Thursday, April 30, 2015

Friday May 1 Housing and Economic stories


Chicago Public School Haunted by Bankruptcy Chatter Ahead of Bond Sale - (www.chicagobusiness.com)  The Chicago Board of Education can't catch a break as it tries to borrow to pay for upgrades to the third-largest U.S. school system. First, Moody's Investors Service and Fitch Ratings cut it to one step above junk last month, delaying a planned $372 million bond sale. Then last week, before a pared-down $296 million version of the deal, set for today, Gov. Bruce Rauner said the system may need bankruptcy protection, an option that's not legally open to it. There's little prospect that the backdrop will brighten. The system faces a projected $1.1 billion budget gap next fiscal year as retirement costs climb. Its relative borrowing costs are at a two-year high. And with negative outlooks from Moody's and Fitch, a downgrade to junk may chase off investors. “There are a lot of balls in the air when it comes to our outlook,” said John Miller, co-head of fixed income in Chicago at Nuveen Asset Management, which oversees about $100 billion of municipal debt. Nuveen may buy the new bonds for its high-yield fund, he said. “They might have to entice people with more spread, particularly with headline risk like this.”

Greece facing 'Lehman moment' as debt costs soar - (www.cnbc.com) As Greece's stock market plunges and borrowing costs soar, analysts warned the country could be facing its "Lehman moment" as it faces bankruptcy and more financial chaos. Greek bank stocks fell dramatically on Tuesday and its borrowing costs rose sharply following news that European Central Bank (ECB) staff were mulling contingency plans for both an "orderly" and "disorderly" default by Greece, sources told CNBC. A default could lead to Greece leaving the euro zone—something that closely-watched investor Mark Mobius said could herald the "beginning of the end" of the single currency bloc. "If there was an exit of Greece from the euro, that would be an amazing event for Europe. It would mean the beginning of the end and that would not be a happy picture," Mobius, executive chairman at Templeton Emerging Markets Group, told CNBC.

China Sees First Bond Default by State Firm With Tianwei - (www.bloomberg.com) A Chinese power-transformer maker became the country’s first state-owned company to default on an onshore bond, signaling the government’s willingness to let market forces decide an enterprise’s fate. Baoding Tianwei Group Co., the unit of central government-owned China South Industries Group Corp., said it will fail to pay 85.5 million yuan ($13.8 million) of bond interest due Tuesday. Kaisa Group Holdings Ltd. became the first Chinese developer to default on its U.S. currency debt Monday. Until now, only private-sector companies have defaulted in China’s domestic bond market even as state-owned enterprises have sold the vast majority of debt. Tianwei’s default highlights a shifting attitude toward financial risk, underscored by Premier Li Keqiang’s pledge to open a cooling economy to market forces and strip power from the government.

Harley has a warning for US companies - (www.businessinsider.com)  When iconic motorcycle maker Harley-Davidson Inc warned on Tuesday that discounting from foreign rivals would dent its profits, the message resonated beyond the motorcycle business. From cars to construction equipment, the impact of the strong dollar is a big problem for U.S. companies selling overseas. But the U.S. dollar's recent surge to multiyear highs against major currencies, such as the euro and yen, has also become a challenge to their efforts to protect market share on home turf. Harley's U.S. market share slipped nearly five percentage points in the first quarter to 51.3 percent as competitors offered discounts of up to $3,000 per bike and slashed suggested retail prices by up to 25 percent.

