Monday, May 2, 2016

Tuesday May 3 2016 Housing and Economic stories

New York Luxury-Apartment Glut Hits Landlord Equity Residential - ( A cool-down in Manhattan’s apartment-rental market is hitting the bottom line of Equity Residential as the landlord is forced to offer concessions to tenants who suddenly have a lot of competition to choose from. “New York City just turned very quickly and more deeply than we expected,” Chief Operating Officer David Santee said on a conference call Wednesday to discuss first-quarter earnings. With the city accounting for about 20 percent of the firm’s revenue, “if you can’t achieve 3 or 4 percent rate growth there, then it’s going to impact your full-year growth.” Equity Residential is among the landlords having to work harder to secure tenants in Manhattan as a glut of new apartments gives residents more bargaining power. 

China's $1 Trillion Bond Leverage Unwinds as Pimco Senses Panic - ( China’s bond traders are getting a painful lesson on the dangers of leverage. After years of racking up profits by borrowing cheaply and plowing the proceeds into higher-yielding debt, investors are now rushing to unwind those wagers amid the deepest selloff in 13 months. The bets are getting squeezed from both sides as bond prices sink and borrowing costs rise to one-year highs in the 8 trillion yuan ($1.2 trillion) market for repurchase agreements, used by traders to amplify their buying power. While a reduction in leveraged wagers is arguably good for China’s long-term financial stability, it risks fueling a downward spiral in a market that Pacific Investment Management Co. says already shows signs of panic amid mounting default concerns. The pullback challenges government efforts to revive economic growth with cheap credit and could hardly come at a worse time for Chinese companies on the hook for a record 547 billion yuan of maturing onshore notes in May.

Currency Trading's 20% Drop Raises Specter of Flash-Crash Future - ( The world’s biggest financial market has shrunk by 20 percent during the past year and a half. Currency trading via CME Group Inc., ICAP Plc and Thomson Reuters Corp. -- three of the largest trading platforms -- fell to $538 billion per day last month, from more than $669 billion in September 2014, according to data compiled by Bloomberg. The figures show the extent of the slump in a market that this month saw some banks report less client activity, just as the Bank of International Settlements prepares its definitive triennial survey of global volumes. All of this is making bouts of extreme volatility more commonplace as traders find it harder to enter or exit positions without affecting prices. As recently as January, the South African rand tumbled 9 percent in 15 minutes before rebounding; New Zealand’s dollar had its own flash crash in August; while the Reserve Bank of Australia concluded that illiquidity caused exchange-rate jolts before three interest-rate decisions last year.

Asia's Market Giants Turn Into $11 Trillion Headache for Traders - ( Asia’s two biggest stock markets are jostling for an ignominious prize. Japan’s Topix index and China’s Shanghai Composite Index have tumbled more than 13 percent in 2016 to rank along Nigerian and Mongolian shares as the world’s worst performers. In the two years through the end of December, the Asian gauges outperformed MSCI’s global measure by at least 20 percentage points. The Bank of Japan stood pat on monetary policy Thursday, sending Tokyo stocks tumbling, while the Shanghai measure fell to a one-month low. The benchmark gauges in two of the world’s largest stock markets, which have a combined value of almost $11 trillion, are declining as investors detect a reduced appetite from policy makers to boost monetary stimulus. Thursday’s BOJ decision was the first under Governor Haruhiko Kuroda where a majority of economists expected easing that didn’t materialize, while strategists now see China’s central bank keeping its main interest rate on hold until the fourth quarter.

Sunday, May 1, 2016

Monday May 2 2016 Housing and Economic stories

As Valeant Tumbles, So Does Bill Ackman’s Hedge Fund Herd - (  The billionaire investor William A. Ackman has become the unofficial leader of a thundering herd that has lost billions of dollars betting on Valeant Pharmaceuticals over the past year. The 49-year-old founder of Pershing Square Capital Management, the $12.5 billion hedge fund, found himself going to bat again for Valeant on Wednesday when he testified before Congress about Valeant’s controversial drug pricing policies, which have included inflating the prices of vital heart medicines right before learning that generic equivalents were coming to the market. Mr. Ackman’s firm has lost billions of dollars on Valeant. Shares of the Canadian drug maker have plummeted 85 percent since he first pitched the company as one of his best investment ideas at a hedge fund charity event last year.

