Thursday, June 22, 2017

Friday June 23 2017 Housing and Economic stories

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Illinois State Official: "We Are In Massive Crisis Mode, This Is Not A False Alarm" - ( Last week we reported that as Illinois, a state which now faces over $15 billion in backlogged bills, struggles over the next two weeks to somehow come up with its first budget in three years ahead of a June 30 fiscal year end, and faces an imminent ratings downgrade to junk - the first ever in US state history - traders finally puked, sending the yield on its bonds surging after a judge ruled at the start of the month that the state is violating consent decrees and previous orders, and instructed the state to achieve "substantial compliance with consent decrees", further pressuring its financial situation. In a last ditch attempt to resolve the ongoing budget impasse and prevent a potential crisis, which may culminate with an eventual default by the distressed state, yesterday the WSJ reported that Illinois Gov. Rauner ordered lawmakers to return for a special session this week, but the two sides still seem far apart. Republican Gov. Bruce Rauner ordered the special session starting Monday, as the backlog of unpaid bills reaches $15.1 billion.

San Francisco Bay Area Sheds Jobs and Workers - ( Commercial and residential real estate bubbles choke the economy. The upper bounds of hype and craziness have been reached. The San Francisco Bay Area has seen an astounding jobs boom since the Great Recession. The tsunami of global liquidity that washed over it after the Great Recession, central-bank QE and zero-interest-rate policies that sent investors chasing blindly after risk, a blistering no-holds-barred startup bubble with the craziest valuations, one of the greatest stock market bubbles ever – whatever caused the boom, it created one of the craziest housing bubbles ever, a restaurant scene to dream of, traffic jams to have nightmares over, and hundreds of thousands of jobs. But it’s over.

Amazon-Whole Foods Deal Is Bad News For Store Cashiers And The Fight For $15 Minimum Wage - ( Among the losers will be traditional neighborhood stores, which won't be able to compete with Amazon's razor thin operating margins -- and minimum wage employees like cashiers, as Amazon's technology will make them dispensable and speed  up a trend already underway in traditional retail chains...and in the process, make the $15 minimum wage irrelevant.... ... other store chains will also have to do away with cashiers to keep up with Amazon, accelerating and broadening a trend already underway in the retail industry. Wal-Mart and Target have been using technology to replace labor that is usually paid the minimum wage.

Small and midsized banks could get regulatory relief from Senate. Wall Street? Probably not – ( One of the key targets of the House bill and the Treasury report is the Consumer Financial Protection Bureau, which would have its authority gutted. The changes include making its director subject to removal by the president for any reason, eliminating the independent funding stream so Congress could reduce its budget, and stripping the agency of its ability to send supervisors into banks to make sure they are complying with consumer protection laws. For [Sen. Sherrod] Brown and Senate Democrats, changes like that amount to a poison pill for any legislation.

It's a 'scary' time with a global crisis on the way, LVMH CEO says - ( A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as "scary". "For the economic climate, the present situation is...mid-term scary," Bernard Arnault told CNBC Thursday. "I don't think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode." Arnault, who is responsible for the world's largest luxury goods company, couldn't say whether the crash would be imminent or within the next few years, but he insisted that almost a decade on from the global financial crisis of 2008, one was due.

Wednesday, June 21, 2017

Thursday June 22 2017 Housing and Economic stories

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GM Extends Plant Shutdowns As Toxic Trifecta For Auto Loans Fuels Carmageddon – ( Here we go again... In yet another unsurprising headline, The Wall Street Journal reports that GM will extend the typical summer shutdown at certain U.S. factories to deal with slumping sales and bloated inventory, a sign the industry’s hot streak is grinding to a halt. The No. 1 U.S. auto maker in terms of sales will idle its Chevrolet Malibu factory near Kansas City for five weeks starting in late June, Vicky Hale, president of the United Auto Workers Local 31, said. Job cuts will be needed if GM is forced to slow assembly-line speeds when those workers return. Additional downtime is also slated in Lordstown, Ohio, a small-car factory already stung by deep layoffs related to a pullback in demand for passenger cars. A GM spokesman declined to comment on specific plans. GM enters the summer with a glut of unsold inventory after running production lines at relatively high rates to prepare for factory downtime related to plant upgrades. estimates GM’s production increased 2.9% over the first four months of 2017, even as the broader industry pulled back.

