Thursday, September 18, 2014

Friday September 19 Housing and Economic stories

Economic harassment and the Ferguson crisis - LA Times - ( According to the group's recent report on the municipal court system in St. Louis County, the Ferguson court is a "chronic offender" in legal and economic harassment of its residents. There's not much of a secret why: the municipality collects some $2.6 million a year in fines and court fees, typically from small-scale infractions like traffic violations. This is the second-largest source of income for that small, fiscally-strapped municipality. For a low-income community--and for a black community subjected to the racial profiling, as the report documents--these fines can gather force like a boulder rolling downhill.  And racial profiling appears to be the rule. In Ferguson, "86% of vehicle stops involved a black motorist, although blacks make up just 67% of the population," the report states. "After being stopped in Ferguson, blacks are almost twice as likely as whites to be searched (12.1% vs. 7.9%) and twice as likely to be arrested." But those searches result in the discovery of contraband at a much lower rate than searches of whites. "You don't get $321 in fines and fees and 3 warrants per household from an about-average crime rate," he notes. "You get numbers like this from [B.S.] arrests for jaywalking" and what the report calls "low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay without a meaningful inquiry into whether an individual has the means to pay."

Revolving door: Washington to Wall Street - ( Rahm Emanuel: Government Gigs: Mayor of Chicago; Chief of Staff to President Obama; Illinois Congressman; Senior Advisor to Bill Clinton.  Wall Street Career: Investment banker at Wasserstein Perella.

There's no question that Rahm Emanuel has enjoyed a long and distinguished career in public service, but it was his short stint in the private sector that proved most fruitful on the financial front.
Between government jobs, the often-feisty politician worked as an investment banker at Wasserstein Perella, reportedly earning a whopping $18 million in only two and a half years on the job despite having no prior experience in finance.

Ex-FBI agent airs Wall Street's dirty laundry - ( When hedge funds and pensions are looking for dirty laundry, they often call people like Ken Springer. The former FBI agent runs a firm that sophisticated investors hire to conduct background investigations on companies they want to invest in. Sometimes Springer's research reveals the secrets of company founders -- like allegations of fraud or even felonies -- that causes investors to walk away from a deal. "We're the people who do the due diligence: Are they who they say they are?" said Springer, founder and president of New York-based Corporate Resolutions. Springer, 60, believes one of the biggest problems in the financial world is that too many big investors, pension funds and venture capital firms simply don't know who they are betting on. He's got plenty of stories to back up his case.

Putin breaks ground on Russia-China gas pipeline, world's biggest – ( Russian President Vladimir Putin and Chinese Vice Premier Zhang Gaoli have launched the construction of the first part of Gazprom’s Power of Siberia pipeline - which will deliver 4 trillion cubic meters of gas to China over 30 years. “The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and above all - our key partner China,” Putin said at the ceremony outside the city of Yakutsk - the capital of Russia's Republic of Yakutia on Monday. Both President Putin and Vice Premier Zhang Gaoli signed the freshly-welded pipeline in a time-honored Russian tradition. The 'Power of Siberia' was welded together by workers from Chayanda gas field, overseen by CEO Aleksey Miller.  "Gazprom is always a reliable supplier of gas to its customers - which also applies to the ‘Power of Siberia," Miller said. The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world. Both Putin and Vice Premier Zhang Gaoli have called the project the world’s largest construction project, as investment from both countries will be more than $70 billion. “The gas pipeline ‘Power of Siberia’ will increase energy security and ensure Russia’s ability to fulfill export obligations,” Putin said in the opening remarks.

GOP Senator Rips Media 'Shield Law' to 'License' Journalists - ( Senate Minority Whip John Cornyn (R – TX) today blasted the “Free Flow of Information Act,” a media “shield law” which is being pushed by Senate Democrats, saying it is fatally flawed and contrary to the First Amendment’s freedom of the press. Sen. Chuck Schumer (D – NY), the main backer of the bill, claims that he already has a filibuster-proof majority that can pass the bill, and insists it will protect the rights of certain journalists to gather information. In theory, the bill protects journalists from having to reveal confidential sources. Yet the bill only affords this protection to “covered journalists,” while being extremely vague over what that means and giving judges considerable latitude to decide who is or isn’t sufficiently a journalist to have protection under the law.

