Sunday, May 28, 2017

Monday May 29 2017 Housing and Economic stories

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Freezing State Employees' Wages Could Save Connecticut $1.5 Billion - (www.dailycaller.com) A tentative concessions deal from public employees unions in Connecticut could save the state $1.5 billion over the next two years. Concessions from public employees unions is widely viewed as a crucial step in solving the state’s projected $2.3 billion deficit in the first year of a two-year budget. The deficit is predicted to rise to $2.7 billion in the second year, according to U.S. News & World Report. The potential deal would save the state $712.6 million next year and $849.4 million the following year, totaling $1.56 billion in savings over two years, according to the Connecticut Mirror. Democratic Gov. Dannel Malloy has called for $1.59 billion in concessions in order to solve the state’s financial mess. Under the tentative deal, state employee wages would be frozen for two years, retroactively starting in 2016. In the third year of the proposal, some workers would be eligible for a $2,000 lump sum bonus, but short of a pay raise.

Used Vehicle Trade-in Values Sink, Hit New Vehicle Sales - (www.wolfstreet.com) 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): According to the report, “the used market continues to experience negative pressure from a struggling new market.”

Ford to cut North America, Asia salaried workers by 10 percent: source - (www.reuters.com) Ford Motor Co plans to shrink its salaried workforce in North America and Asia by about 10 percent as it works to boost profits and its sliding stock price, a source familiar with the plan told Reuters on Monday. A person briefed on the plan said Ford plans to offer generous early retirement incentives to reduce its salaried headcount by Oct. 1, but does not plan cuts to its hourly workforce or its production. The move could put the U.S. automaker on a collision course with President Donald Trump, who has made boosting auto employment a top priority. Ford has about 30,000 salaried workers in the United States. The cuts are part of a previously announced plan to slash costs by $3 billion, the person said, as U.S. new vehicles auto sales have shown signs of decline after seven years of consecutive growth since the end of the Great Recession.

Indian solar power prices hit record low, undercutting fossil fuels – (www.theguardian.com) Wholesale solar power prices have reached another record low in India, faster than analysts predicted and further undercutting the price of fossil fuel-generated power in the country. The tumbling price of solar energy also increases the likelihood that India will meet -- and by its own predictions, exceed -- the renewable energy targets it set at the Paris climate accords in December 2015. Analysts called the 40% price drop "world historic" and said it was driven by cheaper finance and growing investor confidence in India's pledge to dramatically increase its renewable energy capacity. It reduces the market price of solar tariffs well past the average charged by India's largest thermal coal conglomerate, currently around 3.20 rupees per kWh . Wholesale price bids for wind energy also reached a record low of 3.46 rupees in February.

Bitcoin Surge Is Driven by People Leaving Riskier Digital Currencies, Say Execs - (www.bloomberg.com) Bitcoin’s dramatic surge may be more than just a speculative frenzy. The recent rally is being driven partially by enthusiasts rotating out of riskier digital assets and into the more established cryptocurrency, according to industry executives. "A lot of the volume into bitcoin right now is actually not dollar or yen or euro into bitcoin, but is rather alt digital assets," said Peter Smith, co-founder and CEO of digital asset software platform Blockchain, at an industry conference Tuesday that brought in 2,700 people on the first day. “People do view a lot of these newer assets as more risky, and so when they make big gains there, they’re selling down those gains and rotating into bitcoin." Numerous alternative cryptocurrencies, or "altcoins" such as ripple, have emerged since bitcoin broke into public consciousness in 2013. Companies can sell new tokens through initial coin offerings, or ICOs. While the cost of one bitcoin has skyrocketed to more than $2,000 from just 8 cents in 2010, you can buy one litecoin for about $30.





Thursday, May 25, 2017

Friday May 26 2017 Housing and Economic stories

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Noble Group Halted After 32% Plunge as S&P Sees Default Risk - (www.bloomberg.com) Noble Group Ltd.’s crisis deepened after S&P Global Ratings flagged a risk of default for the commodity trader within a year, triggering a rout in the company’s shares before they were suspended in Singapore ahead of a company statement. The 2020 bonds fell to a record low.  “Noble is fighting for its life now,” said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group Ltd., who’s been covering Noble Group since 2008 and has been underweight on the bonds since 2015. “We’re not sure how long it can sustain without a white knight.”

