Tuesday, April 30, 2013

Wednesday May 1 Housing and Economic stories


TOP STORIES:

Obama budget projects $943-million bailout for key housing agency - (www.chicagotribune.com) The Obama administration's proposed budget projects the  Federal Housing Administration will need a $943-million bailout this year to stabilize its shaky long-term finances. The agency, whose mortgage insurance business increased dramatically during the Great Recession, is supposed to fund itself from premiums it charges homeowners. It has never received taxpayer funds in its 79-year history. But the agency reported in November that reserves to cover losses on some of the more than $1 trillion in mortgages it insures had dropped into negative territory for the year that ended Sept. 30. With FHA facing a shortfall of $16.3 billion to cover projected losses in coming years, Obama's 2014 budget anticipates the agency's reserve fund would need $943 million this year. The FHA has permanent authority to draw the money from the Treasury and does not need congressional approval for the bailout. A final decision would not be made until the fiscal year ends Sept. 30.

In Spain, A Mattress That Lets Your Money Rest Easy - (www.npr.org) Spaniards wary of trusting their life savings to their country's shaky banking system can now buy a mattress that has an armored safe equipped with a keypad combination lock hidden in one end. The new product, Caja de ahorros Micolchon — Spanish for "My Mattress Safe" — went on sale three weeks ago, several months after the European Union approved loans of up to $130 billion to bail out troubled Spanish banks. It's the brainchild of Paco Santos, who was laid off from Spain's biggest mattress manufacturer three years ago and has since started his own company, Descanso Santos Suenos, or DeSS. Reached by telephone at his offices in Salamanca, the 57-year-old salesman assured NPR that My Mattress Safe is no April Fool's Day joke. "We're completely serious! And we've sold many, many of these mattresses," Santos said, declining to give specific sales figures.

ECB Worries Shift to the Core. What Now?  - (online.wsj.com) As core euro-zone economies increasingly struggle to generate growth, could the European Central Bank be tilting towards generating yet more monetary stimulus? While countries on the euro-zone’s Mediterranean and Atlantic coasts have long been mired in semi-permanent recessions to the point where Greece is in downright depression and Spain and Portugal could well be heading in the same direction, the euro zone’s Northern European heartland has been doing relatively well. That, though, appears to be changing. Finland, one of the strongest voices against bailouts to the over-indebted south, is flagging. Its most recent industrial production data showed a 7.5% year-on-year decline. The Netherlands is struggling under the weight of a collapsing housing market, while Austria is vulnerable to economic upheavals in Slovenia and Hungary.

Monte Paschi Prosecutors Seize $2.3 Billion of Nomura Assets - (www.bloomberg.com) Prosecutors in Italy are seeking to seize 1.8 billion euros ($2.4 billion) of assets from Nomura Holdings Inc. (8604) as part of an investigation into Banca Monte dei Paschi di Siena SpA’s use of derivatives to hide losses. Sadeq Sayeed, Nomura’s former European head, and Raffaele Ricci, a managing director in fixed-income sales, are also being probed for colluding to obstruct regulators and making false statements, prosecutors in Siena, where the bank is based, said in a statement today. They are also sequestering 14.4 million euros of assets from three former Monte Paschi managers already under investigation, including Chairman Giuseppe Mussari, General Manager Antonio Vigni and finance chief Gianluca Baldassarri. The seizures are linked to allegations of fraud and usury, prosecutors said. Monte Paschi has claimed Nomura colluded with its former managers to devise one of two derivatives in 2008 and 2009 that hid total losses of much as 557 million euros. Nomura reaped at least 88 million euros from the transaction, dubbed Alexandria, according to the Italian lender.