Used Vehicle Trade-in Values Sink, Hit New Vehicle Sales - ( More #Carmageddon data – and its impact. This is just relentless: Wholesale prices of used vehicles up to eight years old going through auctions across the US dropped another 1.5% in April from the prior month. It pushed the seasonally adjusted Used Vehicle Price Index by J.D. Power Valuation Services (formerly known as NADA Used Car Guide) down to 109.9. The 10th month in a row of declines. The index is down 7.1% year-over-year and down over 13% from its peak in mid-2014. It’s at the lowest level since September 2010, when prices were still spiking from the cash-for-clunkers program which had eliminated a whole generation of often perfectly good cars. In that sense, values are just now beginning to normalize (chart by J.D. Power Valuation Services):

Low income families forced to walk 'relentless financial tightrope' (UK) - ( Low-income families are going without beds, cookers, meals, new clothes and other essential items as they struggle to cope with huge debts run up to pay domestic bills, according to a survey highlighting the cost-of-living crisis experienced by the UK's poorest households. ... The pressure of coping with low income and debt frequently triggered mental illness or exacerbated existing conditions, with more than a third of clients reporting that they had considered suicide and three-quarters visiting a GP for debt-related problems. More than half were subsequently prescribed medication or therapy. ... Experts said the survey highlighted the extreme hardship faced by the "new destitute" -- people on low incomes who might in the past have been able to rely on a welfare safety net to help them through financial shocks but who now were forced to go into debt to survive, leaving them struggling to afford even the basics.

Greeks Promised Economic Boost Despair of Seeing Debt Deal - ( Across the country in places like Corinth, an industrial hub about 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future. In the meantime, as the ECB's stimulus measures -- including its asset-purchase program -- buoy the rest of the euro-area economy, Greece's output has been stagnant, leaving its people the most pessimistic in the region. Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That's because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and International Monetary Fund.

Qatar Banks to Boost Deposit Rates to Attract Dollars - ( Some Qatari banks are boosting interest rates on dollar deposits to shore up liquidity as a Saudi-led campaign to isolate the gas-rich Arab state intensifies, people familiar with the matter said. The lenders are offering a premium of as much as 100 basis points over the London interbank offered rate to attract dollars from regional banks, two of the people said, asking not to be named because the matter is sensitive. That compares with rates of 20 basis points over Libor before the feud started on June 5. Some of the banks are dealing with regional lenders directly instead of using brokers, which allows them to determine interest rates depending on the amount being deposited, two of the people said. Qatar, one of the world’s richest countries and biggest producer of liquefied natural gas, is seeking to boost dollar supplies after Saudi Arabia, the United Arab Emirates and Bahrain cut economic and diplomatic ties with the country last week, in an unprecedented move designed to punish it for ties with Iran and Islamist groups in the region. Some banks in neighboring countries are cutting their exposure to Qatar amid concerns of a widening of the blockade, people familiar with the matter said on June 7.

Tuesday, June 20, 2017

Wednesday June 21 2017 Housing and Economic stories

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Sears Canada Hires Bankruptcy Advisory Firm - ( The shares of Toronto-based Sears Canada plunged as much as 50% early today, from very little to even less, to C$0.50 at the low point before recovering some and ending down 24% for the day at C$0.87, on its bumpy ride to zero. The company announced in its first quarter results that there are “material uncertainties” about its “ability to continue to satisfy its obligations,” that it has doubts about its ability “to continue as a going concern,” and that lenders weren’t willing to keep it afloat for the next 12 months. It further announced that it hired one of Canada’s leading bankruptcy and insolvency advisory practices – the same law firm that is representing Target Canada in its insolvency proceedings.

