoil.

No Escape From Pension Math in Pennsylvania - ( Pennsylvania Governor-elect Tom Wolf earned a historic victory in ousting the state’s incumbent chief executive last month. Now budget woes and mounting retirement expenses threaten to undermine his campaign pledges. The 66-year-old Democrat will assume control of a government that has trailed all U.S. states in job growth since 2011. He has to balance promises, including more money for schools, with a $2 billion revenue shortfall for the year that begins July 1. Only New Jersey and Virginia are struggling more than Pennsylvania to fully fund retirement costs, according to Moody’s Investors Service. Pennsylvania’s credit has been cut this year by each of the three biggest rating companies, to two steps below the average for U.S. states. The grade may fall further if Wolf can’t plug revenue misses, said Bill Delahunty, the head of municipal research in Boston at Eaton Vance Management. Borrowing costs for the sixth-most-populous state may rise should the new governor fail to address the pension burden, said Paul Brennan, a money manager at Nuveen Asset Management, which oversees about $110 billion in munis.

As the sun sets in Athens, we thought a moment of reflection was worthwhile. Greek stocks are now down 13% - the biggest single-day drop since (drum roll please) the crash of 1987... led by total carnage in Greek banks (down 15-25% on the day). Greek bond yields exploded, 3YR +183bps to a new post-bailout high at 8.32% (and inverted to 10Y). Worst day since the 1987 crash for Greek stocks... As every smart money hedge fund traders best trade of the year - Greek Banks are destroyed...

Banks’ U.S. Debt Holdings Top $2 Trillion as Treasuries Rally - ( American banks increased U.S. government debt holdings to a record $2 trillion as global regulators implement post-2008 financial-crisis rules requiring financial institutions to own the highest-quality assets while trimming risk-taking activities. U.S. debt has returned 5.3 percent this year as commercial lenders increased their net holdings of Treasuries to $615.6 billion this year as of Nov. 26, little changed from the highest ever, data from the Federal Reserve show. Banks have been net buyers of Treasuries and other agency debt for 14 straight months, equaling the longest streak of gains since June 2003. “Banks have been under tremendous pressure to shore up their balance sheets and that’s manifested in very large Treasury holdings,” said Aaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, one of 22 primary dealers that trade with the Federal Reserve. “In the near-term, it will be difficult for Treasuries (BUSY) to engineer a sell-off because of the demand.”

Venezuelan Bonds Crash To Lowest Price Since 1998 - ( Bond prices in Venezuela have totally collapsed this morning - at 45c on the dollar, they are the lowest since 1998 - as the realization of the "abyss" they are staring into sparks an exodus from all credit positions in the country. VENZ 5Y CDS rallied 130bps which signals hedgers unwinding and the simultaneous sale of the underlying bonds implies broad-based capital flight (and profit taking) as 1Y CDS surges to record highs at 4830bps. VENZ Bond prices collapse to 1998 lows...

Tuesday, December 16, 2014

Wednesday December 17 Housing and Economic stories

It's Time to Start Paying Attention to Greece Again - ( It’s been awhile since Greece was front-page news, so here’s a refresher: A few years ago, it looked as though Greece might be forced to leave the euro zone, as investors lost faith in the country’s ability to pay its debts. In late 2011, 10-year Greek bonds were trading with a yield around 35 percent. The crisis began to dissipate in the summer of 2012, when the center-right New Democracy party eked out the narrowest of election victories and cobbled together a coalition that agreed to a bailout under harsh terms. Since then financial markets have eased considerably, although the economy is still in the gutter. Anyway, you might want to start paying attention again. Greece may see elections early next year, and a new poll just out has the radical leftist Syriza party in first place by more than 3 percent. If Syriza takes power, the relative calm of Greek financial markets could be rocked.

Venezuelan Bond Buyers Pack Into Manhattan Law Office - ( The scores of money managers and analysts who crowded intoCleary Gottlieb Steen & Hamilton LLP’s panel discussion on Venezuela last week are a testament to the deepening concern over whether President Nicolas Maduro can make good on the nation’s debt obligations. During the two-hour event on the 39th floor of the law firm’s downtown Manhattan office, some 150 attendees pressed the lawyers on an array of potential scenarios if Venezuela defaulted, according to interviews with six attendees who asked not to be identified because the meeting was private. Among the topics debated were whether the state oil company’s U.S. gasoline stations could be seized as collateral and whether it was legally possible for Venezuela to restructure the producer as an empty shell to avoid bondholder claims, they said.