Catalonia Threatens Spain with “Financial Bloodbath”  - (www.wolfstreet.com) On Monday El Pais published leaked excerpts from what it claims to be the Catalonian regional government’s road map to independence. The secret document includes a plan for the region to unilaterally break away from Spain should its citizens be prevented from holding a referendum on independence in the fall. It provoked a fierce backlash from Madrid. “This proposal is an unacceptable attempt to blackmail the state,” Spain’s Prime Minister Mariano Rajoy said in a hastily convened press conference. Spain’s defense minister María Dolores de Cospedal likened the plot to a coup d’état. In the meantime, Madrid continues to refuse to even entertain the idea of allowing a referendum on Catalan independence, despite the fact that in just about every survey of the last few years 80% of Catalans, including many unionists, have requested one.

Bitcoin Explodes Above $2400 After China Downgrade, Scaling Agreement Reached - (www.zerohedge.com) Following comments from DoubleLine's Jeff Gundlach tieing the surge in virtual currencies to the demise of China (right before that nation is downgraded), Bitcoin surged overnight, breaking above $2400 for the first time. It is now up over 150% year-to-date. Bitcoin is up fopr the 26th day in the last 29 sessions, doubling in price in that period... Wednesday's gain comes after a bitcoin scaling agreement was reached by the Digital Currency Group, representing 56 companies in 21 countries, at the Consensus 2017 conference in New York, which reduced some of the fears surrounding the so-called 'hard fork' in Bitcoin's code. The agreement states: "We agree to immediately support the following parallel upgrades to the bitcoin protocol, which will be deployed simultaneously and based on the original Segwit2Mb proposal:

Interest-only loans could be 'Australia's sub-prime' - (www.afr.com) High-risk mortgage loans to young families, professionals and other over-extended borrowers amounting to more than six times household incomes could wipe out 20 per cent of the major banks' equity base, institutional investment fund JCP Investment Partners has warned. In a proprietary study of the nation's record high-and-growing household debt mountain, the Melbourne-based fund said Irish-style housing losses for the bigger-than-recognised pool of riskier borrowers could wipe out half of the banks' equity capital. Interest-only loans, said JCP -- which is one of three Australian equities managers appointed by the Future Fund -- could be "Australia's sub-prime".

Brazil Selloff Resumes as Temer's Graft Defense Falls Flat - (www.bloomberg.com) Brazilian assets resumed a selloff Monday as investors fled what had been one of the most popular trades in emerging markets. The real and local stocks were among the world’s worst performers as President Michel Temer’s support deteriorated further over the weekend, days after an audio recording emerged in which he appeared to endorse illegal bribes to a disgraced lawmaker. The losses have been magnified because so many global investors had piled into Brazilian assets on bets that Temer would push through measures to shore up the country’s finances.




Wednesday, May 24, 2017

Thursday May 25 2017 Housing and Economic stories

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Subprime Liar Loans Dog Auto-Loan-Backed Securities - (www.wolfstreet.com) Santander, top subprime auto lender, verified income on only 8% of loans: Moody’s. “Liar loans” were a factor in the housing bust during the Financial Crisis that brought down the banks. Bank regulators now require lenders to verify income and employment of mortgage applicants and take other steps to make sure buyers can afford the mortgage payment. But in auto loans, no such requirement exists. So here we go again… Moody’s Investors Service analyzed $1 billion of Asset Backed Securities (ABS) backed by subprime auto loans that Santander Consumer USA Holdings, one of the largest subprime auto lenders, had issued. “Subprime” means the borrower has a credit score of 620 or below. Turns out, Santander had verified the income of the borrowers on only 8% of the subprime loans.

A Quarter Of American Adults Can't Pay All Their Monthly Bills; 44% Have Less Than $400 In Cash - (www.zerohedge.com) Not surprisingly, the highest percentage, or 92%, of those who responded they were "living comfortably" was among the group with more than $100,000 in family income. For Americans making less than $40,000 the breakdown was almost evenly split with 49% saying they are "just getting by." According to the same study, 28% of respondents said that their income in the last 12 months was less than $25,000, and 40% report that their income was less than the key $40,000 cutoff, which suggests that roughly 4 in 10 Americans are "finding it difficult to get by." ... Nearly eight years into an economic recovery, nearly half of Americans didn't have enough cash available to cover a $400 emergency. Specifically, the survey found that, in line with what the Fed had disclosed in previous years, 44% of respondents said they wouldn't be able to cover an unexpected $400 expense like a car repair or medical bill, or would have to borrow money or sell something to meet it. 

