Tuesday, September 30, 2014

Wednesday October 1 Housing and Economic stories

Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market - (www.bloomberg.com) Beneath the U.S. stock market’s record-setting gains, trouble is stirring. About 47 percent of stocks in the Nasdaq Composite (CCMP)Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index (SPX), which has closed at new highs 33 times in 2014 and where less than 6 percent of companies are in bear markets, data compiled by Bloomberg show. The divergence shows the appetite for risk is narrowing as the Federal Reserve reins in economic stimulus after a five-year rally that added almost $16 trillion to equity values. It’s been three years since investors saw a 10 percent decline in the S&P 500 and they’re starting to avoid companies that will suffer the most when the market stumbles, said Skip Aylesworth, a portfolio manager for Hennessy Funds in Boston.

Calpers to Exit Hedge Funds, Divest $4 Billion Stake - (www.bloomberg.com) The California Public Employees’ Retirement System plans to divest the entire $4 billion that it has with hedge funds, saying they’re too expensive and complex. The decision to eliminate 24 hedge funds and six hedge fund-of-funds, isn’t related to the performance of the program, said Ted Eliopoulos, the interim chief investment officer. The board of the $298 billion pension, known as Calpers, hasn’t decided where to invest the money after the pullout, which will take about a year, he said. “We concluded that we would eliminate the hedge fund program in order to reduce the complexity, reduce the costs in the program, particularly in relation to our view that given the scale of Calpers, we would not be able to scale a hedge fund program to a size that would really move the needle,” Eliopoulos said today in an interview.

State Department orders 5,000 Body Bags and 160,000 hazmat suits for African Ebola outbreak - (www.dailymail.uk.co)  The U.S. Agency for International Development ordered 5,000 body bags from a Florida company last month as part of its planned response to an outbreak of the Ebola virus in western Africa. And as President Obama prepares to enlarge America's aid to affected countries, a company that makes protective clothing says the State Department, which oversees USAID, has invited bids for 160,000 hazmat suits. The body-bag purchase came on August 19, just after the World Health Organization said the epidemic had killed 1,000 people. That death toll is now greater than 2,400. The size of the contracts indicates how seriously governments are taking the threat, especially considering that all 5,000 body bags were destined only for Liberia – one of three countries whose citizens have been hammered with new disease cases and paralyzed with fear. And the purchase says nothing about what resources might be coming as part of other nations' contributions. 

Election Throws Sweden Into Turmoil as Nationalists Advance - (www.bloomberg.com) Sweden’s election threw the nation’s political establishment into turmoil as backing for the anti-immigration Sweden Democrats more than doubled, leaving the largest Nordic economy facing a hung parliament. The three-party Social Democratic opposition led by Stefan Loefvenwon 43.7 percent, versus 39.3 percent for the four-party government of Prime MinisterFredrik Reinfeldt, with all the votes counted. The Sweden Democrats garnered 12.9 percent to become the third largest party. The result, which sent the krona lower, marks an end to eight years of rule by Reinfeldt’s conservative-led coalition, which delivered successive rounds of tax cuts without adding to Sweden’s debt. The premier said he will hand in his resignation today as the responsibility of forming a new government falls to the Social Democrats, which won the most votes.

[Bloomberg] Emerging Market Stocks Extend Rout With Currencies; Ruble Slides – (www.bloomberg.com) Emerging-market stocks fell for an eighth day and currencies slid on speculation the U.S. is moving closer to raising interest rates and on signs China’s economy is slowing. Russia’s ruble weakened to a record for a third day. The MSCI Emerging Markets Index dropped 0.5 percent to 1,055.78, posting the longest rout since a 10-day loss in November. Russia’s Micex Index slid 0.3 percent, while stock markets in the Czech Republic and Saudi Arabia lost at least 0.7 percent. Brazil’s Ibovespa rallied following the worst weekly drop since May 2012. Data on Chinese industrial production and retail sales over the weekend missed estimates, underscoring the risks of a deeper slowdown. Some of the factors that becalmed developed nations are raising risks for emerging markets, the Bank for International Settlements said. 