Ex-Soros Advisor Sells "Almost All" Japan Holdings, Shorts Bonds; Sees Market Crash, Default And Hyperinflation - (www.zerohedge.com) Moments ago, it was none other than Takeshi Fujimaki, Soros' former advisor on all matters Japanese, who tripled down on the warnings, and told Bloomberg that the Bank of Japan’s “huge bet” by boosting quantitative easing won’t turn the economy around and is instead sending the nation toward default. “By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together.” Why? Same reason we have been pointing out every day for the past week, the same reason the Japanese bond market is now essentially broken with daily trading halts becoming an expected feature: “The volatility in the JGB market as well as the fact that there is large selling represent fear among investors,” Fujimaki said. “They are early signs of a larger selloff and we should continue to monitor the moves in the long-term bonds.” Fujimaki said he recently bought put options for Japanese government bonds of various maturities, without elaborating. He continues to hold real estate in Japan and options granting the right to sell the yen against the greenback expiring in less than five years. He also holds assets in U.S. dollars and currencies of other developed nations. “Japan’s finance is sinking into the ocean,” Fujimaki said. “There’s no escape from a market crash in the future when you have such enormous debt.”





Monday, April 29, 2013

Tuesday April 30 Housing and Economic stories


TOP STORIES:

Michigan Tax Board To Investigate City Of Detroit For Overcharging On Property Taxes - (www.mfi-miami.com)  Adjustments Could Cost City $35-$40 Million A Year In Ill-Gotten Property Tax Revenues. One of things that pissed me off when Detroit Cancer Mom, Kelly Parker and I were battling to keep her home wasn’t the arrogance of Wayne County political appointees like Assistant Treasurer David Szymanski and his staff or the foul mouthed ghetto fabulous divas at the Wayne County Register of Deeds, but the fact that Kelly’s property tax bills are based on values that appear to have been taken from a condo development on Fantasy Island rather than in the neighborhoods of Detroit. I began writing about this in November of 2012 when all the details of the deal saving Kelly’s house were finalized.  As I have I have pointed out, Kelly’s tax bills were based on the the purchase price of the house from 2005.  Like in Kelly’s case, many of these homeowners purchased their homes at top dollar before the crash and thanks to unscrupulous finance people these purchase prices were based on inflated appraisals.   This tax scheme has allowed the City of Detroit and Wayne County to enforce tax bills based on numbers 500% higher than they should be.  Assuming 90% of Detroit’s property owners were paying their taxes, MFI-Miami’s calculation indicate Detroit would be losing about $35-$40 million a year in receivables.

American Dream Eludes With Student Debt Burden: Mortgages - (www.bloomberg.com) Luke Nichter of Harker Heights, Texas, said he’s not a renter by choice. The Texas A&M University history professor’s $125,000 of student debt means he has no hope of getting a mortgage. Nichter, 35, who’s paying $1,500 a month on loans for degrees from Bowling Green State University in Ohio, is part of the most debt-laden generation to emerge from college. Two- thirds of student loans are held by people under the age of 40, according to the Federal Reserve Bank of New York, blocking millions of them from taking advantage of the most affordable housing market on record. The number of people in that age group who own homes fell by 4.6 percent in the fourth quarter from the third, the biggest drop in records dating to 1982. “Student debt has a dramatic impact on the ability to buy a house, and to buy the dishwashers and the lawnmowers and all the other purchases that stem from that,” said Diane Swonk, chief economist of Mesirow Financial. “It has a ripple effect throughout the economy.”

I Have Never Seen Anything Like This Crash in Gold - (www.businessinsider.comThe quote of the day belongs to the always enthusiastic newsletter writer Dennis Gartman. In the latest Gartman Letter he writes: "We've traded gold for nearly four decades and we've never… ever… ever… seen anything like what we've witnessed in the past two trading sessions. Spot gold as we write is trading $1450/ounce in dollar terms and that is a rally, hard thought that might seem to believe." On Friday, Gartman wrote that he was long of gold in Yen terms and that the "technical prospects for gold/U.S. dollars appears week." At the time he wrote if gold got to $1,555 it could unleash a "torrent of selling." Today he follows up on that: "Never, however, did we think that gold would plunge by $100+/ounce, and certainly we did not believe that gold would fall by $150/ounce as it has thus far. We thought perhaps that gold might fall $25/ounce… perhaps $35/ounce... but never would we have imagined it selling down by this sum.