Car loans, low rates, second mortgages: all the ingredients for a new credit crunch - (www.theguardian.com) A credit crunch is brewing and when it happens, the UK is going to get hurt. That is the message emerging from senior executives in the financial services industry, who do not think Britain has changed that much since the 2008 credit disaster and the devastating crash that followed. Three developments lie at the heart of this disturbing analysis: spectacular growth in the sale of second mortgages, car loans and credit cards. ... Officials at the Bank have a growing list of concerns. Not only is there the second mortgage problem and the number of car loans: figures show consumer spending on unsecured credit has also rocketed in the last year. In March alone, the amount UK consumers owed on loans and cards grew by £1.9bn, the highest figure in 11 years.

Commodities Bust Hits Farm Lenders, Delinquencies Surge 225% - (www.wolfstreet.com) When it comes to agricultural debt, the numbers aren’t huge enough to take down the global financial system. But this shows how much pain the commodities rout is producing in the farm belt just when the farmland asset bubble that took three decades to create is deflating, and what specialized lenders and the agricultural enterprises they serve – some of them quite large – are currently struggling with in terms of delinquencies. This is what delinquencies on loans for agricultural production – not including loans for farmland, which we’ll get to in a moment – look like: From Q4 2014 to Q1 2017, delinquencies have soared by 225% to $1.4 billion, according to the Board of Governors of the Federal Reserve, which just released its report on delinquencies and charge-offs at all banks. This is the highest amount since Q1 2011, as delinquencies were falling after the Financial Crisis. That amount was first breached in Q4 2009.

American Small Business Owner Rages At Politicians: "Quit Your Job And Try The Real World"  - (www.zerohedge.com) This morning I read a stinging open letter written by a small business owner in the Land of the Free named Don Chernoff.  Chernoff imports and sells luggage, and he pulled no punches in voicing his disgust for the phony support and failed policies that constantly make his life more difficult. I’ve edited his letter for length below; the full version is available here. You all love to talk about how much you support small business; the reality is the opposite. The economy is changing rapidly and is vastly different than just a few years ago. Many of the factory jobs in this country have gone and will not return.  Computer technology and automation will soon eliminate thousands more jobs (think truck drivers, taxi drivers, office workers, etc…). Because there will be fewer middle-class jobs, many people who never considered working for themselves will be forced to become sole proprietors or open a small business. It is therefore critically important that you make it easier for these people to do so.




Tuesday, May 23, 2017

Wednesday May 24 2017 Housing and Economic stories

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The Pillage of Pemex Turns Bloody - (www.wolfstreet.com) Mexico’s state-owned oil giant, Petróleos de Mexico, AKA Pemex, has spent the last few decades being pillaged and plundered from the inside-out. The state-owned giant has been financially bled to the verge of collapse by its swollen ranks of senior managers and administrators, corrupt politicians, shady contractors, and the untouchable, unsackable leaders of the oil workers’ union. Now, Pemex is being bled dry from the outside-in. Those doing the plundering this time include armies of amateur opportunists who live close to the major pipelines that crisscross the country as well as some of Mexico’s most ruthless and organized drug gangs. Thanks to these groups’ immunity, bought with bribes and death threats, Pemex is estimated to be losing 20,000 barrels of gasoline daily, with a market value of around $4 million. That’s about $1.4 billion a year.

"This Is Probably Just The Beginning" - Chinese Banks Are In Big Trouble – (www.zerohedge.com) That's not supposed to happen... With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China's bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms' stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks' cost of borrowing beyond the rate they charge customers for loans for the first time in history.

Jared Kushner's Slumlord Empire - (www.propublica.org) Tenants in more than a dozen Baltimore-area rental complexes complain about a property owner who they say leaves their homes in disrepair, humiliates late-paying renters and often sues them when they try to move out. Few of them know that their landlord is the president's son-in-law. The Townhouse on High Seas Court in the Cove Village development, in the Baltimore suburb of Essex, was not exactly the Cape Cod retreat that its address implied: It was a small unit looking onto a parking lot, the windows of its two bedrooms so high and narrow that a child would have had to stand on a chair to see out of them. But to Kamiia Warren, who moved into the townhouse in 2004, it was a refuge, and a far cry from the East Baltimore neighborhood where she grew up. “I mean, there were bunny rabbits all hopping around,” she told me recently.

Commodity Traders Have a Really Big Problem - (www.bloomberg.com) Unlike the stock market in which transactions are typically based on information that's public, firms that buy and sell raw materials thrived for decades in an opaque world where their metier relied on knowledge privy only to a few. Now, technological development, expanding sources of data, more sophisticated producers and consumers as well as transparency surrounding deals are eroding their advantage. As market participants' access to information increases, the traders highlighted the need to more than simply buy and sell commodities as profits from arbitrage -- or gains made from a differential in prices -- shrinks. That means getting involved in the supply chain by potentially buying into infrastructure that's key to the production and distribution of raw materials, and also providing financing for the development of such assets.