Crackdown Weakens Divided Venezuela Opposition as Election Looms - ( Here’s the kind of a year it’s been for Venezuelan opposition leader Maria Corina Machado: She’s been assaulted by pro-government militants, banned from leaving the country, kicked out of Congress -- and last week charged with conspiring to kill President Nicolas Maduro. Machado’s difficulties symbolize a crackdown that is weakening an already divided opposition, reducing its ability to capitalize on popular discontent building over the fastest inflation in the world, shortages ranging from meat to medicine and the repression itself. Maduro’s government, the most unpopular in at least 15 years, is squeezing its opponents as it tries to tighten its grip on power before congressional elections scheduled for next year, said Diego Moya-Ocampos, an analyst at political risk consultancy IHS Inc. A victory by the opposition in the vote could pave the way for a plebiscite in 2016 on whether Maduro should resign. “Maduro’s use of state institutions (SOUNDS AN AWFUL LOT LIKE OBAMA) to go after political opponents hasn’t been seen in Venezuelasince the fall of the last dictatorship in the late 1950s,” Moya-Ocampos said by telephone from London Dec. 8. “This level of repression is unprecedented in the country’s recent history.”

Singer Default Deal Odds Diminish on Argentina Debt Sale - ( Argentina’s plan to push out debt maturities and raise $3 billion locally may allow it to delay a settlement with holdout creditors who tipped the nation into default, according to JPMorgan Chase & Co. and Emso Partners. For the first time since failing to pay its foreign-currency debt five months ago, Argentina is selling bonds as it tries to tackle $12 billion of obligations coming due next year. Since Economy Minister Axel Kicillof announced the plan to sell and buy back debt, its dollar securities governed by local law have outperformed the overseas notes by the most in three weeks. The proposal may enable the country to delay devaluing the peso further, according to JPMorgan. With foreign-currency reserves bolstered by swaps with China and the peso rallying in informal markets, there will be fewer incentives for President Cristina Fernandez de Kirchner to negotiate a resolution to the decade-long debt crisis with holdouts led by billionaire Paul Singer’s Elliott Management, said Emso Partners’s Patrick Esteruelas.

Greece Lurches Back Into Crisis Mode  - ( Greek stocks fell more than at any point during Europe’s debt crisis today after Prime Minister Antonis Samaras gambled his political future on bringing forward a parliamentary vote on a new head of state. Greek stocks tumbled the most since 1987 and three-year yields surged in response to the prime minister’s move. Unless he can persuade 25 opposition lawmakers to support his choice, Samaras will be forced to call a parliamentary election that anti-austerity party Syriza would be favorite to win. “Investors have taken a second look at Syriza and understood that at this point in time it’s more radical than the traditional left in Greece,” said Nicholas Veron, a fellow at the Bruegel research institute in Brussels. “If Syriza takes over it won’t be a smooth ride.”

Monday, December 15, 2014

Tuesday December 16 Housing and Economic stories

Sudden swings expose fragility of financial markets: BIS - ( Sudden swings in financial markets recently suggest they are becoming more fragile and sensitive to unexpected events, the global organization of central banks said on Sunday, warning that a rising U.S. dollar could have a "profound impact" on emerging markets in particular. MSCI's all-country world stock index is hovering around multi-year highs after rebounding from sell-offs in August and October. The downturns were triggered by uncertainty over the global economic outlook and monetary policy, as well as geopolitical tensions, and the Bank for International Settlements (BIS) said the sharp and sudden dips pointed to frailty in the markets.  "These abrupt market movements (in October) were even more pronounced than similar developments in August, when a sudden correction in global financial markets was quickly succeeded by renewed buoyant market conditions," the BIS said. "This suggests that more than a quantum of fragility underlies the current elevated mood in financial markets," it said in its quarterly review. "Global equity markets plummeted in early August and mid-October. Mid-October's extreme intra-day price movements underscore how sensitive markets have become to even small surprises."