Canary in the US Housing Market: Canadian Snowbirds Cash Out - ( Naples, Florida, a wealthy beach town on the Gulf of Mexico, known for its golf courses and high-end shopping, and a favorite hangout for Canadian snowbirds trying to escape their cold winters, has a problem: Pending home sales in the first quarter plunged 23% from a year ago, according to the Naples Area Board of Realtors. Closed sales plunged 19%. Overall inventory soared 33%. In the two mid-price ranges from $300,000 to $1 million, inventory soared about 42%! But sellers haven’t gotten the memo yet: even as sales crash and as unsold inventories pile up, the median closing price rose 8%. That’s how housing busts start out. Buyers lose interest at these prices and evaporate, while sellers go into denial. As prices still rise, volume collapses. When sellers begin accepting the new reality, or when they’re forced to sell, then prices are getting slashed until enough buyers materialize.


The new Valeant CEO's pay package is putting the company in serious danger - ( Watch out, this is slippery. If you blinked, you may have missed it — a lot of politicians did.
It's the part of incoming Valeant Pharmaceuticals CEO Joe Papa's pay package that makes it a dangerous deal. Bloomberg reported Wednesday that Papa agreed to a $67 million pay package. But that's not the most important part here. If Valeant's shares reach a price of $270, Papa will get stock equaling $500 million. That's right. If Papa manages to get the embattled company's stock up by eight times its current level, he'll take home a staggering amount of money. This news broke at the end of Wednesday's Senate hearing for Valeant, the former Wall Street darling under fire for buying up drugs and then jacking up their prices by (sometimes) triple digit percentages.

The European Union always was a CIA project, as Brexiteers discover - ( Brexiteers should have been prepared for the shattering intervention of the US.  The European Union always was an American project... Nor are many aware of declassified documents from the State Department archives showing that US intelligence funded the European movement secretly for decades, and worked aggressively behind the scenes to push Britain into the project. As this newspaper first reported when the treasure became available, one memorandum dated July 26, 1950, reveals a campaign to promote a full-fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the Central Inteligence Agency.

Laid-Off Oil Workers Struggle to Pay Loans, Credit Cards - (  Rising unemployment in the energy sector is pushing up loan delinquencies and raising the risk of new losses for banks. The slump in crude prices is starting to show up as missed payments by consumers in the oil patch. In states from Oklahoma and Texas to North Dakota and Wyoming, rising unemployment in the energy sector is pushing up loan delinquencies and raising the risk of new losses for banks. Wells Fargo & Co. this month reported an increase in borrowers falling behind on payments in areas including Houston and parts of Alaska. J.P. Morgan Chase & Co. said auto-loan delinquency rates picked up in some energy-related markets. Overall, energy-dependent states are posting delinquency rates that in many cases exceed the national average, according to data prepared for The Wall Street Journal by credit bureau TransUnion.

Fed Leaves Door Open for June Increase, Monitors Global Outlook - (
Fed signals no rush to raise rates as pace of U.S. recovery moderates
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Oil Climbs Above $45 Amid U.S. Crude Output Drop, Fed Statement
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U.S. Stocks Rise as Fed Reassures on Gradual Rate Path, Economy
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Thursday, April 28, 2016

Friday April 29 2016 Housing and Economic stories

Alarm over corporate debt and stalled earnings – ( Such popularity for companies that pay out dividends is generally sign of bearishness and lack of trust. If investors want to be shown the money in this way, it suggests very low confidence in companies' ability to use the cash wisely. At this point, according to Mr Santschi, investors are eschewing buyback stocks because they fear that the buybacks will only be funded with further debt. Companies can of course afford to stay highly levered without too much difficulty, while they enjoy fixed low rates. The problem, and the reason that investors have now started to focus on the problem, is producing the earnings and cash flows needed to pay their debt. That is why earnings are being watched with such anxiety.

China imposes fresh curbs on commodities as iron ore, steel slide - ( Chinese commodities exchanges stepped up efforts on Tuesday to curb surging prices that some say have been driven by speculators, raising fears of another derivatives bubble after last year's stock market collapse. Transaction fees for iron ore futures were hiked for a second time in as many days, after the original increase led to a sharp drop in iron ore and steel futures in China that helped cool a week-long surge in local commodities markets. Base metals futures also fell on Tuesday, while other commodities, including coking coal and cotton, surrendered most of their early gains to end nearly flat. China's top commodity exchanges in Dalian, Shanghai and Zhengzhou increased trading margins and fees in response to last week's spike in prices and volumes, which some analysts said were not matched by fundamentals for the underlying commodities.