Slovenia Asset-Sale Plan Fails to Ease Debt Squeeze Concern - (www.bloomberg.com) Slovenia’s plan to sell shares in state-owned companies failed to ease investor concern that the country will become the next euro-area nation to need a bailout. Slovenia’s default risk rose to a six-month high and bond yields hovered near records as the country prepares to tap markets this week. Prime Minister Alenka Bratusek’s April 12 announcement of plans to sell stakes in companies, including a bank, looks like an effort to stall rather than to obtain financing, according to Milan Smiljanic, head of trading at Perspektiva d.d. “There is skepticism that they are only buying time and will try to fix debt problems, avoiding privatization,” Smiljanic said by e-mail from Ljubljana. “There are no bank bidders at the moment.” Slovenia, the European Union’s fourth-smallest economy, is trying to avoid becoming the sixth euro-area state to seek a bailout after international lenders agreed to help Cyprus. The government will sell 500 million euros ($654 million) in 18- month Treasury bills at an auction in two days as it tries to shore up confidence that it can recapitalize its ailing banks without seeking outside assistance.

J.C. Penney Draws $850 Million From Credit Facility - (www.bloomberg.com) J.C. Penney Co. (JCP) drew $850 million from its revolving credit facility as new Chief Executive Officer Myron Ullman hunts for cash in the wake of his predecessor’s failed overhaul. A week after replacing Ron Johnson as CEO, Ullman is trying to improve J.C. Penney’s liquidity following the first year in which retailer’s operations consumed cash in decades. The drawdown on the $1.85 billion credit line will be used for capital spending and to replenish inventory as the company opens renovated home departments next month, the Plano, Texas-based retailer said today in a statement. J.C. Penney, which today said it is working with advisers to raise additional capital, is focused on selling debt, said a person familiar with the matter, who asked not to be identified because the talks are private. While raising cash by selling a stake to a private-equity firm is being considered, it’s not the primary option, the person said.

IRS: We can read emails without warrant - (www.thehill.com) The Internal Revenue Service (IRS) has claimed that agents do not need warrants to read people's emails, text messages and other private electronic communications, according to internal agency documents. The American Civil Liberties Union (ACLU), which obtained the documents through a Freedom of Information Act request, released the information on Wednesday.
In a 2009 handbook, the IRS said the Fourth Amendment does not protect emails because Internet users "do not have a reasonable expectation of privacy in such communications." A 2010 presentation by the IRS Office of General Counsel reiterated the policy.
 




Sunday, April 28, 2013

Monday April 29 Housing and Economic stories


TOP STORIES:

Computer Sales in Free Fall - (online.wsj.com) The personal computer is in crisis, and getting little help from Microsoft Corp.'s Windows 8 software once seen as a possible savior. Research firm IDC issued an alarming report Wednesday for PC makers such as Dell Inc. and Hewlett-Packard Co. saying world-wide shipments of laptops and desktops fell 14% in the first quarter from a year earlier. That is the sharpest drop since IDC began tracking this data in 1994 and marks the fourth straight quarter of declines.

The Euro Zone Crisis Is Back—On Multiple Fronts - (www.cnbc.com) Europe's finance ministers meeting in Dublin on Friday are facing a renewed crisis on multiple fronts,with a backlash against austerity acting as a gloomy backdrop for negotiations over bailout extensions for Portugal and Ireland, while tackling Cyprus's botched bailout and growing worries about Slovenia. Investors, increasingly aware of the euro zone's disarray, will be closely watching the results of that meeting. On Thursday, Cyprus confirmed that the cost of its troika-initiated bailout had surged to 23 billion euros ($30 billion) from 17.5 billion euros, further jeopardizing its moribund economy. It has also confirmed that it may have to sell most of its gold reserves to raise about 400 million euros to finance its part of the bailout.