Wall Street Demands Derivatives Deregulation In Government Shutdown Bill - (  Wall Street lobbyists are trying to secure taxpayer backing for many derivatives trades as part of budget talks to avert a government shutdown. According to multiple Democratic sources, banks are pushing hard to include the controversial provision in funding legislation that would keep the government operating after Dec. 11. Top negotiators in the House are taking the derivatives provision seriously, and may include it in the final bill, the sources said. The bank perks are not a traditional budget item. They would allow financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. -- potentially putting taxpayers on the hook for losses caused by the risky contracts. Big Wall Street banks had typically traded derivatives from these FDIC-backed units, but the 2010 Dodd-Frank financial reform law required them to move many of the transactions to other subsidiaries that are not insured by taxpayers.  Taxpayer insurance helps banks secure higher credit ratings for their derivatives, since taxpayers assume some of the risk, which in turn makes the banks more profitable. Last year, Rep. Jim Himes (D-Conn.) introduced the same provision under debate in the current budget talks. The legislative text was written by a Citigroup lobbyist, according to The New York Times.

Something Stinks Inside The BLS Jobs Data - (  "I find it extremely odd and troubling that starting with January 2013, the Establishment Survey started moving in nearly an exactly straight line (benchmarks are important). That observation is made more curious by a memo that was just sent out by the Census Bureau to its field offices (the BLS crunches the numbers, but contracts out with the Census Bureau to actually conduct the surveys)... In other words, they were told that there would be penalties for cheating on the surveys, which apparently is tied to suggestions of a rash of field workers completing surveys for people never actually surveyed. The reason for doing so, spelled out by the New York Post, is that compensation is tied to a 90% completion rate." Again, make of that what you will, but I think that this all more than suggests that even the most mainstream of statistics need proper skepticism and thus corroboration. The mystery of Black Friday was not that people were too busy working to shop as might have been the case if the payroll report was as “unblemished” as under past economic circumstances of the plucking model, or something close to it. More simply, I think the ability of these statistics to produce close correlations with other facets of economic monitoring and accounting has been seriously compromised at least by the disparity in data sets and perhaps even more nefariously. Oil prices and yield curves would certainly concur, as would a huge swath of the electorate in the developed world (with emerging markets none too enthused about all this assumed robust US growth either).

Ukraine's electricity crisis deepens as a plan to import South African coal collapses – ( Ukraine’s fuel crisis has deepened after a deal to buy South African coal collapsed. The head of a Ukrainian state energy firm has been arrested on suspicion of embezzlement in relation to the deal. Ukraine’s coal mining has been disrupted by separatist conflict, and the the absence of Russian gas imports since June has resulted in country-wide mass electricity cuts. That is why the government turned to South Africa to boost supplies, but the imported coal turned out to be unfit for purpose. The director of energy firm Ukrinterenergohas been detained by Ukrainian investigators over his involvement in the South African deal. “Once we can resolve the issue of coal supplies we can achieve a lower price for electricity generation”, said Vladimir Demchyshyn, Minister of Fuel and Energy. “We have power stations but we can’t use them to their full capacity unless we have enough fuel to run them”.

Citi Faces $270 Million Loss; "In Panic" Over Chinese Port Commodity Fraud – ( Despite the near-record scream higher in Chinese stocks over the last few months, under the surface China is rattled and nowhere is that more evident than in the collapse of its commodity-backed ponzi-financing deals. Since we first uncovered the fraud at the port of Qingdaoanother has appeared that is just as fraud-ridden - Penglai; and Citi and Mercuria Energy are arguing over who pays. According to Mercuria's lawyer Graham Dunning, Citi was "in a state of panic," when they uncovered the fraud. As Bloomberg reports, Dunning exclaimed "it appears that substantial quantities may be missing from the warehouses or may be the subject of multiple pledges," and the bank says it is owed at least $270 million. Other 'banks' have been less forthcoming about their potential losses, but the government probe has so far uncovered almost $10 billion in fraudulent trade, including irregularities at Qingdao, according to the country’s currency regulator. Suspected metals fraud in China sparked claims of betrayal by both U.S. bank Citigroup and trade house Mercuria over who would absorb about $270 million in exposure to financing deals, a London court heard this week. The dispute: Mercuria held copper and aluminium in Chinese warehouses and agreed a series of deals that were effective loans from Citi using the metal as collateral. Under the repurchasing agreements, or repos, Citi agreed to purchase metal from Mercuria before selling it back at a slightly higher price to include interest on the effective loans. The two groups were in the midst of several repo deals when the potential fraud in China was uncovered in warehouses in both Qingdao and Penglai. Citi demanded early repayment of the repos and Mercuria refused.