Axel Merk's 'Best Bubble Indicator' Is Setting Up For "Major Shock" - ( We increasingly see claims low volatility in the markets may be structural. Even as we agree that some of the analyses we see make good points, we are concerned we may be setting ourselves up for a major shock. "In my experience, complacency, with its cousin low volatility, is the best bubble indicator I am aware of. Perceived safety gets investors to pile into investments that they later regret. When it happens on a massive scale, major market distortions may be created that can lead to financial crises. And as the tech bubble that burst in 2000 shows, even if there is no systemic risk, the unwinding can be most painful to investors." Is the recent sell-off in the Nasdaq the canary in the coal mine? We think it is, but the buy-the-dip troopers may well prove us wrong. For a day. Or a week. Or longer. But maybe not. So while the banks may not need a bailout, I'm not so sure about pension funds or individual investors. Yet, "needing a bailout" and actually getting one are different stories.

Buy the FAANGS Baby! Slow Torture? - (  Here an amusing MarketWatch Opinion: Now that FAANG stocks are crashing, which are undervalued? That title, by Thomas H. Kee Jr., a former Morgan Stanley broker and founder of Stock Traders Daily, says quite a bit about market sentiment. Let’s Investigate. Central bank capital infusions dating back to 2013 are exactly what caused this asset bubble, and the liquidity injections have not stopped. This bubble will burst, but probably not today, and the recent selling in FAANG stocks does not appear to be a precursor to an impending market crash. Looking at the stocks as a group, their influence on the market is tangible, but they have very different relative valuation metrics. For example, Facebook has an immediate and relatively exceptional valuation while Amazon is at the other end, and has virtually no value at these prices.

The Mall of the Future Will Have No Stores - ( Some landlords plug empty spaces with churches, for-profit schools and random enterprises while they figure out a long-term plan. Others see a future in mixed-use real estate, converting malls into streetscapes with restaurants, offices and housing. And some are razing properties altogether and turning them into entertainment or industrial parks. Ford's 10-year lease at Fairlane Town Center [in Michigan] "brought 1,800 to 2,000 employed people to our property, people with a paycheck," said Mr. Powers. The mall, which is still anchored by Macy's , J.C. Penney and Sears, is currently 91% leased, he said, and its food operators are doing better in the daytime than they did before, as Ford workers pile in for lunch. Ford liked the mall's proximity to its main facility in Dearborn, which is being rebuilt over the next 10 years, and its wide open spaces.

U.S. Companies Look Abroad to Sell Their Debt - ( American companies sold $107.3 billion of bonds in other currencies in 2017, the most for any comparable period in a decade, according to data provider Dealogic. U.S. companies have done hefty issuance of euro-denominated debt but have also sold bonds in Canadian dollars and British pounds this year, Bank of America Merrill Lynch data show. The issuers are some of the best-known firms. General Electric Co. issued $8.7 billion worth of euro bonds last month, one of the largest sales in the market's history. And AT&T Inc. sold $7.9 billion of euro bonds last week, according to Dealogic. These so-called reverse Yankee bonds have become increasingly popular in recent years as companies look to diversify their portfolios of debt -- particularly if they have a lot of it or plan to take on a lot to do a deal. Issuance was especially strong in May. At the moment, companies are benefiting from a favorable set of market conditions, analysts say. One thing that's lubricated the euro-denominated debt market recently: The European Central Bank has continued to buy up corporate bonds as part of its stimulus policies. That has maintained a source of strong demand in the market for euro corporate bonds.