The crisis isn't over in the US or Europe - (www.spiegel.de) In a SPIEGEL interview, Harvard economist Carmen Reinhart argues governments are incapable of reducing their debts and that central banks are now stepping up to resolve the crisis themselves. In the end, she argues, everyday savers will pay the price. SPIEGEL: Ms. Reinhart, central banks around the world are flooding the markets with cheap money in order to spur economies and support governments. Are these institutions losing their independence? Reinhart: No central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits. This is nothing new in history. After World War II, there was a long phase in which central banks were subservient to governments. It has only been since the 1970s that they have become politically more independent. The pendulum seems to be swinging back as a result of the financial crisis.

Tobin Tax is madness for Europe, and economic war against Britain - (www.telegraph.co.uk)  France's experiment with the Tobin Tax has proved a spectacular flop. Its finance ministry admits that the scattershot levy on financial transactions has raised just a third of the money expected since August. Total takings will be a paltry €800m in 2013, but that overlooks the much greater damage inflicted on French finance, industry and the government's own tax base. "France is shooting itself in the foot," said Paul-Henri de La Porte du Theil, head of French finance industry AFG. Jean-Yves Hocher from Crédit Agricole said it would cost his company €17bn. One French banker told Les Echos that the tax was "a weapon of mass destruction that is going to ruin our financial sector". The Bourse de Paris and the nexus of French funds in Paris was already in slow decline even before this act of idiocy. Le Figaro fears that the entire industry will now whither on the vine.

What You Can Buy For Having Your House Stolen – (forhavingmyhousestolen.tumblr.com/) “Hello, yes, it’s very nice to meet you, too, I’m LAWYER.” “Ok, so, you were approved for a loan modification? Great! So legally the bank can no longer foreclose on you. Oh? You are still being foreclosed on? I’m very sorry to hear that.” “How long has this been going on? And you received $500 as a part of the@USOCC settlement with the banks?” “Well, you can still pursue legal action. Next steps? Well, I’m afraid our one hour is up. If you’d like to continue, we’ll need to schedule another meeting. And yes, my rate is $500/hour, so if you need to set up a payment plan we can definitely help you with that…”




Thursday, April 25, 2013

Friday April 26 Housing and Economic stories


TOP STORIES:

Cheap Mortgages Are Hiding the Truth About House Prices - (www.businessweek.com) At first blush, home buying looks quite affordable right now. New data from real estate website Zillow (Z) show that if a person earning the median income of $52,513 buys a home at the median price of $157,400, he would spend just 12.6 percent of his income on mortgage payments. That’s more than one-third less than the prebubble averages, when a mortgage on a median-priced home would cost about 20 percent of a median income. Seems good, right? But that affordability is masking a problem—houses are overvalued. From 1988 through 1999, median home values averaged 2.6 times the median annual income. As the bubble kicked into gear, prices pushed up to almost four times income. With the crash, that ratio has come down—but not far enough, largely because incomes have been stagnant, if not declining, in recent years. Home values are now at three times the median income—that’s 15 percent higher than they have historically been, relative to what Americans earn.

Govt refinancing program extended two years. - (www.marketwatch.com) Troubled homeowners will have another two years to use a government refinancing program, which has been extended through the end of 2015, officials said Thursday. The Home Affordable Refinance Program, which enables refinancing for borrowers who owe more on a mortgage than their home is worth, had been slated to expire at the end of this year. “We are extending the program so more underwater borrowers can benefit from lower interest rates,” said Edward DeMarco, acting director of the Federal Housing Finance Agency, which regulates federally controlled mortgage buyers Fannie Mae fn FNMA and Freddie Mac FMCC . To qualify, loans must be backed by Freddie or Fannie. Also, Fannie or Freddie must have bought the loan by May 31, 2009.