Sunday, December 14, 2014

Monday December 15 Housing and Economic stories

D.C. police plan for future seizure proceeds years in advance in city budget documents – (  D.C. police have made plans for millions of dollars in anticipated proceeds from future civil seizures of cash and property, even though federal guidelines say “agencies may not commit” to such spending in advance, documents show. The city’s proposed budget and financial plan for fiscal 2015 includes about $2.7 million for the District police department’s “special purpose fund” through 2018. The fund covers payments for informants and rewards. The financial details emerged Wednesday, when the D.C. Council’s judiciary committee unanimously voted to forward a bill that would overhaul asset forfeiture laws in the nation’s capital. The bill would raise the threshold of proof required for a forfeiture, bolster the rights of individuals whose property has been taken and require that proceeds from seizures under federal law go into the city general fund, rather than directly to the police department. The full council is set to vote on the bill Tuesday. Council member Tommy Wells, chairman of the Committee on the Judiciary and Public Safety, said police should not have a financial incentive to make seizures. He said the bill addresses problems that are common across the country. “All across the nation, law enforcement agencies are directly benefiting from forfeiture,” said Wells (D-Ward 6), who is leading the effort to reform asset forfeiture in the District. “In those places, forfeiture proceeds go directly to the law enforcement entity, creating at best the appearance of a conflict of interest, and at worst, an unchecked incentive for slush funds.”

Tense year end for distressed energy debt - ( Investing on Wall Street this year has provided many surprises — some with a painful sting. At the start of 2014, few expected a third straight year of double digit gains for the S&P 500 and sharply lower long-term Treasury yields. As for oil prices, the collapse from above $100 a barrel to their lowest levels in five years was unforeseen.  The surprising drop in crude oil illustrates the entrenched complacency that has existed across markets for several years. Much of this has come from aggressive central bank action that encouraged investors to downplay risk and reach for returns. Sharply lower energy prices serve as a warning that eventually even the most ebullient markets turn, or experience what is known as a “Minsky Moment”. The economist Hyman Minsky highlighted how at some point financial engineering and leveraged bets based on the idea that asset prices will continue ascending usually reaches a peak and then unravels.

Junk Fervor Cools as Oil Rout Upends Energy Debt: Credit Markets - ( The plunge in oil prices is sapping demand in the $1.3 trillion U.S. junk-bond market, pushing yields to the highest in more than a year and leaving energy companies struggling to attract financing. Speculative-grade companies have sold $4.52 billion of securities in the first four trading days of December, the slowest start for the month since 2011. Gas producer Atlas Energy Group and EnTrans International LLC, a maker of equipment used in fracking, have postponed loan and bond offerings as crude oil prices fell to a five-year low and yields on high-risk, high-yield bonds rose to 6.75 percent, the highest since October 2013. “If you have to finance in this environment you are in real trouble if you don’t have the absolute best assets,” Bill Zox, a money manager at Columbus, Ohio-based Diamond Hill Investment Group, which oversees $15 billion, said by telephone. “Energy prices have been driving the high-yield market, and investors are still discounting the rapid changes in this new environment.”

Feds to Employers: You Can’t Dump Sick Workers Onto Obamacare – ( loophole touted as a way for employers to wiggle out of the Affordable Care Act’s insurance mandate has been closed. What happened? Officials got wind that some employers planned to bypass the mandate by giving their workers bonuses, asking them to decline company-sponsored insurance and sending them to the Obamacare marketplaces to buy subsidized policies. Nudging sick workers, in particular, onto the exchanges could save employers’ health plans money and shift the cost onto publicly subsidized plans. The Labor Department published new guidelines in November to explicitly forbid that practice. Why did employers think they could get out of a federal mandate?  “Brokers were running around selling this idea that employers could give everybody a raise and say, ‘Go, get the tax credit, knock yourselves out,’ and they wouldn’t pay a penalty. Go figure—the IRS got wise to that,” says Keith McMurdy, a partner in the employee benefit division at Fox Rothschild, a law firm in New York City.

Japan's In Deeper Trouble Than We Thought - (  Japan's economic contraction in July-September was deeper than initially expected on declines in capital expenditure, according to revised data on Monday that backs Prime Minister Shinzo Abe's recent decision to delay a second sales tax hike. The data indicated that the hit from April's sales tax hike turned out to be bigger than expected. Abe, who has called a snap poll for Sunday, hopes voters will agree that his stimulus policies and a decision to delay a second sales tax hike next year will revive a sputtering economy. The revision to an annualized 1.9 percent contraction, more than a preliminary 1.6 percent fall, confirmed the world's third-largest economy had slipped into recession with only a modest rebound expected in the current quarter. It compared with a median forecast for a 0.5 percent contraction.