Thursday, November 27, 2014

Friday November 28 Housing and Economic stories

'When All Of A Sudden The Most Liquid Market Out There Isn't Liquid, It's Worrisome' – ( US fund firms are taking extra measures to make sure they don't get stuck holding hard-to-sell bonds in the event that fixed income markets see a massive race to the exits when interest rates start to rise. Over the past few months a growing number of asset managers, including Neuberger Berman, Natixis Global Management, and T. Rowe Price have been testing their funds against various market scenarios, building cushions of cash, shorter-duration bonds, and other liquid securities, and regularly discussing risks with their boards. The concern is this: As the Federal Reserve begins to raise rates, which many expect will begin to happen next year, investors will rush to sell bonds as their value drops in a rising interest rate environment. Historically Wall Street banks have been the buyers of these bonds, but regulations and capital requirements imposed since the financial crisis have forced these firms to slash their inventories. "I look around and ask, 'At the end of the day how easy would it be to sell what I own?', and the answer is it is much more challenging," said Jason Brady, a fixed income portfolio manager at Sante Fe, New Mexico-based Thornburg Investment Management, which has $70 billion in assets under management, $17 billion of which is in fixed income.

Loan ‘Guarantee Chains’ in China Prove Flimsy - ( When a fabric company called Jiangyin Xueyuan Textile Co. collapsed, the troubles soon cascaded through other firms in this mill town. A machinery maker, paper producer, manufacturer of faux-wood flooring and textile maker had one thing in common. They had promised, in the event of default, to repay the loans taken on by Xueyuan. Court documents say the fabric company can’t pay what it owes. With China’s economic growth flagging, businesses such as Xueyuan are foundering. And these chains of guarantees, in which companies back loans to other firms, are causing pain for the wider Chinese economy. The central bank cut benchmark lending and deposit rates on Friday to reduce financing costs for companies and help revive growth. Places like Jiangyin, in the prosperous Yangtze River delta, have been a point of concern for the government.

Auto Loan Delinquencies Surge 18% Among Young Americans
- ( Auto loan delinquency rates jumped nearly 13% in the last year, according to a new report by Transunion, withyoung (under-30) Americans seeing a 17.8% surge in 60+ day delinquency rates, as auto loan debt rose for the 14th straight quarter to $17,352. While these are notable rises, the overall levels remain low for now, but subprime-loan-delinquencies rose notably to 5.31%. However, in a somewhat stunningly blinkered conclusion, Transunion's Peter Terek notes "the uptick in delinquency reflects a healthy and thriving auto finance industry where credit is more broadly available to all consumers." So delinquencies are great news...

The Last Time Gas Prices Fell This Far ... - ( The last time gas prices fell this far, this fast, we were in a recession. Or actually, closer to a depression. According to a tweet sent out this afternoon by Bespoke Investment Group, the average price of gas in the US hasn't risen in 60 days. This is the second longest streak in a decade, and the longest since an 87-day streak in late 2008. In late 2008, you may recall, the economy was reeling from the Lehman Brothers bankruptcy and the bursting of the housing bubble, with the stock market in the midst of a huge sell off and the economy plunging into a recession that would last through most of 2009. This year's decline in the price of gas comes as crude oil has fallen about 30% since its highs in June as a glut of supply comes to the global market and concerns abound about a global economic slowdown. Later this week, OPEC is set to hold its annual meeting, with some on Wall Street expecting the cartel to announce a production cut this year to reduce global supply and bolster prices.  Here's the chart of gas prices over the last three years.