Guess What Happened The Last Time Bond Yields Crashed Like This... - (www.zerohedge.com) If a major financial crisis was approaching, we would expect to see the “smart money” getting out of stocks and pouring into government bonds that are traditionally considered to be “safe” during a crisis.  This is called a “flight to safety” or a “flight to quality“.  In the past, when there has been a “flight to quality” we have seen yields for German government bonds and U.S. government bonds go way down.  As you will see below, this is exactly what we witnessed during the financial crisis of 2008.  U.S. and German bond yields plummeted as money from the stock market was dumped into bonds at a staggering pace.  Well, it is starting to happen again.  In recent months we have seen U.S. and German bond yields begin to plummet as the “smart money” moves out of the stock market.  So is this another sign that we are on the precipice of a significant financial panic? Back in 2008, German bonds actually began to plunge well before U.S. bonds did.  Does that mean that European money is “smarter” than U.S. money?  That would certainly be a very interesting theory to explore.  As you can see from the chart below, the yield on 10 year German bonds started to fall significantly during the summer of 2008 – several months before the stock market crash in the fall…



Wednesday, April 29, 2015

Thursday April 30 Housing and Economic stories


Monsanto Furious At World Health Organization For Claiming Weedkiller Causes Cancer
- (www.zerohedge.com) Following Monsanto lobbyist comments recently that he's "not stupid" enough to drink the weedkiller that he also proclaimed was safe enough that "you can drink a whole quart of it and it won’t hurt you;" Reuters reports that the maker of the world's most widely used herbicide, Roundup, wants an international health organization to retract a report linking the chief ingredient in the weedkiller to cancer. The company said on Tuesday that a report, issued on Friday by the WHO, was biased: "The WHO has something to explain." However, as one scientist noted, "there are a number of independent, published manuscripts that clearly indicate that glyphosate...can promote cancer and tumor growth."

Greece Flashes Warning Signals About Its Debt - (www.nytimes.com)  By the standards of his frenzied schedule here last week, the meeting on Friday between Yanis Varoufakis, the Greek finance minister, and Lee C. Buchheit, the dean of international debt lawyers, was a quiet one. There was none of the media scrum that had followed Mr. Varoufakis around town during the semiannual meetings of the International Monetary Fund and World Bank, as he paid calls on the I.M.F. chief, Christine Lagarde; the head of the European Central Bank, Mario Draghi; the United States Treasury secretary, Jacob J. Lew, and even President Obama. But the get-together with Mr. Buchheit carried critical meaning, according to experts here. After all, it was Mr. Buchheit who helped brokerGreece’s most recent debt refinancing, in 2012.

[Evans-Pritchard] Europe ready for Grexit contagion as Athens gets closer to Russian cash - (www.telegraph.co.uk)  The European Central Bank has warned that a rupture of monetary union and Greek exit from the euro could have dramatic consequences, but insisted that it has enough powerful weapons to avert contagion. Mario Draghi, the ECB's president, said it would be far better for everybody if Greece recovers within EMU but made it clear that the currency bloc is no longer vulnerable to the immediate chain-reaction seen in earlier phases of the debt crisis.
This sends an implicit message to the radical-Left Syriza government in Athens that it cannot hope to secure better terms from EMU creditors by threatening to unleash mayhem. "We have enough instruments at this point of time, the OMT (bond-buying plan), QE, and so on, which though designed for other purposes could certainly be used in a crisis if needed," said Mr Draghi, speaking after a series of tense meetings at the International Monetary Fund. "We are better equipped than we were in 2012, 2011."

Tax Receipts Flash Economic Warning Sign - (www.zerohedge.com) With "tax day" now firmly behind us, it is expected that 2015 will show a record level of tax collections. This is a good thing, right? Maybe not. Over the weekend, an economist friend of mine sent me an interesting piece of analysis discussing the record level of tax receipts as a percentage of the economy. This is something that I have written about in the past. While the current push higher in tax collections partially due to economic growth, it is primarily due to higher tax rates brought on by the "2011 Budget Control Act." That bill imposed automatic tax increases and spending cuts beginning in 2013. It is worth noting that then chairman of the Federal Reserve, Ben Bernanke, launched "QE 3" specifically to offset the potential risks of the "fiscal cliff" imposed by the "debt ceiling deal." The good news is that those tax increases and automatic spending cuts led to a massive shrinkage of the deficit which has declined from a record of $1.35 Trillion in 2010 to just $559 billion as of the end of 2014.

