KeNo's Housing and Economic Portal: Tuesday July 14 Housing and Economic stories

TOP STORIES:

Will Greece spark a delayed stock market crash? - (www.marketwatch.com) By now, everyone has woken up to the idea that Greece may end up defaulting and potentially leaving the euro after all. European market averages took a significant hit at today's open, while U.S. averages have broadly been down less. Looking purely at the U.S., it appears there may be enough "buy the dip" buyers to mitigate losses on the belief that a deal ultimately will get done. Against that backdrop, Spanish and Italian bond yields are surging higher as German bunds and Treasury yields TLT, +2.00% move lower in a classic flight-to-safety trade. I have argued that the complacency surrounding Greece is shocking enough to make one concerned that many are underestimating the potential a Grexit has on global financial markets and stability. My base thinking remains the same — the S&P 500 will likely react with a lag to what is happening in Europe.

No pensions? No paychecks? State budgets in limbo - (www.cnbc.com) Faced with rising pension costs and weak revenue growth, Illinois lawmakers began the new fiscal year without a state budget as a bitter, long-running battle on the spending plan went into overtime. The deadlock between the Democrat-controlled legislature and Republican Gov. Bruce Rauner could freeze state workers' paychecks if an agreement isn't reached soon. Facing a union lawsuit to force those payments, state Attorney General Lisa Madigan said the Illinois Constitution bars the state from spending money—even to make payroll—and without a budget "even a court cannot order all of these payments to be made." Illinois isn't alone in failing to enact a state budget on time. As of the July 1 budget deadline, Pennsylvania, Wisconsin and three other states had failed to pass a budget. The Wisconsin Legislature's finance committee, however, completed revisions to the state budget plan in early morning hours on Friday, clearing the way for a full vote by the Legislature.

China's Boom has World Bank Worried - (www.bloomberg.com) The World Bank has a timely warning for Chinese President Xi Jinping: Don't let all that money go to your head. The global lender didn't refer directly to Shanghai's stock boom or the Asian Infrastructure Investment Bank (Beijing's attempt to develop a World Bank of its own). Nor did it have to. By urging Beijing to clamp down on wasteful investment, unsustainable debt, and a shadow banking industry run amok, it was delivering a clear enough warning that President Xi should stop fanning China's giant asset bubble. The World Bank was also implying China should get its own economic house in order before trying to change the global economy. "China has reached a critical phase of its economic and social development path," the lender said in a new report released Wednesday. The economy "will need to be transformed to increase the efficiency of new investments and widen access to finance, enabling China to sustain solid growth and rebalance its economy."

The next financial crisis is on its way, experts warn - (www.fin24.com) The next economic disaster could hit the world soon – and we are not ready for it, warned economic and financial experts at the screening of a new financial documentary in Cape Town this week. The world is not ready for the next financial crisis, which could hit us sooner than most people realise, according to Professor David Taylor from the African Institute of Financial Markets and Risk Management (AIFMRM) at the University of Cape Town (UCT). “It is not a question of whether there will be another financial crisis like we saw in 2008 following the US sub-prime mortgage debacle. The question is when and where,” he said. Taylor was speaking at the screening of the new documentary film Boom Bust Boom at the Labia cinema. The documentary, described as a “fresh take on global economics” is presented and co-written by Terry Jones of Monty Python fame. The documentary is a combination of light-hearted humour and serious commentary. It features interviews with actor John Cusack, journalists Paul Mason and John Cassidy, along with world-renowned experts Andy Haldane, chief economist at the Bank of England and Nobel Prize winners Daniel Kahneman, Robert J Shiller and Paul Krugman.

Recession time bomb ticking faster, louder - (www.marketwatch.com) Americans are unprepared for the trillions they will lose again. Yes, the clock’s ticking louder, louder, warns the Economist, “only a matter of time before the next recession strikes.” Unfortunately, the “rich world is not ready.” America’s not prepared. You are not ready. Get it? America’s 95 million investors are at huge risk. Remember the $10 trillion losses in the crash and recession of 2007-2009? The $8 trillion lost after the dot-com technology crash and recession of 2000-2003? This is the third big recession of the century. Yes, America will lose trillions again. Especially with dead-ahead predictions like Mark Cook’s 4,000-point Dow correction. And Jeremy Grantham’s warning of a 50% crash around election time, with negative stock returns through the first term of the next president, beyond 2020. Starting soon. Why is America so vulnerable when the next recession hits? Simple: The Fed’s cheap-money giveaway is killing America. When the downturn, correction, crash hits, it will compare to the 2008 crash. The Economist warns: “the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession,” whatever the trigger.

OTHER STORIES:

Greece latest: Varoufakis out, IMF 'ready to assist' - (www.cnbc.com)

Robert Shiller's shocking call: Buy Greek stocks! - (www.cnbc.com)

Senator calls for a crackdown on 'dark money' - (www.cnbc.com)