[Eavis] New York Fed Is Criticized on Oversight - ( The government agency that watches over Wall Street came in for repeated rounds of criticism on Friday at a Senate hearing into its regulatory track record. Many of the senators at the hearing were expected to be critical of the Federal Reserve Bank of New York, after recent reports cast doubt on the agency’s ability to rein in large banks. William C. Dudley, the president of the New York Fed, defended the agency, but Senator Elizabeth Warren, Democrat of Massachusetts, at one point told him, “You need to fix it, Mr. Dudley, or we need to get someone who will.” The president of the New York Fed is not chosen by Congress. And much of the stern questioning could be seen as the sort of grandstanding that plays well with those who want to limit Wall Street’s power or were harmed in the financial crisis of 2008. Even so, it will be hard for the Fed to ignore the anger directed at Mr. Dudley. The New York Fed is the public’s first line of defense against Wall Street’s excesses and abuses, and the discontent in Congress could build if more evidence emerges that suggests the New York Fed is not tough enough with the large banks it oversees.

Wednesday, November 26, 2014

Thursday November 27 Housing and Economic stories

Russia puts losses at up to $140 billion from Western sanctions, oil price fall: minister - ( Lower oil prices and Western financial sanctions imposed over the Ukraine crisis will cost Russia around $130-140 billion a year - equivalent to around 7 percent of its economy - Finance Minister Anton Siluanov said on Monday. His comments are the latest acknowledgement by Russian policymakers that sanctions restricting borrowing abroad by major Russian companies are imposing heavy economic costs. But in Siluanov's view, the fall in oil prices is the bigger worry. "We're losing around $40 billion a year because of geopolitical sanctions, and about $90 billion to $100 billion from oil prices falling by 30 percent," he told a news conference. "The main issue that affects the budget and economy and financial system, this is the price of oil and the fall in monetary flows from the sale of energy resources."

Budweiser Is In Huge Trouble – ( Budweiser is quickly losing its status as the most iconic beer brand in America. A recent company study found that 44% of drinkers aged 21 to 27 have never tried the brand, reports Tripp Mickle at The Wall Street Journal. Budweiser is the third-most-popular beer brand in America, behind Bud Light and Coors Light. It has recently also been challenged by craft beer, which is hugely popular with the millennial set. At the brand's peak in 1988, it was selling 50 million barrels of beer a year. That number has declined to 16 million barrels.  To "stop the free fall," the company has decided to double down and advertise only to millennials, The Journal reports. "It means February’s Super Bowl ads will feature something more current than last year’s Fleetwood Mac," Mickle writes. "It means less baseball and more raves with DJ group Cash Cash."

Brazil Bribery Probe Threatens Petrobras’s Debt Financing - ( The widening corruption probe at Petroleo Brasileiro SA (PETR4) is threatening to impair its ability to finance the world’s biggest oil investment plan. The state-controlled producer, which delayed releasing third-quarter earnings because of an investigation into alleged bribery involving contracts, said Nov. 13 it plans to publish unaudited statements within a month. Bank of America Corp. said Petrobras may have difficulties borrowing in international debt markets until it provides results that have been audited. The producer’s funding costs based on its benchmark bonds reached a 14-month high last week after police arrested officials at construction companies that allegedly formed a cartel to win contracts, including 59 billion reais ($23 billion) from Petrobras. While the company can turn to state development bank BNDES in the short term, it won’t be enough to cover the $12 billion a year in financing that Petrobras says it needs, Oppenheimer & Co. said.

How the EU Plans to Turn $26 Billion Into $390 Billion - ( The European Union is planning a 21 billion-euro ($26 billion) fund to share the risks of new projects with private investors, two EU officials said. The new entity is designed to have an impact of about 15 times its size, making it the anchor of the EU’s 300 billion-euro investment program, according to the officials, who asked not to be named because the plans aren’t final. European Commission President Jean-Claude Juncker is due to announce the three-year initiative this week. The commission will pledge as much as 16 billion euros in guarantees for the vehicle, which will also include 5 billion euros from the European Investment Bank, the officials said. Loans, lending guarantees and stakes in equity and debt will be part of its toolbox, with the goal to jumpstart private risk-taking so that stalled projects can get off the ground.