Illinois Democrats In Senate Pass 33% Hike Of Personal And Corporate Income Taxes - (www.zerohedge.com) Senate Democrats in Illinois, with a final vote of 32-26, have just passed a new budget proposal that includes a massive personal and corporate income tax hike and an expansion of the state's sales tax, after saying they are no longer willing to wait for a broader deal with Republicans. As the Chicago Tribune noted earlier this morning, the Democrats' budget proposal includes a ~33% hike in both the the personal and corporate income tax rates and an expansion of the state's share of sales tax revenue.  In all, the package would cost Illinois taxpayers an incremental $5 billion. Democrats spent the weekend tweaking the spending plan, and unveiled an updated proposal late Monday. It calls for spending $37.3 billion after raising about $5 billion through the tax hikes; a floor vote is expected Tuesday, said Sen. Heather Steans, a Chicago Democrat and key budget negotiator. The blueprint relies on the passage of companion legislation that would raise the personal income tax rate from 3.75 percent to 4.95 percent, which is just below the 5 percent rate in place before Rauner took office. The corporate income tax rate would be hiked from 5.25 percent to 7 percent. Meanwhile, the state's share of the 6.25 percent sales tax would be extended to various services not currently covered, such as dry cleaning. The proposal also calls for ending three corporate tax breaks, including requiring companies that drill on the outer continental shelf and do business in Illinois to pay income taxes.




Sunday, May 21, 2017

Monday May 22 2017 Housing and Economic stories

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Global property bubble is ready to pop - (www.fool.co.uk) Ever since interest rates were slashed to near zero in the wake of the financial crisis, the world has gone property mad. Residential house prices from Abu Dhabi to Zurich have spiralled as hot money travelled the world looking for a home. For those who got in early it has been incredibly rewarding, even if – whisper it – stock markets have actually done far better. The global property bubble cannot blow much bigger. The best we can hope is that it deflates slowly… but it could burst. China crisis? Property is still going crazy in China, where prices have been pumped up by yet another bout of government stimulus. Guangzhou, close to Hong Kong on the Chinese mainland, leapt a whopping 36% in the past 12 months, according to Knight Frank. Prices rose around 20% in Beijing and Shanghai, as well as in Toronto, Canada. Seoul in South Korea continues to boom, as does Sydney and Stockholm, both up 10.7% over the last year. Berlin (8.7%), Melbourne (8.6%) and Vancouver (7.9%) are also performing strongly.

The Backlash to Spain’s New Property Boom Has Begun - (www.wolfstreet.com) Spain is in the grip of a property boom. Whereas the last bubble was driven largely by the rampant construction and sale of new homes, with the country at one point accounting for more housing starts than Germany, France, Britain and Italy combined, the focal point of the new boom is the smaller but fast-growing rental apartment market. Spain has traditionally been a country of home-owners, with an average ownership rate of 78.5%, 10 percentage points above the EU average. But things are changing. “The concept of owning a home in Spain was almost religious, but that’s changed for an entire generation of young people who have seen people losing their homes, (their house) prices dropping, and losing access to credit,” said Fernando Encinar, co-founder and head of research at the online real estate marketplace Idealista. “That has made renting a more attractive option, especially in big cities such as Madrid and Barcelona.”

New Theory Behind Stalled Economy: Retirees Are Hoarding Too Much Cash – (www.zerohedge.com) For years we've written about the fact that Americans, young to old, are lousy savers (see "Retirement Crisis Looms As Average U.S. Household Has Saved $2,500 For Retirement"). Of course, they have to be because how else can a mature economy continue to grow unless every single person levers every asset they own to the maximum extent possible and then spends all of that money?  Anything less would mean that all of Janet Yellen's efforts have been a colossal waste. Meanwhile, this inherent inability to save is awful news for a nation that faces a massive wave of baby boomer retirements over the next 20 years.  All that said, we were somewhat shocked to come across a report from money manager United Income which effectively argues that American retirees are saving too much money rather than too little.  To summarize the thesis, United Income argues that retirees become more conservative as they grow older which causes them to save more and allocate less to equities...which is, of course, a somewhat self-serving conclusion but never mind that.

