Thursday September 17 Housing and Economic stories

TOP STORIES:

China’s Searching for Stock Market Scapegoats - (www.bloomberg.com) To commemorate the 70th anniversary of Japan’s World War II surrender, China planned a 12,000-soldier march down Beijing’s Chang’an Jie—Eternal Peace Street—on Sept. 3. For President Xi Jinping, it was a chance to project an image of calm, order, and strength. Unfortunately for Xi, China’s financial markets are sending a completely different message. Since the stock market started melting down in mid-June, wiping out $5 trillion in shareholder value, the government has tried a series of increasingly desperate measures to halt the slide. The latest looked like an attempt to shift blame: In a campaign to crack down on alleged market manipulation, it arrested executives at Citic Securities, China’s largest brokerage, an employee of the China Securities Regulatory Commission, and a journalist at Caijing, a business magazine. The Citic executives, including Managing Director Xu Gang, admitted insider trading, according to Xinhua, the state-run news service. The journalist, Wang Xiaolu, admitted wrongly reporting on July 20 that the CSRC was studying whether to end stock market support measures, causing panic and confusion, Xinhua said. A Citic representative declined to comment, and Caijing didn’t answer calls. The magazine has said it will cooperate with authorities.

Investors Withdraw Most From U.S. Mutual Funds Since June 2013 - (www.bloomberg.com) Turmoil in financial markets prompted investors to pull $27.3 billion from U.S. mutual funds last week, the biggest withdrawal in more than two years. Stock funds suffered redemptions of $11 billion in the week ended Aug. 26 while bond funds saw outflows of $12.1 billion, according to a statement Wednesday from the Investment Company Institute, a Washington-based trade group. Funds that buy a mix of stocks and bonds had redemptions of $4.3 billion. Stocks tumbled last week as investors speculated that an economic slowdown in China could harm growth prospects in the U.S. Junk bonds also lost ground, according to the Bank of America Merrill Lynch High Yield Index.

Central Banker Urges Lying To The Public About Bank Health – (www.zerohedge.com) For years, many had mocked both European and US stress tests as futile exercises in boosting investor and public confidence, which instead of being taken seriously repeatedly failed to highlight failing banks such as Dexia, Bankia and all the Greek banks, in the process rendering the exercise a total farce.  The implication of course, is that regulators, thus central bankers, openly lied to the public over and over just to preserve what little confidence in the system has left.  Now we know that this is precisely the policy intent: as Reuters reports citing a paper co-authored by a Bundesbank economist, "banking supervisors should withhold some information when they publish stress test results to prevent both bank runs and excessive risk taking by lenders."

Almost Half of Homes in New York and D.C. Are Now Losing Value - (www.bloomberg.com)  Almost half of single-family houses in the New York and Washington metropolitan areas are losing value, a sign that buyers' tolerance for high prices in many large U.S. cities may be reaching a limit. The values of 45 percent of houses in both the Washington and New York areas slumped by at least 2 percent in June from a year earlier, according to a new index created by Allan Weiss, co-founder of the Case-Shiller home price indexes. In June 2014, only 15 percent of Washington residences dropped in value, while 20 percent fell in New York. Because the index is of only single-family homes, it doesn't include Manhattan. More properties also were in decline in Los Angeles, Chicago, Phoenix and Miami. 

Giant U.S. Pension Fund Calstrs to Propose Shift Away From Stocks, Bonds - (online.wsj.com) The nation’s second-largest pension fund is considering a significant shift away from some stocks and bonds, one of the most aggressive moves yet by a major retirement system to protect itself against another downturn. Top investment officers of the California State Teachers’ Retirement System have discussed moving as much as 12% of the fund’s portfolio—or more than $20 billion—into U.S. Treasurys, hedge funds and other complex investments that they hope will perform well if markets tumble, according to public documents and people close to the fund. Its holdings of U.S. stocks and other bonds would likely decline to make room for the new investments. The board of the $191 billion fund, which is known by its abbreviation Calstrs, discussed the proposal at a meeting Wednesday. A final decision won’t be made until November.

OTHER STORIES:

Foreign Firms Feel China’s Chill - (online.wsj.com)

Marc Faber: There Is No Safe Asset Anymore - (www.bloomberg.com)

Ackman's Pershing Square Hedge Fund Drops 9.2 Percent in August - (www.nytimes.com)
Vantage Bonds Plunge as Petrobras Cancels Deal Amid Bribe Probe - (www.bloomberg.com)
Five Chinese Navy Ships Are Operating in Bering Sea Off Alaska Coast - (online.wsj.com)

Jack Lew: We're going to hold China accountable on currency - (www.cnbc.com)
Almost Half of Homes in New York and D.C. Are Now Losing Value - (www.bloomberg.com)
Foreigners Flee Japan Stocks at Fastest Pace Since at Least 2004 - (www.bloomberg.com)
Yuan Effect Chokes Egypt as Trades Signal Pound Peg Too High - (www.bloomberg.com)

IMF staff warn G20 of increasing downside economic growth risks - (www.reuters.com)