Monday, June 10, 2013

Tuesday June 11 Housing and Economic stories


TOP STORIES:

Killer employee under Obamacare: No. 50 or 51? - (money.cnn.com) The employer mandate under Obamacare is clear: Starting in 2014, "large employers" with 50 or more full-time employees must start providing insurance. "Small employers" near the cutoff have a name for the hire that subjects them to the employer mandate: The killer employee. Worker No. 50 is the one to watch. But many keep putting the blame on Worker No. 51."It is 50-plus employees," confirmed Joanne Peters, a spokeswoman for the U.S. Department of Health and Human Services. It's a small mistake, but widespread. In a Washington Times editorial, Sam Graves (R-Mo.), chair of the House Small Business Committee, wrote: "Businesses that cannot afford the fine won't hire a 51st employee."

NY State Court Halts Judge Shopping in RMBS Putback Cases - (www.teribuhl.com) Banks looking to judge shop in RMBS putback cases filed in New York State court are going to get shut out of the process. Apparently there are so many cases to litigate against banks, like JP Morgan and Credit Suisse selling billions of garbage mortgage securities to investors, that administrative judge Sherry Heitler has decreed all RMBS cases as of March 2013 now go to one judge. Roberta McClinton, Heitler's law clerk, confirmed this today giving the reason that similar cases need to go to one judge now because it's for `judicial economy'.

Bubblenomics is back. Markets have become completely detached from economic reality - (www.telegraph.co.uk) Make no mistake. Bubblenomics is back. Stock markets are at dotcom highs – that goes for the FTSE 250 domestic index as much as the FTSE 100 global one. House prices are rising. Yields on “junk” bonds are at record lows. Dangerous “covenant-lite” lending is enjoying a renaissance, just four years after being declared extinct. Markets are convinced interest rates will remain at 0.5pc until late 2016, even though the economy is forecast to be growing at annual rate of 2pc by the back end of next year. And a single month’s surprise fall in inflation sends sterling tumbling by a cent against the dollar, on expectations that the central bank will load up the printing presses once again. None of it makes any sense, but it is the current juncture. Short-term financial hedonism has replaced rational long-term decision making. Persistently low rates are now the markets’ status quo, and traders can only see evidence of more quantitative easing in the runes.

Gold, Silver, Massive Leverage & Super Wealthy Panicking - (www.kingworldnews.com) Given the massive contract dump that we saw a few Fridays ago, who are the likely visible victims?  The reports indicate that it was the group known as the speculative longs.  Many of these are traditional hedge funds.  Hedge funds play in these commodity markets not for taking delivery of the commodities or metals, but to simply bet on the direction against their fellow speculators.  Like the betting parlor of old, the bets can be made using extreme leverage.  No doubt, the perpetrators of the smash down made billions of dollars from those with long positions as the short selling ensued. The hedge funds are funded by the very wealthy, pension funds and endowments.  There is a small percentage of the hedge funds that do very well, but the majority lag far behind.  When billions of losses occur, the real losers are the retirees and the schools that gave them the funds in the first place.  Despite the losses, the hedge funds are recapitalized as we saw after the 2008 debacle.  Consultants have been known to give even more money to the losing funds under the guise of asset allocation and rebalancing. For the operators of the funds, there is contractual incentive is to take risk and lots of it.  For the successful fund, great fortunes have been made between the annual management fee and the carried interest on profits.  The investors in the funds are gambling, too.  The sponsors know they cannot make the actuarial defined benefit payments required in the future with traditional investing, so they believe that ‘alternative assets’ will solve their problem.  It is just desperation and hope with a fancy name.

Too-Big-To-Jail Dogs Obama's Justice Department As Government Documents Raise Questions - (www.huffingtonpost.com)  Attorney General Eric Holder told Congress in March that some banks were “too large,” impeding attempts to bring criminal prosecutions. Holder's comment is perhaps the most explicit public admission of concern by a senior Obama administration official regarding big banks. Though Holder has since attempted to walk back those comments, at the time he said that the size of large financial institutions “has an inhibiting influence -- impact on our ability to bring resolutions that I think would be more appropriate.” He further told lawmakers: “And I think that is something that we -- you all -- need to consider.” DOJ officials have previously defended the lack of criminal charges against banks suspected of wrongdoing in large part by pointing to the so-called “collateral consequences” associated with filing a criminal indictment against a leading financial institution. Two examples occurred in December, when HSBC, the U.K. banking giant, settled allegations that it violated U.S. sanctions and facilitated the movement across the U.S. financial system of tainted money by Mexican drug cartels, and UBS, the Swiss bank, settled claims it manipulated world interest rates.





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