J.C. Penney Said to Hire Blackstone to Raise $1 Billion - (www.bloomberg.com) Myron Ullman is just a few days into his return as chief executive officer of money-losing department store J.C. Penney Co. (JCP) and he’s already come to one important conclusion: the chain needs cash. J.C. Penney Co. hired Blackstone Group LP (BX) to help it raise at least $1 billion, said people with knowledge of the situation, as the retailer tries to recover from its worst annual loss in more than 25 years. The third-largest U.S. department-store chain is exploring a range of options to raise the money, including selling a stake to some private-equity firms, said the people, who asked not to be identified because the process is private. The Plano, Texas- based company also is interviewing other outside advisers to help it preserve cash, said one of the people.

Ruling in Portugal Poses Question Elsewhere: Can Courts Upend Austerity - (www.nytimes.com) Portugal was once seen as a role model in the euro debt crisis as its conservative government stuck to the stringent terms of a 78 billion euro bailout negotiated with international creditors two years ago. But it has now earned a very different distinction as the test case of the limits of the austerity plans that have been prescribed across Southern Europe. Last Friday, Portugal’s constitutional court struck down four of nine contested austerity measures that the government had introduced as part of its 2013 budget. The measures rejected by the court represented between 1 billion euros and 1.4 billion euros, or $1.8 billion — more than a fifth — of the 5 billion euro austerity package of spending cuts and tax increases. Among its rulings, the court drew a line on cuts aimed specifically at civil servants, who it said were being singled out for punishment and therefore discriminated against.

Why US Jobs Market Is Going to Get a Lot Worse - (www.cnbc.com) Friday's jobs report came in well below expectations, raising concerns that the recovery in the world's largest economy is weakening. March's participation rate was at its lowest since 1979, according to the U.S. Bureau of Labor Statistics. Just 88,000 jobs were added to the economy last month, although the unemployment rate fell to 7.6 percent from 7.7 percent in February. "In the labor market, at least, we see a real risk of even worse news down the line," Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors said in a research note on Monday. Weakening labor demand, not rising layoffs, is the key problem with the U.S. economy, according to Shepherdson. The weakening demand is mostly coming from smaller firms that are below the radar of the Institute for Supply Management (ISM) survey, which reflects national factory activity.





Wednesday, April 24, 2013

Thursday April 25 Housing and Economic stories


TOP STORIES:

Europe Risks 'Endless Depression' in Pursuit of Austerity - (www.cnbc.com) One of the U.K.'s largest asset managers has warned that the continued focus on austerity in Europe could lead to "almost endless depression" for the region. The comments come as George Soros and the U.S. Treasury Secretary Jack Lew have urged Europe's leaders to do more to boost growth after Portugal's top court rejected some of the country's austerity measures, on which its bailout depends. "The prospects for GDP [gross domestic product] recovery in the euro zone in 2013 or 2014 are diminishing by the month," John Greenwood, chief economist at U.K. asset manager Invesco Perpetual wrote in his quarterly outlook on Tuesday.
S&P 500 may fall more than 40% by Fall, 2013 - (finance.yahoo.com) Even though the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) are hovering at all-time highs, Chris Martenson, author of PeakProsperity.com and the “Crash Course” Series, is forecasting a major market correction. Martenson predicts the S&P could fall 40% to 60% to the 600-800 level by this fall. His last major market call was in March 2008, before the financial crisis. The Daily Ticker’s Lauren Lyster sat down with Martenson at the 2013 Wine Country Conference in support of Les Turner ALS Foundation to get his market and economic predictions. "I see recessionary signs all over the landscape. In particular, Europe is already in recession [and] Japan is already in recession," he says. "We are looking at global economic slowdown." As for corporate earnings, a stronger U.S. dollar could bring down profits this year, Martenson believes. Corporate profits currently account for 11% of GDP, which is way outside the norm of 6% of U.S. growth. He's also bearish on the U.S. economy and sees weakness in sectors that have shown improvement like the housing market.

