Wednesday August 26 Housing and Economic stories

TOP STORIES:

Chicago Schools Demand $500 Million Bailout From State – (www.dailycaller.com) Chicago’s public schools have released a budget that relies on nearly $500 million in funding the state has not yet voted to provide. The official budget essentially demands that the state hand over money or risk throwing the school district into chaos. Even Chicago’s teacher union is critical of the move. With a total budget of $5.7 billion, the $480 million Chicago Public Schools (CPS) expects the state to provide is more than 8 percent of their budget. The money is needed to fulfill pension obligations the city has to current and retired teachers. If the money isn’t forthcoming by the end of the year, the district says it will have to lay off thousands of current teachers to meet those pension obligations. The district is already preparing itself for the blow, as Monday’s budget also came with an announcement of over 400 layoffs. Chicago’s schools have repeatedly had to shed jobs the last few years as they descend further and further into a pension-induced budget crisis.

Renting in America Has Never Been This Expensive - (www.bloomberg.com) Americans living in rentals spent almost a third of their incomes on housing in the second quarter, the highest share in recent history. Rental affordability has steadily worsened, according to a new report from Zillow Group Inc., which tracked data going back to 1979. A renter making the median income in the U.S. spent 30.2 percent of her income on a median-priced apartment in the second quarter, compared with 29.5 percent a year earlier. The long-term average, from 1985 to 1999, was 24.4 percent. While mortgages remain relatively affordable, landlords have been able to increase rents because demand for apartments remains strong. The U.S. homeownership rate fell to the lowest level in almost five decades in the second quarter, as strict lending standards and tight inventories keep many families in the rental market.

Oil Majors’ $60 Billion Cuts Don’t Go Far Enough as Crude Slides - (www.bloomberg.com) The $60 billion of oil-industry spending cuts this year aren't likely to be enough to meet sacrosanct dividend commitments as crude languishes near a six-year low.  The world’s biggest producers will need to trim investments by a further $26 billion, according to Jefferies Group LLC. Capital spending will have to fall 10 percent next year, Banco Santander SA says.  Oil companies are bracing for “lower for longer” prices as a global supply glut persists, dragging crude to the lowest close since March 2009 in New York on Tuesday. Royal Dutch Shell Plc, which has reduced spending 20 percent this year, has “more levers to pull” should the market weaken further, according to Chief Executive Officer Ben Van Beurden.

The tightening means international producers such as Shell and Chevron Corp. can break even at a lower crude price -- about $10 lower than before they started cuts last year, according to Jefferies analyst Jason Gammel.

Wall Street Sees Junk Bond Collapse, Prepares to Profit from it - (www.wolfstreet.com)  When something collapses, new opportunities open up. Hedge funds, private equity firms, and other asset managers specialize in this. And now there are signs of hope for these folks, that opportunities are approaching, that the credit bubble is about to implode, offering untold riches to those able to pick up the right scraps. How do we know? Wall Street firms are staffing up for the coming era of “distressed debt.” This is an ad I ran into on S&P Capital IQ LCD’s highyieldbond.com: Taplin, Canida & Habacht is looking for a High Yield/Distressed Debt Corporate Analyst. The analyst will be a generalist, looking for opportunities across sectors and issuer capital structures. And the first of the “Key Accountabilities” is this: Monitor and analyze credit risk and recovery value of high yield and distressed debt sectors through sector analysis, bottom-up fundamental research and bond covenant analysis.

Goldman Buyback Desk Saw Record Volume in Wednesday Rebound - (www.bloomberg.com) Who did the buying as U.S. stocks staged the biggest turnaround in three years? The companies that issued them. The Goldman Sachs Group Inc. unit that executes share buybacks for clients had its busiest day since 2011 on Wednesday, according to a note from the firm’s corporate agency desk. Based on the value of equities repurchased, volume handled by the bank set a record. The note was confirmed by spokeswoman Tiffany Galvin. Corporations have emerged as one of the biggest sources of fresh cash in the stock market, eclipsing even mutual funds with more than half a trillion dollars spent last year, according to data compiled by S&P Dow Jones Indices. They swooped in and bought again on Wednesday as the Standard & Poor’s 500 Index flirted with its largest two-day selloff since January.

OTHER STORIES:

Emerging-Market Stocks Halt Slide as China Soothes Yuan Panic - (www.bloomberg.com)
Emerging-Market Exporters Feel Heat From Weakening Yuan - (online.wsj.com)
So How Are All Those Yuan Structured Products Doing? - (www.bloomberg.com)
Turkish Lira Slumps to Record Low as Coalition Talks End Early - (www.bloomberg.com)
Fractures Form Inside Russia’s Central Bank as Recession Deepens - (www.bloomberg.com)

Surge in Commercial Real-Estate Prices Stirs Bubble Worries - (online.wsj.com)
Who’s Crazy Now? Yuan Bears Vindicated by Tumble See More Pain - (www.bloomberg.com)
China Central Bank to Maintain ‘Normal’ Movement of Yuan Exchange Rate - (www.bloomberg.com)
Greece creditors raise 'serious concerns' about spiralling debt levels - (www.theguardian.com)
ECB Prepared to Tweak QE If Needed as Recovery Disappoints - (www.bloomberg.com)