US warships are reportedly heading to Yemeni waters to intercept an Iranian arms shipment  - (www.businessinsider.com) US Navy officials say the aircraft carrier USS Theodore Roosevelt is steaming toward the waters off Yemen and will join other American ships prepared to intercept any Iranian vessels carrying weapons to the Houthi rebels fighting in Yemen, the AP reports. The US Navy has been beefing up its presence in the Gulf of Aden and the southern Arabian Sea amid reports that a convoy of Iranian ships may be headed toward Yemen to arm the Houthis. The Houthis are battling government-backed fighters in an effort to take control of the country. The UN Security Council passed an arms embargo on aid to the Houthi rebels on April 14th. Iran is also prohibited from exporting weapons under a 2006 UNSC resolution.


Tuesday, April 28, 2015

Wednesday April 29 Housing and Economic stories


Greece Moves to Seize Public-Sector Funds as IMF Payment Due - (www.bloomberg.com) Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank. With negotiations over bailout aid deadlocked, Tsipras needs the cash for salaries, pensions and a repayment to the International Monetary Fund. Greek bonds fell after the move, pushing three-year yields to the highest since the nation’s debt restructuring in 2012. The order was questioned by local officials and slammed by the leading opposition party. The decree to confiscate reserves now held in commercial banks and transfer them to the central bank could raise about 2 billion euros ($2.15 billion), according to two people familiar with the decision. It shows how time is running out for Tsipras, a point made by European officials who addressed the matter at IMF meetings in Washington in recent days.

Major Chinese Developer (Kaisa) Says It Can't Pay Dollar Debts  - (www.bloomberg.com) Kaisa Group Holdings Ltd. became China’s first real estate company to default on its U.S. currency debt, capping a month of distress in bond markets amid an anti-corruption probe and fueling concern that losses will spread. The default coincides with the expiration of a 30-day grace period on $52 million of missed interest payments on two dollar-denominated bonds, according to a Hong Kong stock exchange statement Monday. Kaisa, based in the southern city of Shenzhen, is struggling to service 65 billion yuan ($10.5 billion) of debt owed to both onshore and offshore lenders while becoming embroiled in President Xi Jinping’s crackdown on graft. The developer’s problems have rippled across the region’s debt market, where investors starved of yield elsewhere in the world have swooped in to boost returns. As the government’s anti-corruption probes widen, it’s raising concern that defaults will spread after overseas noteholders bought a record $21.3 billion of bonds issued by Chinese property companies.

Creditors Chase Consensus With Greece to Unlock More Aid - (www.bloomberg.com)  Greece and its creditors remained at loggerheads with time running out to unlock aid and avert a default. The sides haven’t even set 2015 budget targets, let alone on policies to meet them, an official representing creditors said Monday, asking not to be named as talks aren’t public. Euro-area finance ministers said in February that a list of measures must be agreed upon by the end of April. European leaders want Greece to do more to revamp its debt-burdened economy, with progress to be reviewed on April 24 in Riga, Latvia, when finance ministers from the currency bloc meet. European Commission Vice President Valdis Dombrovskis said in an interview in Washington that creditors might need to wait until mid-May to see what Greece can deliver.

Ukraine’s $32 Billion Eurobond Pile Means Restructure or Go Bust - (www.bloomberg.comWith less than $10 billion of reserves to repay $32 billion of foreign-currency bonds, Ukraine is running out of time to reach a deal with creditors. Finance Minister Natalie Jaresko last week rejected a bondholder proposal to extend the maturities of its debt because it wouldn’t ease the overall burden enough without a reduction in principal, known as a haircut. The nation must repay $7.5 billion in government and corporate Eurobonds due this year and $5.3 billion in 2016, according to data compiled by Bloomberg. “The creditors are trying to achieve a reprofiling without a haircut,” Michael Ganske, who helps manage $6 billion as the head of emerging markets at Rogge Global Partners Plc in London, said by phone on Friday. “Frankly speaking, I can’t see how that will work because debt-sustainability is not established with that.”