Slovenia faces 'severe banking crisis', warns OECD - (www.telegraph.co.uk) The OECD said that "excessive risk taking, weak corporate governance of state-owned banks and insufficiently effective supervision tools" had led to a "protracted bust [...] compounded by domestic structural weaknesses and the European debt crisis." "Slovenia faces risks of a prolonged downturn and constrained access to financial markets. " it said in a report on Tuesday. "Banks’ and firms’ balance sheets have been severely impaired and their necessary deleveraging is depressing growth, as credit is declining [...] Additional and far reaching reforms are needed as soon as possible to head off such daunting outcomes." Slovenia's three-largest banks are owned by the state, and have been recapitalised several times due to a high level of risky loans accumulated during the pre-crisis boom.

France Faces 'Devastating Scandal' as Economy Stalls - (www.cnbc.com) France's economy is at near-stall speed, trade and budget deficits widened last month and the country is embroiled in increasing political uncertainty. The Bank of France forecast on Tuesday that the French economy posted growth of 0.1 percent in the first quarter of 2013, in line with its estimates, meaning that the euro zone's second largest economy will have narrowly averted recession after its economy contracted by 0.3 percent in the last quarter of 2012. But such low growth could lead France's government to miss its budget deficit targets, which are based on growth of 0.8 percent this year. The news came on top of widening trade and budget deficits in February and a decline in business confidence in the services sector, according to a monthly survey.

The International Bank Heists Have Begun - (finance.yahoo.com) Last month, the financial press churned out a veritable encyclopedia-length discourse on the death of Cyprus’s financial sector. However, one glaring question remains: How did everybody miss it? Actually, the puzzle is far more perverse, because not only did the experts fail to foresee the Cypriot banking debacle, these very professionals who were responsible for recognizing the good banks and rooting out the bad ones were, in fact, lauding Cypriot banks throughout their entire decline. The chart above depicts a sampling of the accolades that the global finance community bestowed on the Bank of Cyprus during its six-year trek into insolvency. Starting with the bank’s 2008 award for best bank from Global Finance Magazine, the trail of tributes continued in 2009 and 2010, when the bank received quality recognitions from The Banker magazine and JP Morgan Chase. Even as late as 2012, with the bank’s shares down 98% from their all-time high, the Bank of Cyprus still received a 2012 private banking award from the internationally renowned financial journal Euromoney. The Bank of Cyprus website described its bookending tribute from Euromoney this way: “This is yet another major international distinction which confirms the successful path taken by the Bank of Cyprus Group, placing it among the world’s top financial institutions offering private banking services.”




Tuesday, April 23, 2013

Wednesday April 24 Housing and Economic stories


TOP STORIES:

Fed sent minutes early to staffers, top banks - (www.marketwatch.com)  The Federal Reserve on Wednesday confessed to sending out market-moving minutes from the last interest-rate-setting meeting to Hill staffers and officials from leading Wall Street firms a day early. The Fed moved up the release of the minutes by five hours, to 9 a.m. Eastern, as a result of the goof. “The reason is they were inadvertently sent early to a list of individuals who normally receive the minutes by email shortly after their usual release time,” a Fed spokesman said in a statement. “The individuals on the distribution list -- primarily congressional employees and employees of trade organizations -- received the minutes shortly after 2 p.m. Tuesday.”

Obama Leans on High Earners for More Taxes in 2014 Budget - (www.bloomberg.com) President Barack Obama wants to again rely on top-earning U.S. households for most of the tax increases he’s proposing. Obama’s budget plan, released today, would cap tax deductions for top earners, increase the estate tax, eliminate private-equity managers’ ability to receive lightly taxed carried interest and require those earning more than $1 million a year to pay a minimum tax rate. “The wealthiest individuals and biggest corporations cannot keep taking advantage of loopholes and deductions that most Americans don’t get,” Obama said in Washington.
In a break from past budgets, Obama’s fiscal 2014 proposal reserves most business tax increases and new business breaks for a plan that would reduce the corporate tax rate.