Twitter "Hedge Fund Manager" Anthony Davian Sentenced To 4 Years 9 Months In Federal Prison
- ( Over a year ago we reported that one of Twitter early and most aggressive self-promoters, Anthony Davian, was busted for what was at the time financial Twitters' the first Ponzi Scheme.  Today, we can close the case on Athony Davian. As SIRF reports, "Anthony Davian, a once-prolific presence on social media who held himself out as a iconoclastic hedge fund manager prior to his August 2013 indictment on a series of fraud charges, was sentenced several hours ago in a Cleveland courtroom to four years and nine months in federal prison."

Tuesday, November 25, 2014

Wednesday November 26 Housing and Economic stories

Fed Warning Sends Small Caps Red For 2014 - ( The word "volatile" comes to mind when reflecting on today's cross-asset class action. US equities dumped into and beyond the US open, decoupling entirely from JPY carry, only to reverse perfectly at the European close and recover all the way back to USDJPY right as the FOMC minutes hit. A kneejerk sent stocks higher but that quickly decoupled also and stocks fell. Small Caps underperformed and are back in the negative year-to-date. Treasury yields were volatile, ramping higher into the US open, rallying post, then whipsawing on FOMC minutes to close 3-4bps higher on the day.The USD was flat on the day despite the surge in USDJPY back above 118. Commodities were a mess with a big dump on Swiss Gold polls, rip higher on Russian buying rumors and dropped again on FOMC (oil and copper followed suit). HY Credit was "bidless" and continues to decouple from stocks (along with VIX).

Seven big U.S. companies paid CEOs more than Uncle Sam in 2013: study - ( Seven of the 30 largest U.S. corporations paid more money to their chief executive officers last year than they paid in U.S. federal income taxes, according to a study released on Tuesday that was disputed by at least one of the companies. Amid talk in Washington about corporate tax reform, the study said the seven companies, which in 2013 reported more than $74 billion in combined U.S. pre-tax profits, came out ahead on their taxes, gaining $1.9 billion more than they owed. At the same time, the CEOs at each of the seven companies last year was paid an average of $17.3 million, said the study, compiled by two Washington think tanks. The seven companies cited were Boeing Co (BA.N), Ford Motor Co (F.N), Chevron Corp(CVX.N), Citigroup Inc (C.N), Verizon Communications Inc (VZ.N), JPMorgan Chase & Co(JPM.N) and General Motors Co (GM.N).

Obama poised to announce go-it-alone plan on immigration Thursday  - ( President Barack Obama is set on Thursday to outline a controversial plan to relax U.S. immigration policy and grant relief from deportation to as many as 5 million undocumented immigrants in a go-it-alone move that will deepen a partisan divide with Republicans. Sources close to the administration said the rollout would include a televised speech by Obama on Thursday night laying out the plan followed by a trip to Las Vegas on Friday to build support. Nevada is home to the highest proportion of undocumented immigrants in the country. The White House declined to comment on the specific timing of the announcement but officials have made clear Obama was planning to take executive action soon. Some conservative Republicans have threatened to try to thwart the immigration move by imposing funding restrictions in a must-pass spending bill, which could conceivably raise the possibility of a government shutdown.

Obama Says Illegal Immigration HURTS ‘Blue-Collar Americans,’ STRAINS Welfare [VIDEO] - (  President Barack Obama once declared that an influx of illegal immigrants will harm “the wages of blue-collar Americans” and “put strains on an already overburdened safety net.” “[T]here’s no denying that many blacks share the same anxieties as many whites about the wave of illegal immigration flooding our Southern border—a sense that what’s happening now is fundamentally different from what has gone on before,” then-Senator Obama wrote in his 2006 autobiography, “The Audacity of Hope: Thoughts on Reclaiming the American Dream.” ”Not all these fears are irrational,” he wrote. “The number of immigrants added to the labor force every year is of a magnitude not seen in this country for over a century,” Obama noted. “If this huge influx of mostly low-skill workers provides some benefits to the economy as a whole—especially by keeping our workforce young, in contrast to an increasingly geriatric Europe and Japan—it also threatens to depress further the wages of blue-collar Americans and put strains on an already overburdened safety net.”