We are in the 'first inning' of a 'wash out' in hedge funds, says top hedge fund - (  Hedge funds are getting killed, says hedge fund manager Dan Loeb. Loeb's Third Point Capital put out its quarterly letter to investors on Tuesday, calling the first three months of 2016 "one of the most catastrophic periods of hedge fund performance that we can remember since the inception of this fund." Third Point was down 2.3 percent during the first quarter, which compares with a 1.3 percent gain for the S&P 500 over the same period. (As bad as that may be, though, it could have been worse — Bill Ackman's Pershing Square was down more than 25 percent in the quarter.)

Consumers, Small-Business Owners Souring on This Economy - ( Consumer optimism about the economy is waning, and small-business-owner sentiment is giving off recession vibes. That’s how different surveys are now mucking up the rosy scenario. Gallup’s Economic Confidence Index, released today, added another dimension. It dropped four points in the week ending April 24, to -16, the lowest since August 2015, and down from positive territory in January 2015. It left Gallup groping for answers: Pessimism has increased despite a strong stock market in recent weeks and a persistent low unemployment rate. However, there have been reports of weak retail sales and expectations of low first quarter economic growth. Gas prices have also started to rise, although they remain well below where they were for most of the past decade.

Business "Subsidies" Plummet 70% As Government Support Evaporates - ( In order to attract and retain small and big business alike, it has long been a tactic by states and local governments to offer tax breaks - just ask Elon Musk who has been a happy recipient of taxpayer generosity over the years. However, as times have got touch in Obama's "recovery", government subsidies of at least $50 million have plummeted by 70% Bloomberg reports. As an example, tax breaks for companies such as Boeing, IBM, and Toyota were part of $17 billion from state and local governments in 2013. In 2014 that number dropped to $7 billion, and last year plummeted to just $4.8 billion. The reasoning may be twofold. The first, is that new accounting rules will force state and local budgets to account for tax incentives given to business as lost income in order to stay compliant with GAAP. This could upset the public, knowing just how much each business in their area didn't have to pay in taxes, and thus potentially increasing property taxes.

Wednesday, April 27, 2016

Thursday April 28 2016 Housing and Economic stories

The Canary In Canada's Real Estate Mine Just Died: Toronto's Urbancorp Files For Bankruptcy - ( Less than two weeks ago we documented that Toronto based Urbancorp, one of Canada's largest residential developers, was having significant issues. Its attorney's had taken the highly unusual step of terminating their contract, it hadn't released 2015 financials due to the audit committee having "open issues and questions", and most intriguing, a board member quit just two weeks after being appointed specifically to provide expertise in accounting. For those unfamiliar with the company, Urbancorp was launched in 1993 by Alan Saskin, a former Cadillac Fairview executive, and has built dozens of condos and other housing developments in the Greater Toronto Area. This is how it describes itself on its website: Urbancorp is proud to have created some of the most visionary home and condominium communities in the GTA.

1MDB Says It's in Default After Missing Interest Payment - ( The Malaysian government’s reputation took another hit on Tuesday after state-owned 1Malaysia Development Bhd. defaulted on a $1.75 billion bond. The ringgit fell and 1MDB’s dollar debt slumped. The development fund withheld a $50 million coupon payment amid a wider dispute with Abu Dhabi’s International Petroleum Investment Co., the co-guarantor of the bonds. The missed payment triggered cross defaults on 7.4 billion ringgit ($1.9 billion) of 1MDB debt, including borrowings that are guaranteed by the Malaysian government, the fund said in a statement on Tuesday. The default is the latest episode in financial scandals that have rocked 1MDB, whose advisory board is headed by Malaysian Prime Minister Najib Razak. 

Used car prices are falling for the first time since 2008 - ( Used car prices look set to suffer their first meaningful decline since 2008. And the likely culprit is the strong number of new vehicle sales. According to "NADA Used Car Guide," used car prices will fall 5 to 6 percent this year. And while some may be tempted to draw from that negative conclusions about the U.S. economy, NADA executive analyst Jonathan Banks explains that the drop is reflective of rising supply, rather than falling demand. "2016 marks the first year where we have a material increase in used supply," Banks said Friday on CNBC's "Trading Nation." He explains that recently, record-high used car prices have been spurred by a lack of used car supply, which in turn was caused by low new vehicle sales as a result of the recession. That trend is now reversing.