Wednesday, September 17, 2014

Thursday September 18 Housing and Economic stories

$2.4B Revel casino shuts down after just 2 years - ( Revel Casino Hotel opened with a bang a little more than two years ago amid high hopes of turning around Atlantic City's struggling casino market. But the $2.4 billion resort went out with a whimper in the wee hours of the morning Tuesday, as its casino closed one day after the hotel checked out its last guest. The property that debuted at sunrise on April 2, 2012, with its then-president joining New Jersey Lt. Gov. Kim Guadagno in a blueberry smoothie toast, quietly ended operations as the last handful of gamblers, who never turned out in great enough numbers to keep Revel alive, filed out of the sleek glass tower. "When I started, it was promising. We had high hopes," said Liditze Diaz, a restaurant worker at Revel. "Then we started hearing rumors, but I thought, 'No way this place is going to close. It's too new, too pretty.' It's hard to believe."

China’s Property Slump Leads to Record Loans to Builders - ( Cash-strapped Chinese developers are borrowing a record amount in the offshore loan market this year, adding to the highest debt loads since 2005. Homebuilders in the world’s second-largest economy got $5.9 billion from foreign banks, up 39 percent from the same period last year, according to data compiled by Bloomberg. Builder debt has soared to 128 percent of equity, the highest since 2005, according to a Bloomberg Intelligence gauge of 84 companies. New home prices fell in July in almost all cities the government tracks and developers are missing sales targets. “Higher leverage on the balance sheet will give developers a higher financial burden,” said Agnes Wong, credit strategist at Nomura Holdings Inc. in Hong Kong. “That means that if presales are not going as quick as they expect it can translate into trouble more easily than before.”

Anti-euro party's success poses dilemma for Merkel - ( The success of a new anti-euro party in a German state election intensifies a dilemma for Chancellor Angela Merkel: how to handle a rival whose rise could make it more difficult for her party to form coalition governments around the country. Alternative for Germany, or AfD, won 9.7 percent support in Saxony on Sunday and took its first seats in a regional legislature. It is the latest success for a party that has already won representation to the European Parliament after narrowly missing the 5 percent threshold needed to enter Germany's parliament last fall. AfD leader Bernd Lucke told Deutschlandfunk radio Monday that his party has "visibly arrived in the German party spectrum" and that it is "growing from election to election." The party hopes to repeat its success in two more eastern states in elections Sept. 14.

German GDP Shrinking Signals Fading Euro-Area Powerhouse - ( Cracks are emerging in Germany’s once rock-solid economy as companies’ reluctance to invest bears out Mario Draghi’s warning that the euro-area recovery is in danger. Gross domestic product in Europe’s largest economy shrank 0.2 percent in the second quarter, the Federal Statistics Office said today, confirming an Aug. 14 estimate. While part of the drop can be attributed to a mild winter that front-loaded output earlier in the year, the Bundesbank has cast doubt on a second-half rebound and suggested its forecasts may prove too optimistic. The weakness of a German economy that has outperformed its peers since the regional debt crisis comes as European Central Bank President Draghi ponders adding more stimulus to fight the threat of deflation in the currency bloc. He signaled that declining inflation (ECCPEST) expectations could tip the ECB into broad-based asset purchases, an option officials may discuss at this week’s policy-setting meeting.

Swiss Economy Unexpectedly Stalls as Euro Area Takes Toll - ( The Swiss economy unexpectedly stalled in the second quarter as stagnating growth in the euro area hurt exports. Swiss gross domestic product was unchanged in the three months through June from the previous quarter, when it expanded 0.5 percent, the State Secretariat for Economic Affairs in Bern said in a statement today. That’s the weakest quarterly reading in two years and compares with a median estimate for 0.5 percent growth in a Bloomberg News survey of 16 economists.  The Swiss National Bank’s three-year-old cap on the franc has helped the economy outperform that of the euro area in nine of the last 12 quarters. With conflicts between Russia and Ukraine, as well as in the Middle East, putting a strain on global growth, SNB President Thomas Jordan yesterday reaffirmed the ceiling’s importance to ward off economic risks.