Monday, September 29, 2014

Tuesday September 30 Housing and Economic stories

Faber's Doomsday money strategy: 'Only lose 50%'  - (finance.yahoo.com) Marc Faber famously predicts that U.S. stocks will lose 30 percent of their value-a prognostication, needless to say, that has not proven particularly prescient over the years. Still, the author of the Gloom, Boom & Doom report continues to see bubbles everywhere he looks, especially in U.S. equities. Given his near-apocalyptic outlook, it's unsurprising that Faber's greatest focus is on avoiding losses. But what's incredible is the degree of portfolio destruction he's willing to tolerate. "I hope that when the collapse happens, I'm only going to lose 50 percent of my money," Faber said Thursday on CNBC's " Futures Now ."

China Lender Faces $650 Million of Defaults From Shadow Banking  - (www.bloomberg.com) A Chinese bank was saddled with $650 million of defaults from an off-balance-sheet lending arrangement that channeled money to one of its shareholders and an affiliate, according to a state media report. Evergrowing Bank Co. in Shandong province repaid 3.7 billion yuan ($600 million) of principal and 300 million yuan of interest on Aug. 29 as guarantor for the borrowing, the People’s Daily said on its website today. Three calls to the lender for comment went unanswered. Intricate structures for some off-balance-sheet lending by China’s banks make it harder for investors to assess risks to the financial system after an explosion in shadow banking. In some cases, banks have channeled money to companies through trusts or brokerages to bypass government limits on lending and requirements relating to provisions and capital.

Elon Musk is building batteries in a desert when no one is buying - (finance.yahoo.com)  Tesla's planned 5-million-square-foot ‘gigafactory' wouldn't just be the biggest battery factory in the world. It would be one of the biggest factories in the world, period. But hours before CEO Elon Musk took the podium last week to tout the $5 billion facility came August sales numbers for electric vehicles and a spate of news stories about how U.S. interest for electric cars has stalled. So what gives? Why would Tesla build capacity for half a million car batteries a year if no one is buying? Four charts below tell the story. First the bad news. August brought another month of electric-car sales that came up short of previous highs. Interest isn't falling, but at four percent market share for combined sales of hybrids and plug-ins, people aren't exactly clamoring for them. The dark blue shows hybrids, the light blue shows anything with a plug; stack them together and you've got what's known as the electrified-vehicles market.

Venezuela Threatens Harvard Professor for Default Comment - (www.bloomberg.com) Venezuelan President Nicolas Maduro instructed the attorney general and public prosecutor to take “actions” against Harvard Professor Ricardo Hausmann, saying the economist sought to destabilize the country by suggesting the government default on its debt. Maduro lashed out at Hausmann during a televised address last night, calling him a “financial hitman” and “outlaw” who forms part of a campaign “that has been initiated around the world against Venezuela.” He didn’t specify what actions he had asked the attorney general and prosecutor to take.

Obama losing the confidence of key parts of the coalition that elected him - (www.washingtonpost.com) Kimberly Cole was part of the coalition that voted in 2008 to make Barack Obama the 44th president and gave him another four years in 2012 to deliver on his promises of hope and change. Now, the 36-year-old mother of three young children in Valencia, Calif., is among the majority of Americans who have lost confidence in Obama’s leadership and the job he is doing as president. “He’s been faced with a lot of challenges, and he’s lost his way,” Cole said in an interview. She worries that Obama lacks the resolve needed at a time when things at home and abroad are looking scarier. On the other side of the country, Karlene Richardson, 44, once counted herself a “very strong supporter” of the president. But now she feels much the same as Cole does.

Sunday, September 28, 2014

Monday September 29 Housing and Economic stories

Foreclosure activity reverses course, rising again - (www.cnbc.com) After falling for four years straight, the number of U.S. properties scheduled for foreclosure auction in August was higher than it was a year ago, according to a new report from RealtyTrac, a foreclosure sales and analytics company. The rise was very small, just one percent, but it was, nonetheless, a warning that the foreclosure crisis is not entirely over. "The messy business of cleaning up the distress lingering from the housing bust continues in many markets," said Daren Blomquist, vice president at RealtyTrac. "The annual increase in foreclosure auctions — the first since the robo-signing controversy rocked the foreclosure industry back in late 2010 — indicates mortgage servicers are finally adjusting to the new paradigms for proper foreclosure that have been implemented in many states, whether by legislation or litigation or both."

