Monday December 21 Housing and Economic stories

TOP STORIES:

Energy and Mining Producers Reeling as Price Collapse Deepens - (www.nytimes.com) The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s largest players cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities. The full extent of the shakeout will depend on whether commodities prices have further to fall. And the outlook is shaky, with a swirl of forces battering the markets. The world’s biggest buyer of commodities, China, has pulled back sharply during its economic slowdown. But the world is dealing with gluts in oil, gas, copper and even some grains. “The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.”

Bond King Gets Antsy as Junk Bonds, Which Lead Stocks, Spiral to Heck - (www.wolfstreet.com)  “We are looking at real carnage in the junk bond market,” Jeffrey Gundlach, the bond guru who runs DoubleLine Capital, announced in a webcast on Tuesday. He blamed the Fed. It was “unthinkable” to raise rates, with junk bonds and leveraged loans having such a hard time, he said – as they’re now dragging down his firm’s $80 billion in assets under management. “High-yield spreads have never been this high prior to a Fed rate hike,” he said – as the junk bond market is now in a precarious situation, after seven years of ZIRP and nearly as many years of QE, which made Grundlach a ton of money. When he talks, he wants the Fed to listen. He wants the Fed to move his multi-billion-dollar bets in the right direction.

DoubleLine's Gundlach Says 'Real Carnage' in Junk Bonds Ahead of Fed - (www.reuters.com) Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital, said on a webcast on Tuesday that the junk bond market has come under severe selling pressure ahead of the Federal Reserve's policy meeting next week. "We are looking at real carnage in the junk bond market," Gundlach said. Gundlach also said it was too early to buy high-yield junk bonds and energy debt securities. "I don't like things when they go down every single day." Gundlach, who has been warning that the U.S. Federal Reserve should not tighten monetary policy in December, cited a number of other asset classes that are signaling deteriorating conditions. The commodities market has been facing monstrous declines with copper prices, as an example, down 37 percent since July 2014 while "the breadth of the equity market may be the worst ever." Gundlach characterized commodities as the "widow maker" of the markets.

If It Owns a Well or a Mine, It’s Probably in Trouble - (www.nytimes.com) The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s largest players cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities. The full extent of the shakeout will depend on whether commodities prices have further to fall. And the outlook is shaky, with a swirl of forces battering the markets. The world’s biggest buyer of commodities, China, has pulled back sharply during its economic slowdown. But the world is dealing with gluts in oil, gas, copper and even some grains. “The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.”

Dogged by Lousy Global Demand and Wild Overcapacity, China Containerized Freight Index Crashes to Worst Level Ever - (www.wolfstreet.com)   To the chagrin of the government, China has one export that is booming: capital flight. Fearing further devaluations of the yuan, a terribly inconvenient crackdown on corruption, political purges, and other mayhem, wealthy Chinese are trying to get part of their money out of harm’s way. Capital outflows tripled to an estimated $113 billion in November from October. To prop up the yuan in face of this sort of capital flight, the People’s Bank of China has been selling foreign currency, including US Treasuries. As a consequence, its foreign exchange reserves plunged by $87 billion in November to $3.396 trillion, the lowest since February 2013. The export of capital is a booming business in China. Actual exports weren’t so lucky, according to China’s General Administration of Customs. In November, they dropped 6.8% year-over-year (3.7% in yuan terms), after a 6.9% swoon in October. They’re down for a fifth month in a row. They’re a sign of crummy global demand for Chinese goods.

OTHER STORIES:

PBOC Cuts Yuan's Daily Fixing to Weakest Level Since August 2011 - Bloomberg Business - (www.bloomberg.com)
Emerging Markets Warned of Capital Drought as Fed Nears Liftoff - (www.bloomberg.com)
Kinder Morgan Cuts Dividend by 74 Percent to Conserve Cash - (www.bloomberg.com)

Brazil lower house names impeachment committee stacked against Rousseff - (www.reuters.com)
To hike or not to hike: Turkey's central bank faces crucial test - (www.reuters.com)
The unenviable currency problem facing China - (www.ft.com)