Tuesday, September 16, 2014

Wednesday September 17 Housing and Economic stories

Postal Service paid $287K for trucks it can’t find - ( The sum of $287,000 may seem like a tiny drop in the bucket when it comes to Washington's astronomical spending totals. But at a time when the United States Postal Service has been bleeding literally billions of dollars, spending even that amount on a fleet of vehicles it now cannot locate, and never actually could, is worth a bit of a pause. A report in Government Executive this morning notes that while USPS spends about $39 million a year to rent 10,000 trailers—the cargo bodies of its trucks—it also leased 35 trailers in fiscal years 2011 and 2012 to a distribution center in New Jersey. "There was one problem with these particular trailers, however: The Postal Service had no idea where they were, according to the agency's inspector general, or if it ever even received them from the leasing company," explained Government Executive. It continued: The Postal Service identified the problem during a 2011 initiative to reduce its trailer fleet by 35 percent. While conducting a leased trailer inventory, the New Jersey plant realized it had a problem. "Unfortunately," the IG wrote, "they could not account for the 35 leased trailers. They were initially determined to be missing and after an extensive search for these trailers, they were subsequently classified as lost."

[Reuters] Special Report: The billion-dollar fall of the house of Espirito Santo - ( U.S. stocks were poised for the biggest monthly gain since February amid improving economic data and speculation central banks will continue to spur growth. Benchmark indexes were little changed today. The Standard & Poor’s 500 Index has added 3.6 percent in this month, poised for its best August performance since 2000. The benchmark gauge rose less than 0.2 percent to 2,000.26 as of 1:37 p.m. in New York today. Volume was 38 percent below the 30-day average at this time of day. Economic reports showed consumer confidence unexpectedly rose in August, while consumer spending dropped in July for the first time in six months. Euro-area inflation slowed this month to the weakest rate since 2009, increasing pressure on the European Central Bank to add stimulus. American equity markets will be closed on Sept. 1 for the Labor Day holiday. In Ukraine, insurgents made more gains as Russia dismissed NATO allegations of its involvement.

Yellen Assets Grow With Fed Colleagues as Financial Markets Rise - ( Federal Reserve officials benefited from gains in asset prices that have boosted the wealth of millions of other Americans, financial disclosure reports show. Fed Chair Janet Yellen’s assets were valued at $5.3 million to $14.1 million last year compared with a range of $4.8 million to $13.2 million in 2012, according to financial disclosure documents released today. The assets are listed in ranges, so determining a precise valuation isn’t possible from the documents. The Fed is winding down the most aggressive U.S. monetary stimulus in history, which has benefited stock and bond markets over the past several years. The Standard & Poor’s 500 Index rose about 30 percent in 2013 and is up 8 percent so far this year. The $42.8 trillion global bond market lost 0.3 percent last year, according to the Bank of America Merrill Lynch Global Broad Market Index.

LA mayor plans one of the highest minimum wage rates - ( Los Angeles may soon be implementing one of the highest minimum wages in the country, at least if the city's mayor has his way. The Los Angeles Times reports that Mayor Eric Garcetti is expected to announce on Labor Day a three-year plan to implement a $13.25 minimum hourly wage. That dollar figure would receive annual inflation-based increases, the paper reported, citing businesses and local government officials briefed on the proposal. The plan has faced a "cool reception" from many major business groups worried about costs, according to the Times. Some union leaders, meanwhile, are reportedly unhappy because the plan does not start at a previously stated labor goal of $15 per hour. A spokesman for the mayor would not confirm the plan, the L.A. Times reported, but acknowledged that Garcetti had met with leaders across the city to "discuss ways to help L.A. families and our economy thrive."

JPMorgan Sees ‘Lehman Moment’ for Russia If Ukraine Deteriorates - ( Russia’s equity markets may face a “Lehman moment” if the Ukraine conflict deteriorates further, according to Alexander Kantarovich, head of research for JPMorgan Chase & Co. in Moscow. “With the significant deterioration in the Ukrainian situation, markets may treat this as a Lehman-style shock,” Kantarovich wrote in an e-mailed report today. “Revisiting the post-Lehman lows would imply downside of 50 percent from an index perspective.” Russia’s ruble-denominated Micex Index has fallen 6.6 percent this year. The stock gauge posted the worst monthly drop in July since 2012 as the U.S. and the European Union escalated sanctions targeting Russia’s $2 trillion economy after the downing of a passenger jet on July 17 over Ukrainian territory controlled by pro-Russian insurgents.