Here Are the Theories for Why Mega-Cap Tech Stocks Took a Bath - (
A Record Number of Investors Say Stocks Are Overvalued
- (
Sinking Hong Kong Dollar Has Money Managers Unworried -- for Now
- (

Monday, June 19, 2017

Tuesday June 20 2017 Housing and Economic stories

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This Toxic Trifecta for Auto Loans is Fueling #Carmageddon - ( Subprime Auto-Loan Backed Securities from 2015 on track to be Worst Ever. Institutional investors that manage other people’s money grabbed subprime auto-loan backed securities because of their slightly higher yields. These bonds are backed by subprime auto loans that have been sliced and diced and repackaged and stamped with high credit ratings. But those issued in 2015 may end up the worst performing ever in the history of auto-loan securitizations, Fitch warned. And then there are those issued in 2016. They haven’t had time to curdle. The 2015 vintage that Fitch rates is now experiencing cumulative net losses projected to reach 15%, exceeding the peak loss rates during the Financial Crisis.

Puerto Ricans Vote for U.S. Statehood with 97% of the Vote, But Turnout was a Mere 23% - ( By an overwhelming margin, Puerto Ricans Vote for Statehood. But the vote is nonbinding, and only 23% bothered to vote. “According to early results on a government website, statehood drew 97% of support with more than 90% of votes counted Sunday afternoon, but less than one in four voters participated in the plebiscite as opponents called for a boycott. Polls closed at 3 p.m. Sunday. The vote was spearheaded by the territory’s governor, Ricardo Rosselló, who has pushed for statehood as a way to help improve the island’s economy, which is weighed down by debts of more than $73 billion. In May, Mr. Rosselló declared what amounts to the largest-ever municipal bankruptcy in the U.S. that placed Puerto Rico under court protection. Congress would need to authorize a new state. Mr. Rosselló recently signed into law a measure creating a commission to press U.S. lawmakers for admission. On Sunday evening, he said he would visit Washington, D.C. to formally notify Congress and the White House of the results.

Qatar Is Running Out Of Dollars - (  "We have no dollars because there is no shipment or transportation from the United Arab Emirates. There is no stock," said a dealer at the Qatar-UAE Exchange House in Doha's City Center mall. "The shipment is blocked from the UAE." While the Saudi-led campaign to starve Qatar's citizens may end up short of the target, with both Turkey and Iran volunteering to provide needed staples to the isolated Gulf nation while local entrepreneurs have started a cow paradropping campaign to offset the decline in milk imports, a more pressing problem has emerged: Qatar's financial system is running out of dollars. As Bloomberg reports, several Qatari banks have boosted interest rates on dollar deposits to shore up liquidity as the Saudi-led campaign to isolate the gas-rich Arab state intensifies. To boost their hard currency reserves, Qatar banks are now offering a premium of as much as 100 basis points over LIBOR to attract dollars from regional banks, some 80 bps higher compared to the rate they offered prior to last week's crisis. A similar picture is visible on the 3-Month QIBOR, or Qatar Interbank Rate, which has surged to 2.3% as of Tuesday.

Subprime Auto Bonds From 2015 May End Up Worst Ever, Fitch Says - ( Subprime auto bonds issued in 2015 are by one key measure on track to become the worst performing in the history of car-loan securitizations, according to Fitch Ratings. This group of securities is experiencing cumulative net losses at a rate projected to reach 15 percent, which is higher even than for bonds in the 2007, Fitch analysts Hylton Heard and John Bella Jr. wrote in a report Thursday. "The 2015 vintage has been prone to high loss severity from a weaker wholesale market and little-to-no equity in loan contracts at default due to extended-term lending, a trend which was not as apparent in the recessionary vintages," said the analysts, referring to lenders’ stretching out repayment terms on subprime loans, sometimes to over six years, to lower borrowers’ monthly payment. That becomes riskier in the tail end of the loan, after the car has mostly depreciated and borrowers may be left owing large balances.

