Thursday August 27 Housing and Economic stories

TOP STORIES:

CalPERS, CalSTRS took big losses on energy investments, report says - (www.latimes.com) California's two major public pension funds, the biggest in the nation, lost a total of more than $5 billion on energy-related investments for their fiscal years, ended June 30, according to a new report. The California Public Employees' Retirement System posted losses on its oil and gas portfolio of about $3 billion, a 28% decline, and similar set of investments at the California State Teachers' Retirement System was down 27%, or about $2.2 billion, the report said. Both systems, though, posted overall annual gains for the year. CalPERS, with $300 billion in assets under management, reported an overall gain of 2.4%. CalSTRS, with about $190 billion in assets, had a total return of 4.8%. The report covering the funds’ largest oil and gas investments was prepared by Trillium Asset Management, a Boston investment firm specializing in what it calls “socially responsible” investments. Trillium produced the report on behalf of 350.org, an environmental group backing a pending state Assembly bill that calls for California's big pension funds to divest from coal-related holdings.

Puerto Rico Staring at $400 Million Short-Term Funding Squeeze - (www.bloomberg.com) Puerto Rico is approaching an inflection point that may prove to be more challenging than the commonwealth’s decision this month to skip a bond payment for the first time. After borrowing internally, omitting debt-service payments and slowing tax rebates, the island is at risk of running out of cash to fund day-to-day operations. Puerto Rico must raise $400 million through a bank loan or a sale of short-term securities by November, Victor Suarez, Governor Alejandro Garcia Padilla’s chief of staff, said Aug. 10 in San Juan. Garcia Padilla’s administration had already alienated creditors before defaulting on $58 million of bonds Aug. 3 by saying they need to restructure a $72 billion debt burden that it can no longer sustain. Puerto Rico appears to be betting that investors will provide access to capital markets again once the commonwealth unveils a debt-restructuring proposal Sept. 1. “They’re going to have some severe liquidity issues,” said David Hitchcock, a Standard & Poor’s analyst in New York. “Without cash-flow financing, they’re going to have a very difficult time trying to just pay for ongoing operations as well as their upcoming debt payments in the next six months.”

Jack Ma Website With Junk Debt a Click Away Raises Risk in China - (www.bloomberg.com) Billionaire Jack Ma has faced criticism about the quality of goods on his e-commerce sites. Now his push into Internet finance is raising red flags as he puts risky bonds a few clicks away from China’s 668 million netizens. Ma’s Zhao Cai Bao, a platform that lets small businesses and individuals borrow from investors, has overseen 252 billion yuan ($39.4 billion) of financial product sales since starting last year. Recent offerings: unrated bonds from a hotel operator in Anhui province and investment firms set up last year in a Shenzhen financial zone still under construction. None of the prospectuses online provide revenues, profit, assets or debt. “The risks of such financial products are high,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “You shouldn’t sell bonds issued by small companies with no ratings to just any individual investor.”

AEP: China denies currency war as global steel industry cries foul – (www.telegraph.co.uk)  Chinese steelmakers are preparing to flood the global market with cut-price exports as they take advantage of this week’s shock devaluation of the yuan, setting off furious protests from struggling competitors in Europe and the US. It is the first warning sign of a deflationary wave of cheap products from China after the central bank, the People's Bank of China, abandoned its exchange rate regime, letting the currency fall in the steepest three-day drop since the country emerged as an economic powerhouse. The yuan has fallen 3.3pc against the dollar, closing at 6.3989 on Thursday. Steel mills in the Chinese industrial hub of Hebei have already begun to trim prices of rebar mesh-wires used for building by between roughly $5 and $10 to $295, citing the devaluation as a fresh chance to offload excess stocks of steel. Europe’s steel lobby Eurofer warned that there would be “very real competitiveness impacts” for European steel firms, already battling for their lives with wafer-thin margins.

Spain's New "Employed Poor"-  (www.nytimes.com) The desperation among job seekers is now so acute that many accept work contracts that pay less than the country's reduced minimum wage -- often by agreeing on paper to work two days a week, but actually working many more unpaid hours, experts say. And some, returning to their old jobs, are finding that they must take huge pay cuts. Campaigning for his center-right party recently, Prime Minister Mariano Rajoy talked of Spain's recovery in glowing terms, at one point saying that no one was even "talking about unemployment anymore." But local and regional elections this spring were humbling for his Popular Party and for the center-left Socialist party, which lost control of cities throughout Spain, including Zaragoza and the capital, Madrid... And in the long run, the recovery faces many challenges, including a growing group of aging unemployed who may never work again and a middle-aged work force that left school early for high-paying construction jobs, which disappeared when Spain's real estate bubble burst in 2008. Such work is unlikely to return soon, but that part of the labor force is trained for little else.

OTHER STORIES:

Greek PM faces biggest party revolt yet as bailout approved - (www.reuters.com)
China's Yuan Rate Rises for First Time Since Devaluation - (www.bloomberg.com)
China’s Yuan Positions Fall by a Record, Signaling More Outflows - (www.bloomberg.com)
Faber: Yuan devaluation is completely meaningless - (www.cnbc.com)
Brazil Braces for Protests as Referendum on Rousseff Impeachment - (www.bloomberg.com)
Malaysia’s Ringgit Heads for Worst Drop Since 1998 Amid Outflows - (www.bloomberg.com)

Global M&A activity surges toward record high
High-yield, investment-grade funds post third week of outflows -Lipper
The Lowly Lightbulb Outshines Solar and Wind on U.S. Power Grids - (www.bloomberg.com)
Japan joins U.S.-Philippine humanitarian drills amid China sea dispute