 

Large hedge funds moved out of financial stocks in first quarter - (www.reuters.com) Several big-name hedge fund investors trimmed their stakes in financial companies in the first quarter as hopes for immediate tax cuts and loosening of regulations after President Donald Trump’s victory in November began to fade. Boston-based Adage Capital Management cut its position in Wells Fargo & Co, which has come under fire for its sales practices, by 3.9 million shares, according to regulatory filings, while John Burbank’s Passport Capital cut its stake in the company by 947,000 shares. Third Point cut its stake in JPMorgan Chase & Co by 28 percent, to 3.75 million shares, while Suvretta Capital Management sold all of its shares of Morgan Stanley, JPMorgan Chase and Citigroup Inc.

 

Behind China's Silk Road vision: cheap funds, heavy debt, growing risk - (www.reuters.com) Behind China's trillion-dollar effort to build a modern Silk Road is a lending program of unprecedented breadth, one that will help build ports, roads and rail links, but could also leave some banks and many countries with quite a hangover. At the heart of that splurge are China's two policy lenders, China Development Bank (CDB) and Export-Import Bank of China (EXIM), which have between them already provided $200 billion in loans throughout Asia, the Middle East and even Africa. They are due to extend at least $55 billion more, according to announcements made during a lavish two-day Belt and Road summit in Beijing, which ends on Monday. Thanks to cheaper funding, CDB and EXIM have helped to unblock what Chinese president Xi Jinping on Sunday called a 'prominent challenge' to the Silk Road: the funding bottleneck.



Thursday, May 18, 2017

Friday May 19 2017 Housing and Economic stories

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#Carmageddon Now: Ford to Slash 10% of its Workforce - (www.wolfstreet.com) Ford’s shares have gotten hammered as it struggles with plunging car sales, and in April even with weak truck sales, mired as automakers are in the US “car recession.” At $10.94 at the close on Monday, shares are down 37% from their high in July 2014, when Mark Fields became CEO. Shares hit a new 52-week low on Friday, despite two consecutive years of record earnings. But Ford announced that profits would decline in 2017, and at a “strategy session” last week, Ford’s frustrated directors put the heat on Fields. After announcing in March that Ford would create 700 jobs in Michigan, more or less an optical illusion as a nod to Trump, it is now time to throw Wall Street a bone. A huge bone. Ford is considering cutting 10% of its global workforce of around 200,000 employees (about half of them in the US), “according to people briefed on the plan,” cited by the Wall Street Journal.

Oregon Officials Threaten To Seize 2,000 Acre Organic Farm, Spray It With Roundup – (www.zerohedge.com) Sherman County Oregon believes the 2,000 acre Azure Farms is not doing enough to control Canada Thistle. To remedy the alleged problem, the county proposes seizing the farm and spraying everything with Roundup and other herbicides. Azure Farms is certified organic. Of course, organic farms cannot by definition use herbicides, so the farm would be forced out of business by the county government. Adding insult to injury, the county would place a lien on the property forcing it to pay for the herbicides.

Rue21 files for bankruptcy as retail woes drag on - (www.cnn.com) The chain of teen clothing stores says it has filed for Chapter 11 bankruptcy protection and is closing about a third of its 1,200 locations... In a press release, Rue21 said it is streamlining to "better align the size of its footprint with market realities, and focus on its hundreds of highly performing locations." The company said it may consider closing even more stories. Rue21 is trying to secure $175 million in financing to stay afloat, subject to court approval.

Obamacare Will Soon Be Zombiecare - (www.mauldineconomics.com) Insurers need months to reprogram systems, train staff, and build provider networks. Congress can't dawdle into summer and then unveil something entirely new. If they do, the 2018 rollout will be a catastrophe. So insurers are doing the rational thing. They're either backing out or raising rates to compensate for all the unknown risks they will be taking. Early signs are ugly: Maryland's top insurer, CareFirst Blue Cross, has requested an average 50% rate increase for 2018; In Virginia, Anthem Blue Cross is asking for 37.7% higher rates; Aetna said it will be pulling out of all Obamacare exchanges nationwide, [and] Iowa is down to only one carrier, Medica, which only covers a few counties.

Debt Island: How $74 Billion in Bonds Bankrupted Puerto Rico - (www.bloomberg.com) San Juan’s gleaming commuter train seemed like a coup -- the kind of big-ticket item many U.S. cities can only dream of. More than a decade on, the Tren Urbano is a monument to the folly, bloat and abuse that finally bankrupted Puerto Rico. Despite years of planning, it sells only a third of the rides it needs to, and loses roughly $50 million a year. The cost so far: $2.25 billion, $1 billion more than planned. That, in a nutshell, is Puerto Rico’s story. With Wall Street’s help, the U.S. commonwealth borrowed tens of billions in the bond markets, only to squander much of it on grand projects, government bureaucracy, everyday expenses and worse. Debts were piled on debts, even as the economy gave way.