FBI probes trading as KPMG quits as Herbalife, Skechers auditor - (www.reuters.com) A former KPMG LLP partner admitted passing on stock tips about clients to a friend who gave him cash and gifts, in a scandal that led the big accounting firm to resign as auditor for two companies. Herbalife says KPMG has resigned as its as auditor in connection with alleged insider trading in Herbalife involving a KPMG partner. Steven Russolillo reports. Scott London, the partner in charge of audits of Herbalife Ltd. and Skechers USA Inc. until KPMG fired him last week, told The Wall Street Journal Tuesday that "I regret my actions in leaking nonpublic data to a third party."  Mr. London said his leaks "started a few years back," adding that KPMG bore "no responsibility" for his actions. "What I have done was wrong and against everything" he believed in, said Mr. London, who was based in Los Angeles for the accounting firm. The Federal Bureau of Investigation and the Securities and Exchange Commission are looking into allegations of insider trading in the shares of certain KPMG clients, said people familiar with those probes.

Battle Heats Up Over Fate of Troubled Energy Buyout - (www.nytimes.com) The biggest private equity buyout ever — the $45 billion deal for the Texas energy giant TXU in 2007 — has been steadily sliding toward becoming one of the biggest busts. Yet even as bankruptcy is acknowledged as a possibility, the company’s private equity owners are trying to make sure they don’t walk away empty-handed. The company, now called Energy Future Holdings, has completed a series of moves in recent months that analysts say could allow it to put only part of its business — the retail energy and power-generation operations — into bankruptcy, while holding on to the staid-but-safe utility business. And the company recently received a favorable tax ruling that could potentially allow it to save billions of dollars in a reorganization. Still, as much as Energy Future Holdings may want to tie a reorganization into a neat little bow, some creditors, including seasoned hedge fund investors in distressed debt, are certain to make this a fight of junkyard dogs.

Mutual funds attract record amount of cash in 1Q - (www.google.com/hostednews.ap) The stock market hit a record high during the first quarter, and so did the flow of cash into mutual funds. Stock funds and bond funds attracted a combined $193 billion in the first three months of 2012, industry consultant Strategic Insight said on Wednesday. That tops the previous record of $140 billion in net deposits during the first quarter of 2007. It also was a record when factoring in exchange-traded funds, which hold less cash than mutual funds but are growing at a faster pace. Net deposits into conventional mutual funds and ETFs totaled $246 billion. The previous record of $173 billion was set in last year's first quarter. This year's figures suggest that investors are getting comfortable with stocks again following the financial meltdown and market plunge of 2008-2009. Withdrawals from U.S. stock mutual funds exceeded deposits for the past six years in a row, while bond funds attracted more than $1.3 trillion in net deposits. This year investors have added $48 billion to U.S. stock mutual funds and $60 billion to funds investing in foreign stocks.





Monday, April 22, 2013

Tuesday April 23 Housing and Economic stories


TOP STORIES:

New Trouble for Euro in Portugal - (www.nytimes.com) Just weeks after European leaders tamped down a banking crisis in Cyprus, troubles in the euro zone have again reared their head, this time in Portugal. In an address to his beleaguered nation on Sunday, Prime Minister Pedro Passos Coelho warned that his government would be forced to cut spending more and that lives “will become more difficult” after a court on Friday struck down some of the austerity measures put in place after a bailout package two years ago. The renewed tension in Portugal raised the threat of further trouble elsewhere in the euro zone, where ailing members have struggled to rebuild economic growth after enduring wrenching spending cuts. “The risks in the euro zone have increased markedly over the past six weeks or so,” wrote Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based consultancy that assesses risk on sovereign debt.