Monday, September 15, 2014

Tuesday September 16 Housing and Economic stories

This Is An Actual Conversation With A Car Dealer — And It Shows How The Industry Is Juicing Sales – ( In Thursday's note, Jonas relays a recent conversation with his uncle "Chuck," a Chevy dealer in Canton, Ohio, which shows that this trend toward ever-lengthening hasn't slowed, but has in fact accelerated through the summer. Here's what "Chuck" had to say:
Jonas: How are August sales going so far?
Chuck: We’re holding our own. Nothing Earth-shattering. We’re pushing hard for a big, strong Labor Day weekend finish. The month hasn’t been as good as we hoped, but it could have been worse.
Jonas: How’s the incentive environment?
Chuck: GM brought back 0% for 72 on the trucks and selected models, so that was a Godsend to us. It’s not uncommon anymore to do 75- to 78-month loans. It used to be that 60 months was the norm. Then it went to 66, and now it’s over 70.
Jonas: Are you saying >72-month loans are normal?
Chuck: Absolutely. People don’t seem to care anymore. It’s all about the monthly payment. Folks just want a car, have a monthly budget and they say: "Just tell me how I can fit this into my monthly budget." They don’t care as much if they still have half the loan balance left after five years. Now we do get people who we put into 75-month loans from four or five years ago that are coming back today asking us: 'How can I get out of this loan?' ... but that’s a different story.

Deeper Argentine Default Pain Looms as Cash Concerns Grow - ( When Argentina defaulted last month, it was a long-standing legal dispute that tripped the government up, not a shortage of cash. Now, though, as the nation sinks deeper into recession, Bank of America Corp. and Jefferies Group LLC are warning the money could soon start running out too. The distinction between the two events is crucial for bondholders. It’s one thing for an issuer to get entangled in a legal squabble that temporarily blocks debt payments. It’s another thing to not have the cash. While Argentina’s benchmark bonds traded yesterday at 79.9 cents on the dollar, four cents above their five-year average, Jefferies estimates they could plunge to 60 cents if the default morphs into a capacity-to-pay problem.

"The Buyback Party Is Over" - Albert Edwards Warns The "Market Is Now Running On Fumes" - (  "two landmark firsts have occurred only recently, with the S&P500 breaking above 2,000 and the 10y bund yield breaking below 1%. Our Ice Age thesis has long called for sub-1% bond yields and I see this extending to the US and UK in due course. It is the equity markets where I have been consistently surprised. QE has been an essential driver for the equity market, providing the fuel for the heavy corporate bond issuance being used for share buybacks. Companies themselves have been the only substantive buyers of equity, but the most recent data suggests that this party is over and as profits also stall out, the equity market is now running on fumes." - Albert Edwards

Argentine Workers in National Strike as Economic Woes Mount - ( Argentine labor unions are staging a second national strike in less than five months as July’s bond default threatens to fuel inflation and undermine growth. Truckers, train conductors, port workers and waiters walked off their jobs today in a 24-hour strike to demand higher wages and in protest at dismissals. While strikers blocked some of the main entrances to Buenos Aires, most bus and metro services worked as normal, according to TV channel TN. “There’s a great desire to take part and show the government that people are fed up, tired and seeking answers to these demands that haven’t been met,” Hugo Moyano, secretary general of the General Workers Confederation and a former government ally, told reporters yesterday.

New FICO criteria could help borrowers - ( The nation's dominant credit-scoring system is being revised in a way that could save consumers nationwide billions of dollars, especially in qualifying for mortgages, auto loans and credit cards at lower interest rates. The changes to FICO criteria are aimed at reducing the negative effect of overdue medical bills and at removing the penalties to consumers who pay off debts that had been assigned to collection agencies. The revisions, to take effect this fall, will alter the formulas used to generate the credit grades used in more than 90% of the decisions that lenders make about how much consumers can borrow and at what interest rates. The scores also are used by employers and landlords. Improved scores could make it easier for millions of Americans with past credit blemishes to get loans or to get them at lower rates.