Iconic Hedge Fund Brevan Howard Slammed With $1.4 Billion In Redemption Requests - ( It has already been a very bad several years for hedge funds with 2016 starting off especially brutally, when moments ago we learned that it is about to get even worse for one of the most iconic names in the macro hedge fund space, Brevan Howard, which according to Bloomberg has been served with $1.4 billion in cash redemption requests. As Bloomberg writes, investors in Brevan Howard Asset Management have asked to pull about $1.4 billion from the firm’s main hedge fund after successive annual declines followed by losses during the first quarter, according to two people with knowledge of the matter.

China’s bond market is on edge - ( Stand easy — or easier, at least. Ten basis points might not be the biggest one-day change for borrowing costs in China’s vast $7tn bond markets, but it was enough on Monday to push the country’s closely watched onshore repo rate back from an eight-month high. That offers a little breathing space for investors to ponder what next for the rising tensions in onshore bond markets. One point to look at is their own leverage as well as their fears for companies. Bond yields in China have jumped. This month, China’s five-year government bond yields have risen 25 basis points to 2.75 per cent — their worst monthly performance in a year. Defaults by two state-owned groups have raised fears that others could follow suit. All this has added roughly half a percentage point this month alone for high-quality borrowers onshore. Spooked by this, companies have so far suspended plans for an estimated $10bn in expected bond issuance. Amid all the furore about the pain of rising rates, one so-far overlooked factor is that investors, as well as companies, appear precariously balanced.

Tuesday, April 26, 2016

Wednesday April 27 2016 Housing and Economic stories

Amid oil price plunge, Alaska's economy braces for losers and survivors  - (  Alaska's $3.5 billion deficit — roughly two-thirds of its budget — reads like a classic boom-bust tale. With the collapse in crude prices, lower oil revenues are hitting Alaska hard. Roughly 90 percent of the state government and one-third of all state jobs comes from oil money. But weaning Alaska off oil revenues won't be a straight shot. And the pain won't be uniform. The effects of budget solutions will vary among Alaska's diverse population. In many ways, the Last Frontier State is a collection of regions and micro economies — each with its own constellation of employers and local price swings for everything, from a gallon a milk to a gallon of fuel.

Germans flock to property as interest rates fall and rents rise - ( Unlike his parents who rented their whole life, Berlin resident Sebastian lives in his own apartment and is considering buying a second property in the German capital as an investment to top up his pension one day. For decades a nation largely of tenants and prudent savers, growing numbers of Germans are buying property, not just to own their homes but also in search of investment returns they can no longer earn on their bank savings. This shift to a more U.S. or British approach to property is being encouraged by the European Central Bank's cheap money policies and rising rents, especially in German cities.

China debt load reaches record high as risk to economy mounts - ( China’s total debt rose to a record 237 percent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn. Beijing has turned to massive lending to boost economic growth, bringing total net debt to Rmb163 trillion ($25 trillion) at the end of March, including both domestic and foreign borrowing, according to Financial Times calculations. Such levels of debt are much higher as a proportion of national income than in other developing economies, although they are comparable to levels in the U.S. and the eurozone.

With Impeccable Timing, ‘Economic Miracle’ in Spain Unravels - (  Since the granddaddy of all housing bubbles popped in Spain between 2008 and 2009, unleashing one of the deepest recessions in living memory, the nation’s public debt has more than doubled, from just over 40% of GDP to almost exactly 100% today. Last year, despite the fact that Spain grew faster than almost any other European economy, the government managed to rack up a deficit of 5.2%, one full percentage point above the target that it had set itself a year earlier and over three percentage points above the Eurozone average. It’s the third-highest deficit-to-GDP ratio in the Eurozone after Greece and Portugal. That’s some claim for Europe’s supposed economic success story. This is the eighth consecutive year that Spain has overshot its fiscal target. 

In Shocking Finding, The Bank Of Japan Is Now A Top 10 Holder In 90% Of Japanese Stocks – ( The latest shocking example of just how intertwined central banks have become in all capital markets, comes courtesy of the Bank of Japan which days ahead of a move which may see it double its ETF purchases from the current run rate of JPY3.3 trillion to JPY7 trillion or more (if Goldman is correct), is revealed to be a top 10 holder in about 90% of all Japanese stocks. Crazier still, if as Goldman predicts the BOJ doubles its purchases of ETFs, the central bank could become the No. 1 shareholder in about 40 of the Nikkei 225’s companies by the end of 2017,