Slovenia Bailout Signaled by Worsening Debt Swaps: Euro Credit - (www.bloomberg.com) Slovenia’s creditworthiness is deteriorating at the fastest pace in the world after Cyprus as investors speculate a banking crisis will force it to follow the island nation and become the sixth euro country to need aid. Credit-default swaps insuring Slovenian debt for five years soared as much as 66 percent to a six-month high of 414 basis points on March 28 from 250 on March 15, the last trading day before Cyprus announced plans for its rescue. It’s now up 34 percent at 336 basis points, compared with a 45 percent increase for Cyprus and 18 percent for Portugal in the period. Slovenia’s two-week old government is struggling to prop up banks hit by recession and saddled with bad loans worth about a fifth of the country’s economic output. Cyprus, which accounts for 0.2 percent of the euro region’s economy, was forced to inflict unprecedented losses on uninsured depositors and senior bondholders as part of the 10 billion euro ($13 billion) rescue of its financial system.

Liquidity Carpet Bombs Fueling Asset Bubbles, Rohde Says - (www.bloomberg.com) Policy makers steering the global economy have pumped the financial system with so much liquidity that any exit risks popping potential asset bubbles or stunting a recovery, Danish central bank Governor Lars Rohde said. “The risk is we stay in this climate too long and that the carpet bombing of liquidity spurs inflation,” Rohde, 59, said in an April 5 interview from his office in Copenhagen. Though there are no current signs of consumer price inflation “there is inflation, perhaps a bubble, in some asset classes,” he said. “Equities (MXWO) are trading close to all-time highs. Segments of property markets across the globe, for example London, also display symptoms of this. How do we exit this without killing whatever nascent recovery there might be at that time?”

Extreme home takeover: dubious deeds used to scoop up Dade properties - (www.miamiherald.com) Scavenging the remnants of South Florida’s housing crisis, a partnership called Presscott Rosche appeared to gobble up almost three dozen foreclosed homes in Miami-Dade County last year. The company is currently listed as the owner of 12 homes worth about $3.5 million, according to the Miami-Dade property appraiser. But this seemingly thriving business is, in many ways, an illusion. The name of the company’s agent listed in state records is fake. So are many of the deeds the company has filed in Miami-Dade Circuit Court to stake its claim to more than 30 houses and condos, a Miami Herald investigation has found. The company has gained control of these homes — renting them out to unsuspecting tenants, in some cases — by filing dubious deeds and documents filled with legal-sounding jargon and shoddy punctuation. The author of many of these documents calls himself an “attorney in fact,” though he is not, in fact, a licensed attorney in Florida.

Bail-In vs. Bailout – (www.ritholtz.com) In the aftermath of the bungled Cyprus affair, we are now observing a major transition underway with regard to bank-deposit safety. In the Eurozone and in Europe generally, the sacredness of an insured deposit was bludgeoned by the finance ministers in their botched attempt to impose a cost on insured deposits in Cyprus. The finance ministers were taken to task decisively by their political constituents. Imagine: it was the parliament of Cyprus that stood between the insured depositors in Eurozone banks and the outrageous attempt to breech the sacred promise that insurance entails. One has to be thankful for the democratic political process that elects parliaments, even in Cyprus. Now we are seeing a different form of attack on depositors. We are transitioning from a system of bank bailouts to “bail-ins.” In the bailout approach, banks that fail are resolved through some form of governmental, taxpayer-backed initiative. That is what we mostly have in the US, with the Federal Deposit Insurance Corporation (FDIC) as the resolution entity. The FDIC honors insured depositors’ claims. The uninsured deposits become a liability of the resolved banking institution. Those depositors may suffer losses along with shareholders, debt holders, preferred stock holders, and others. That hybrid system includes the attempt to consolidate banking institutions. Most bank failures in the US are resolved through a merger.




In China, off-balance-sheet lending risks lurk in the shadows - (www.reuters.com)