KeNo's Housing and Economic Portal: Thursday October 15 Housing and Economic stories

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China Billionaire With Canal Dream Confronts Biggest Loss of '15 - (www.bloomberg.com) The Chinese billionaire using his personal fortune to help fund a $50 billion Nicaraguan challenger to the Panama Canal has crashed into the bitter reality of equity markets in the world’s second-largest economy. Telecommunications entrepreneur Wang Jing, 42, was one of the world’s 200 richest people with $10.2 billion at the peak of the Chinese markets in June, according to theBloomberg Billionaires Index. His net worth has since fallen to $1.1 billion. His 84 percent drop so far in 2015 is the worst recorded by the index, which provides a daily ranking of the world’s 400 richest people. Ivan Glasenberg, chief executive officer of Baar, Switzerland-based Glencore Plc, had the second-biggest percentage decline, falling 66 percent to $1.8 billion. Wang owns 35 percent of publicly traded Beijing Xinwei Telecom Technology Group Co., which has tumbled along with China’s equity markets. The end of a lockup on 51 percent of its shares on Sept. 10 triggered a further decline that’s pushed Xinwei to a 57 percent drop this year. He pledged Xinwei shares valued at $2.4 billion in July that were removed from his net worth calculation.

Distressed Debt Exactly That as Bond Prices Plunge to 59 Cents - (www.bloomberg.com) Investors may struggle to profit from bonds of distressed companies in developing nations this year after a plunge last quarter, teamed with an increasingly uncertain outlook, looks set to erase 2015’s gains. The securities tumbled 13.4 percent in the three months to Sept. 30, paring annual returns to 0.95 percent, a Bank of America Merrill Lynch index shows. The market value of the gauge’s 156 notes has dropped by almost 30 percent since Dec. 31 to $54 billion, or about 58.8 cents on the dollar. Global high-yield bonds fell 4.51 percent in the third quarter, bringing year-to-date losses to 1.4 percent. They’re on track for their first negative return since 2008. “A broad recovery will be elusive,” David Tawil, a co-founder of New York-based Maglan Capital LP, said. “There will be increasing dislocation, mostly driven by companies with considerable leverage. That may lead to significant restructuring and defaults.”

Ackman, Einhorn Lead Hedge Funds on Track to Rival '08 Slump - (www.bloomberg.com) There’s no big bank failure on the horizon. The housing market is booming, not melting. Yet for a handful of well-known hedge fund managers, 2015 is looking a lot like 2008, when their industry suffered record losses and investor withdrawals. David Einhorn and Michael Novogratz have slumped about 17 percent so far this year, and Bill Ackman declined almost 13 percent in a publicly traded fund. Sean Fahey andMichael Platt have seen billions of dollars flee their firms and are now managing less than a third of what they oversaw at their peaks. Every struggling hedge fund has struggled in its own way, yet September did a lot damage for many managers, including Ackman, who slumped as much as in all of 2008. Six of the stocks that were most popular with the hedge fund set fell more than 20 percent last month, according to a report by Novus Partners Inc. The carnage added to a year of market twists and turns that included the unexpected surge in the Swiss franc in January, the rally in European government bonds in April and the surprise devaluation of the Chinese yuan in August.

Junk or AAA? Rating Split Plagues Chicago as It Borrows Billions - (www.bloomberg.com) What’s Chicago’s risk to municipal-bond investors? It depends on which credit-rating company you ask. In the eyes of Moody’s Investors Service, most of the $20 billion of bonds tied to Chicago are junk, as speculative as a charter school or regional hospital that could shut down. To Standard & Poor’s, the city’s park district is as credit-worthy as the U.S. government, and its sales-tax-backed debt is even safer. Only Kroll Bond Rating Agency deems thepublic schools worthy of an investment grade. No U.S. city has caused a larger difference of opinion in the municipal-bond market than Chicago, which is being squeezed by soaring bills to its underfunded retirement system. The city’s sales-tax, motor-fuel-tax, water, sewer and park bonds all have at least a six-level gap between the lowest and highest ratings, data compiled by Bloomberg show. The discrepancy has led investors to err on the side of caution by demanding higher yields, threatening to saddle Chicago with added costs as it prepares to issue about $3 billion of debt.

The next shoe to drop - (www.wolfstreet.com) It’s not like stocks need any additional problems. But they’re getting them. On Monday, junk bonds suffered their worst sell-off since October 6, 2011, according to S&P Capital IQ LCD’s index of “high-yield flow names.” The index is comprised of large junk-rated companies, including Charter Communications, Chrysler, Dish Network, Dollar Tree, First Data, Reynolds Group, Rite Aid, Sprint, and Valeant Pharmaceuticals. The average bid plunged 246 basis points from 94.44 cents on the dollar to 91.98. The worst plunge and the worst level since that infamous October 6, 2011, when a flare-up of the euro debt crisis wreaked havoc in the global markets. The average yield jumped to 8.62%. Almost all of the components of the index were in the red. LCD: This time around, declines are linked to ongoing concerns about global economic growth and the commodities crunch, with the latter, in particular, forever defining the state of play for late 2015. The decrease builds on a 186 bps retreat on Thursday, for a net-432 bps decline week over week, and it follows negative observations more mildly in the prior three readings, for a decline of 578 bps dating back four weeks.

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