Dem congressmen's hypocrisy on minimum wage – (what-is-is.blogspot.com) Seldom do I quote the far-right Daily Caller, much less agree with it, but never say never. (HT: AL).  I tells it like it is, and lets the chips fall where they may. Check it [emphasis mine]: According to a new study by the Employment Policies Institute (EPI), only four percent of the 210 lawmakers who pledged their allegiance to a bill raising the minimum wage pay their interns. The Fair Minimum Wage Act would increase the federal minimum wage from $7.25 an hour to $10.10 an hour. EPI found that 96 percent of its House and Senate supporters give their interns a minimum wage of zero. For shame, my liberal comrades!  Seriously though, I've written before about the institutional elitism of unpaid professional internships. There ought to be a law against them, except in very special circumstances.  If something is worth doing, it's worth paying for; if it's worth paying for, then unpaid interns shouldn't be allowed to do it. They displace people who are looking for jobs but can't afford to work for free.  

Santander weighs as European shares fall for fourth session - (www.reuters.com) Shares in Santander fell 1.7 percent after Emilio Botin, who transformed the firm from a small domestic lender into the euro zone's biggest bank, died of a heart attack on Tuesday night. The stock knocked nearly 3 points off the Euro STOXX 50 index of euro zone blue chips, which was down 13.01 points, or 0.4 percent, at 3,232.42 points at 0751 GMT. "He was perceived as the man who built Santander into a global bank," Javier Bernat Valenzuela, an analyst at Beka Finance in Madrid, said. "He has been the person who has looked after the bank for the last 30 years but you have to realise there will not be significant changes because the bank is pretty well structured."

Struggling Homeowners Are Shouldering The Responsibility Of U.S. Deficit - (www.mfi-miami.com) No Fannie/Freddie Mortgage Write-Downs Means More Cash For Uncle Sam. Since the housing crisis began in 2007, the major banks and the major servicers have paid nearly $130 Billion in fines and court settlements to settle mortgage fraud issues with Fannie Mae and Freddie Mac. These settlements have brought Fannie Mae and Freddie Mac out of insolvency and on the path to profitability with a projected profit of $180 billion for 2014 with a projected profit of $190 Billion to $250 Billion in 2015.
Unfortunately, the likelihood of underwater homeowners receiving any type of a “thanks for bailing us out” gift from Fannie Mae or Freddie Mac in the form of a principal write downs have yet to materialize. Advocacy groups had hoped that principal write-downs would come after former Democratic Congressman, Mel Watt took the helm of the Federal Housing Finance Authority, the government agency that oversees Fannie Mae and Freddie Mac,

Exclusive: Japan, U.S. discussing offensive military capability for Tokyo - Japan officials - (www.reuters.com)  Japan and the United States are exploring the possibility of Tokyo acquiring offensive weapons that would allow Japan to project power far beyond its borders, Japanese officials said, a move that would likely infuriate China. While Japan's intensifying rivalry with China dominates the headlines, Tokyo's focus would be the ability to take out North Korean missile bases, said three Japanese officials involved in the process. They said Tokyo was holding the informal, previously undisclosed talks with Washington about capabilities that would mark an enhancement of military might for a country that has not fired a shot in anger since its defeat in World War Two. The talks on what Japan regards as a "strike capability" are preliminary and do not cover specific hardware at this stage, the Japanese officials told Reuters.

Thursday, September 25, 2014

Friday September 26 Housing and Economic stories

Albania Central Bank Governor Arrested Over Theft Of $7 Million From Bank Vaults
- (www.zerohedge.com) As it turns out, since there is a central bank involved, there is once again more than meets the eye, and the story has since mutated into something far more grotesque than even we could imagine, with news coming out late last week and over the weekend that not only was the theft by "two employees" a misdirection, but that the guilty party was none other than the Albanian version of Janet Yellen, the governor of the central bank himself Ardian Fullani. From Reuters: Albania's central bank governor Ardian Fullani was arrested on Friday evening in his office on charges of abuse of office over the theft of 713 million lek (6.63 million US dollar) from the bank's vaults, the prosecutor's office told Reuters. Fullani had refused to step down despite protests by citizens who started a petition to demand his dismissal. He had won a confidence vote in the supervisory board by a landslide. Fullani is the 17th bank employee to be arrested in the case.