Bond Market Doomsayers Sound Alarm as Margin of Safety Vanishes - ( Look around the $14 trillion U.S. Treasury market, and you’d be hard-pressed to find anything to suggest investors are even remotely concerned about the possibility of a selloff.  Bond yields keep falling day after day, bullish bets have soared and volatility has all but vanished. At the same time, traders foresee inflation subdued for decades and seem to have bought into the idea the Federal Reserve will take its time to trim its crisis-era bond investments. To Binky Chadha, that’s a recipe for disaster. Chadha, the chief global strategist at Deutsche Bank’s U.S. securities unit, is part of a group of die-hard bond bears who say Treasuries have become unhinged from reality and yields have nowhere to go but up. Like many before him, he points to all the obvious signs investors seem to be ignoring: higher benchmark interest rates, wage pressures that will lead to faster inflation, worsening budget deficits that will result in more debt issuance.

Sunday, June 18, 2017

Monday June 19 2017 Housing and Economic stories

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Broadway's empty storefronts total almost 200, borough president says - ( Manhattan Borough President Gale Brewer announced Monday that her office tallied 188 vacant storefronts on the iconic thoroughfare, thanks to volunteers who helped survey storefronts along the avenue's entire span in Manhattan last month. ... Retail experts cited several factors hindering the industry: people purchasing items online rather than in brick-and-mortar shops, demographic shifts that have flooded areas with newcomers who eschew former mainstays, and a rental market in flux. "You're seeing the highest vacancy [rate] in Manhattan, at least, in history," said Scott Plasky, a retail specialist in Marcus & Millichap's Manhattan office. "They have opportunities to rent those spaces. There are tenants that want to be here: this is New York. But these guys either are unwilling or unable to lease at what the marketplace is telling them they're worth."

Albertson’s Reveals Supermarket Meltdown as Global Deep-Discounters Promise Price War in Stagnating US Market - ( Aldi’s $5 billion bet at a brutal time. Today, Albertson’s explained in an amended S-4 filing for a debt exchange offering just how tough things have gotten for traditional supermarket chains. As is so often the case, there is a private equity angle to it. Albertson’s was acquired in a 2005 LBO by a group of PE firms led by Cerberus. In January 2015, it acquired Safeway to eliminate some competition. It then wanted to sell its shares to the public. But in October 2015, as brick-and-mortar retail began to melt down, it scrapped its IPO. The filing’s most revealing data are same-store sales on a quarterly basis through Q4, 2016, comparing year-over-year sales growth at stores that have been open in the current and prior year. I added the red line to show the trend since Q3 2015:

Obamacare Death Spiral: First 2018 Coverage Map Reveals At Least 47 Counties With No Coverage - ( "This is yet another failing report card for the Exchanges. The American people have fewer insurance choices and in some counties no choice at all. CMS is working with state departments of insurance and issuers to find ways to provide relief and help restore access to healthcare plans, but our actions are by no means a long-term solution to the problems we’re seeing with the Insurance Exchanges." Earlier today the Centers for Medicare and Medicaid Services (CMS) released the first projected county-by-county map of Obamacare coverage for the 2018 plan year which depicts at least 47 counties, with 35,000 active Obamacare exchange participants, that will have no health insurance options next year.  Meanwhile, another 2.4 million people are expected to have only 1 option for coverage. Per CMS: The Centers for Medicare & Medicaid Services (CMS) is releasing a county-level map of 2018 projected Health Insurance Exchanges participation based on the known issuer participation public announcements through June 9, 2017. This map shows that insurance options on the Exchanges continue to disappear. Plan options are down from last year and, in some areas, Americans will have no coverage options on the Exchanges, based on the current data.

US Oil Production Makes Waves, Swamping OPEC  - (  It's not just the US production numbers that are making waves: It's the spike in US crude oil exports. The US exported 830,000 barrels of crude per day in March, a whopping 64.2% increase year over year. In February, it exported 1.1 million barrels per day, a nearly 200% increase year over year...[per the WSJ,] the February numbers are closer to the new norm, as it expects the US to export, on average, roughly 1 million barrels per day in 2017. This is a huge challenge for major oil producers, especially Saudi Arabia and Russia. In December 2016, OPEC and its oil-producing partners agreed to cut production by about 1.8 million barrels per day, or roughly 1.5% of global crude production at the time...

