Sunday, August 3, 2014

Monday August 4 Housing and Economic stories


The Next Domino: Espirito Santo Holding Company Preparing To File Bankruptcy - (www.zerohedge.com) While Banco Espirito Santo continues to exist on fumes and life support (that last ditch equity injection by Baupost a week ago may not have been Seth Klarman's wisest investment), a key link in the Espirito Santo Holding Company structure is preparing to default. According to Reuters: ESPÍRITO SANTO GROUPS HOLDING COMPANY RIOFORTE PREPARING TO FILE FOR CREDITOR PROTECTION IN LUXEMBOURG – SOURCES

For those confused, "creditor protection" =  bankruptcy. Which one is RioForte again? We showed this handy org chart a few days ago, here it is again. The good news: as every single European bank "expert" predicted last week when scrambling to avoid a panic, there is no fear of contagion. Aside from this one of course. Remember: there is always only one cockroach. The full report from Reuters: Rioforte, a holding company of Portugal's troubled Espirito Santo banking clan, is preparing to file for creditor protection, sources familiar with the matter said on Tuesday, hours before Rioforte was due to repay over $1 billion in debt to Portugal Telecom. The filing will be made with a court in Luxembourg, where Rioforte is registered, one source close to the process said, adding that the filing is aimed at preventing insolvency that would entail uncontrolled asset sales at any price.

The Implosion Is Near: Signs Of The Bubble's Last Days - Stockman - (www.davidstockmanscontracorner.com) The central banks of the world are massively and insouciantly pursuing financial instability. That’s the inherent result of the 68 straight months of zero money market rates that have been forced into the global financial system by the Fed and its confederates at the BOJ, ECB and BOE. ZIRP fuels endless carry trades and the harvesting of every manner of profit spread between negligible “funding” costs and positive yields and returns on a wide spectrum of risk assets. Moreover, this central bank sponsored regime of ZIRP and money market pegging contains a built-in accelerator. As carry trade speculators drive asset prices steadily higher and fixed income spreads steadily thinner—- fear and short interest is driven out of the casino, making buying on the dips ever more profitable and less risky. Indeed, the explicit promise by central banks that the money market rate will remain frozen for the duration and that ample warning of any change in rate policy will be “transparently” announced is the single worst policy imaginable from the point of view of financial stability. It means that the speculator’s worst nightmare—–suddenly going “upside down” due to a sharp spike in funding costs—-is eliminated by central bank writ.

Puerto Rico Utility May Default on January Interest Payment - (www.bloomberg.com) The Puerto Rico Electric Power Authority, which supplies most of the commonwealth's electricity, won't make a January interest payment to investors, according to Municipal Market Advisors. The agency, called Prepa, used $41.6 million of reserve funds to help pay bondholders $417.6 million on July 1. With the reserve containing only one year of scheduled interest expense, now depleted by about 10 percent, "we expect the bond trustee is unlikely to make any more distributions to bondholders, reserving cash for likely litigation expenses," Matt Fabian, a managing director at Concord, Massachusetts-based MMA wrote today in a report.'

US debt will eclipse GDP in 25 years: CBO - (www.cnbc.com) U.S. public debt remains on an unsustainable path and will reach 106 percent of economic output in 25 years versus about 74 percent currently, the Congressional Budget Office said on Tuesday, marking a slight increase from projections made last September. The non-partisan budget referee agency attributed the changes in its long-term budget outlook based on current tax and spending laws to a slight downward revision in its economic growth projections, partly offset by assumptions of reduced interest rates and health care costs. The revisions represent essentially no shift in the CBO's view that despite some near-term relief, the federal deficits are unsustainable and could lead to another financial crisis in the long run. It attributes much of the increase in deficits and debt through 2039 to the costs of caring for an aging population, especially the so-called Baby Boom generation.

Emerging nations plan their own World Bank, IMF - (news.yahoo.com) Fed up with U.S. dominance of the global financial system, five emerging market powers this week will launch their own versions of the World Bank and the International Monetary Fund. Brazil, Russia, India, China and South Africa —the so-called BRICS countries — are seeking "alternatives to the existing world order," said Harold Trinkunas, director of the Latin America Initiative at the Brookings Institution. At a summit Tuesday through Thursday in Brazil, the five countries will unveil a $100 billion fund to fight financial crises, their version of the IMF. They will also launch a World Bank alternative, a new bank that will make loans for infrastructure projects across the developing world. The five countries will invest equally in the lender, tentatively called the New Development Bank. Other countries may join later.





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