Draghi Plea for ABS Support Rebuffed by France, Germany - (www.bloomberg.com)  Mario Draghi asked European governments to help him help them. The answer so far is “no.” France and Germany, the euro area’s two largest economies, will say they’re not interested in providing state guarantees for the European Central Bank president’s asset-purchase program announced last week, according to a draft document obtained by Bloomberg News. Draghi asked governments to guarantee some elements of asset-backed securities, bundled loans that the ECB plans to purchase to unlock funding in the region’s stalling economy. After rolling out interest-rate cuts and long-term loans to banks, the ECB is now turning up the pressure on political leaders to put their own money on the table. “Some actors have called for a public intervention, to facilitate the development of the securitization market, notably to improve the economics of securitization,” the French and German governments wrote in a paper that may be presented at a meeting of the region’s finance ministers in Milan this week. “An intervention in the form of a public guarantee would be problematic.” The German and French finance ministries declined to comment on the subject of guarantees today.

The American family makes $200 more a year than it did in 1989 - (www.marketwatch.comAs of a year ago, typical U.S. households still hadn’t recovered all of the wealth they lost in the Great Recession of 2008-09, according to the latest Survey of Consumer Finances released by the Federal Reserve on Thursday. Median net worth fell 2% (inflation-adjusted) between 2010 and 2013 to $81,200 per family, down about 40% from the $135,400 they had in 2007, just before home prices and stock prices plunged, the Fed reported. (The median means that half of families had more wealth, and half had less. Net worth is the value of all assets minus the value of all liabilities or debts.). The Survey of Consumer Finances is considered one of the most comprehensive studies on income, wealth and debt. Unfortunately, it’s only produced every third year, and it’s published about 18 months after the survey. A lot can change in that 18 months, including a 14% increase in home prices and a 30% gain in the stock market.

"Why This Stock Market Will Never Go Down" - (www.zerohedge.com) Presenting: "Why this stock market will never go down" which contains such stunning pearls of financial insight as the following: Everyone believes the U.S. stock market has reached a permanently high plateau. Everyone, that is, but the bears. Last week’s Investors Intelligence survey showed bearish sentiment at its lowest since 1987 (13.3%). In fact, short-sellers have nearly disappeared along with the few remaining bears. In addition, the VIX is at historic lows (near 12), which reflects investor complacency. Put another way, almost no one believes this market will go down. Wait, "permanently high plateau"? When was the last time we heard that line. Oh wait, nevermind. That said, the author does point out the clear inherent falacy in his premise, namely that there no longer is any retail participation in a market which everyone realizes is too rigged, too manipulated and too broken to hope to even break even: Ironically, retail investors are not as gung-ho about the market as in the past. Viewership of financial television programs is at 20-year lows, especially in the coveted 25-to-54 age group. It’s a sign that even as the market climbs higher, interest in the stock market is falling along with volatility.

Consumer Credit in U.S. Surges on More Loans for Automobiles - (www.bloomberg.com) Consumer borrowing in the U.S. rose more than forecast in July as non-revolving loans including those for cars climbed by the most in three years. The $26 billion increase in credit and exceeded the highest forecast in a Bloomberg survey and followed an $18.8 billion advance in June that was more than previously estimated, a report from the Federal Reserve in Washington showed today. Non-revolving loans, which include borrowing for autos and college tuition, climbed $20.6 billion, the biggest gain since July 2011. Credit-card lending rose for a fifth straight month. A stronger job market and rising home values are giving households the confidence to take on debt to buy big-ticket items such as motor vehicles. Banks are also becoming more willing to lend, which could encourage more consumers to boost their spending, which makes up the biggest part of the economy.