Fed Hints It Won't Bail Out Stocks Next Time
- ( Curious why, even as many were expecting at the time, the Fed decided against commenting on the October market swoon? Here is the answer, in the Fed's own words: "... members considered the advantages and disadvantages of adding language to the statement to acknowledge recent developments in financial markets. On the one hand, including a reference would show that the Committee was monitoring financial developments while also providing an opportunity to note that financial conditions remained highly supportive of growth. On the other hand, including a reference risked the possibility of suggesting greater concern on the part of the Committee than was actually the case, perhaps leading to the misimpression that monetary policy was likely to respond to increases in volatility."

Monday, November 24, 2014

Tuesday November 25 Housing and Economic stories

Record Beef Prices Soaring By 28% Got You Down? Then Drown Your Sorrows In Cheaper Booze
– (  The bad news in today's PPI inflation report: por prices soared by 7% in the past month, while beef prices hit a new record high, rising 2% in the month, and up nearly 30% from a year ago. The good news: for the first time in years, booze prices declined from a year ago. So, with compliments of the hoapy president: don't be moapy and start drinking cheap booze, preferably early and often, as you try to remember - in an alcoholic daze - what beef tastes like.

Disappointment Becomes Norm for Global Growth as Japan Contracts - ( Group of 20 leaders pledged over the weekend to do everything they can to boost the global recovery. Japan’s descent into a recession is the latest reminder of how elusive that goal is proving to be. Less than 24 hours after heads of state gathering in Brisbane, Australia, agreed to take measures that would boost their economies by a collective $2 trillion by 2018, the Cabinet Office delivered news in Tokyo that Japan’s gross domestic product unexpectedly shrank an annualized 1.6 percent in the three months through September, the second straight contraction.

Abe $1 Trillion Gift to Stock Market Shields Recession Gloom - ( Shinzo Abe has helped make investors in Japanese stocks $1 trillion richer over the last two years, and many are betting he will make them even richer. Abe, Japan’s prime minister, is moving to safeguard his political future at the same time government data show the economy unexpectedly sank into a recession last quarter. In a press conference today, he called for an early election and delayed an unpopular sales-tax increase. Global investors, for their part, are standing by Abe and his campaign to restore growth. Since November 2012, his efforts to weaken the yen, restore profits and revive the economy -- collectively known as Abenomics -- sent the Topix index up 93 percent, the biggest gain in developed markets. Now, in the face of a 2.5 percent decline yesterday on the economic data, fund managers say they will keep buying.

Inflation Expectations Are Breaking Down Again – (www.businessinsider.comBack in October, the big story was not just that equity markets were selling off while bonds were rallying, but that inflation expectations had completely fallen off a cliff.  And while the stock market found a bottom on October 15 and has since moved back to all-time highs, inflation expectations, after a brief bounce, are heading back towards their lows. Breakevens are indications of future inflation expectations, calculated by subtracting the yield on Treasury Inflation-Protected Securities notes from Treasury bonds of the same duration. This measure indicates what the market thinks the inflation rate will be over the next five- or ten-years, depending on the duration of the bond used. 

Kissinger Warns "We Need A New World Order"; Ukraine Should Forget Crimea & NATO - ( Former U.S. Secretary of State Henry Kissinger says in an interview with Der Spiegel that there currently is an urgent need for a new world order, but its coming into being will be long and complicated."There is the Chinese view, the Islamic view, the Western view and, to some extent, the Russian view. And they really are not always compatible," he warns, adding that introducing anti-Russian sanctions was a mistake. He added that Ukraine should not hope to become a member of NATO in the foreseeable future, as the alliance will never vote unanimously for the accession of Ukraine.