Stockman Fears Fiscal Bloodbath As "Mother Of All Debt Ceiling Crises" Looms – ( "Washington is heading for the unthinkable... And unlike the saves which were put together at the 11th hour in August 2011 and October 2015 by President Obama and Speaker Boehner, this time there will be absolute legislative paralysis." As my colleague Lee Adler has pointed out, Treasury tax collections have slowed to a crawl. Overall collections are barely even with prior year, and even withholding payments are now coming in at barely 2% on a year/year basis. That is far below the built-in spending growth rate of about 4% — and says nothing to the big increases for defense, law enforcement, border control and infrastructure being sought be the Trump White House. The four week moving average of withholding collections — about as accurate a real time measure of the US economy as exists — is running below the average wage rate gain of about 2.6% per annum. That means real wage growth is turning negative — not accelerating like the “escape velocity” narrative being peddled by Wall Street.

Thursday, June 15, 2017

Friday June 16 2017 Housing and Economic stories

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Gymboree files for Chapter 11 bankruptcy; CFO departs retailer – ( Gymboree has filed for Chapter 11 bankruptcy protection. The children's clothing retailer announced the move Monday morning, only a few weeks after it partnered with a turnaround firm, AlixPartners, to assist with its operations and then missed a June 1 debt payment. A bankruptcy filing had been seen as imminent, with S&P Global lowering its corporate credit rating on the company to "D" from "CC." San Francisco-based Gymboree also announced Monday the departure of Chief Financial Officer Andrew North, who is leaving for personal reasons.

Is the Chain-Restaurant Recession Becoming Structural? - ( A 15-month downturn, longest since 2009, and no end in sight. There’s simply no respite for chain restaurants. Industry-wide, same-store sales fell again in May. The last time, same-store sales actually rose year-over-year was in February 2016. On that basis, the chain-restaurant recession is now in its 15th month, the longest downturn since the Financial Crisis. In May, same store sales fell 1.1% year-over-year. Same-store foot traffic fell 3.0%. Food sales were down, and alcohol sales were down, according to TDn2K’s Restaurant Industry Snapshot, tracking sales at 27,000 restaurant units from 155 brands, generating about $67 billion in annual revenue. But the average amount of the check per person increased by 2%, and not because they ordered more food and booze, but because prices rose.

Coinbase Crashes As Bitcoin, Ethereum Join FANG Stocks Meltdown - ( Whether it is just a curious coincidence or not, cryptocurrencies are crashing along with FANG stocks this morning... Earlier statements about the Ethereum network running slow due to extremely heavy activity appear to have taken their toll on one major exchange... And Bitcoin is tracking FANG stocks lower (down around 13% this morning)... This is the biggest drop since January 2015. And Ethereum is down over 15%...after tagging $400 earlier last night

New economic woes put Theresa May under fresh pressure  - ( Theresa May has been hit by a series of economic blows, with consumers tightening their belts and businesses increasingly showing fears of a sharp slowdown as she attempts to cling on to power. The crucial services sector stands on the brink of a contraction, new data shows, and credit card spending has fallen for the first time in four years. High Street footfall has also gone sharply into reverse and manufacturing and construction companies in the English regions report a widespread slowdown in activity.


The Biggest Tech Stocks Come Unglued - ( Wow, did you see that? That was quick. Friday morning between 10:15 AM and 11:15 AM, the Nasdaq gallivanted around blissfully for an entire hour in record territory of around 6,340 with not a worry in sight, and then someone must have looked at the valuations or something, and it became infectious, and the sell-orders started pouring out, and by 2:48 PM, the Nasdaq hit a low for the day of 6,160, down 3.1% from peak to trough. It closed at 6,208, down 114 points, or 1.8%, its biggest daily decline so far this year. Meanwhile, the Dow rose nearly 90 points or 0.4% to 21,272. And the S&P 500 ended down a minuscule 2 points.