Fed’s Cold-Case Files: Many Leaks But Nobody Caught Since 1980s - (www.bloomberg.com)  The leak came from the inner sanctum of Federal Reserve Bank of New York. Inside the regal board room of the New York Fed in lower Manhattan, a director quietly telephoned a brokerage with inside information on interest-rate policy. It was 1984, and the director, Robert Rough, had been tipping off the New Jersey brokerage for more than a year. His story, a tale of clandestine calls and dishonest profits, stands alone: He was the first, and so far only, official indicted for divulging confidential Fed information. Some three decades later, the Federal Reserve is once again confronting uncomfortable questions about possible leaks. So far little has come to light about who might have passed details of a 2012 Federal Open Market Committee meeting to a newsletter that caters to hedge funds.



Monday, April 27, 2015

Tuesday April 28 Housing and Economic stories


Greek Bond Yields Climb Most Since Aftermath of Syriza Election - (www.bloomberg.com) Greek government bonds were set for their worst week since the aftermath of Syriza’s election victory as the nation remained locked in negotiations to secure funding and avoid a default. The yield on 10-year securities climbed to the highest since December 2012 this week, and Spanish and Italian bonds also dropped, as officials worked to reach an agreement before Greece faces payments of almost 1 billion euros ($1.1 billion) next month. German 10-year yields dropped below 0.1 percent for the first time as European Central Bank President Mario Draghi said Wednesday that the institution’s 1.1 trillion-euro bond-buying program must be implemented in full to work.

Kaisa Keeps Creditors Guessing as China Dollar Default Looms - (www.bloomberg.com) Kaisa Group Holdings Ltd. has until Monday to find $52 million for missed payments on two of its dollar bonds as it seeks to avoid default. The troubled developer must pay the interest on its 2017 and 2018 notes that was due on March 18 and March 19 respectively after the expiry of a 30-day grace period. The delay is the latest twist in a saga that has seen Kaisa’s founder Kwok Ying Shing make an unexpected return to the company, projects in Shenzhen blocked, a near default on a loan in December and a takeover offer from Sunac China Holdings Ltd. Standard & Poor’s doesn’t expect Kaisa to pay and downgraded it to default last month. “Kaisa in the last four months has been mysterious and unpredictable, and Kwok coming back is equally surprising,” said Ashley Perrott, the head of pan Asia fixed income in Singapore at UBS Global Asset Management Ltd. “It wouldn’t be a good signal if they didn’t pay the coupon.”

Shares hit by China trading clampdown fears - (www.cnbc.com)  New rules for trading Chinese stocks spooked European and U.S. markets on Friday. Chinese exchanges and regulators announced Friday that they would crack down on over-the-counter margin trading and that they would allow fund managers to lend shares for short-selling. The type of stocks that investors can short sell will also be expanded soon to 1,100, from 900 currently. All of these moves could slow Chinese equities' wild run higher in recent months. Although the Shanghai Stock Exchange Composite Index rose 2.2 percent in Friday trading, Chinese after-hours stock futures fell about 5.5 percent in a response to the new regulations. Traders said U.S. and European markets were then in turn spooked by the move in those futures, and worries that the regulatory changes would be negative for the flow of recent money that has poured into Chinese exchanges.

The ECB Is Considering A Parallel Greek Currency - (www.zerohedge.com) As we first reported yesterday, one of the proposed measures to be implemented in Greece just before, or during its default and/or exit from the Eurozone, in addition to pervasive capital controls of course, is the implementation of a parallel "currency", or as explained yesterday, a government paying its citizens with IOUs. This is what we said less than 24 hours ago: Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a euro-zone exit. Assuming that a deal is not reached next week, there are a couple of routes that the Greek Government might take to avert disaster in the short term. First, it could issue IOUs to pay public sector workers and pensioners and free up money to repay its debts. But this could cause economic chaos if fears that the IOUs would never be paid sparked riots or public sector employees simply refused to work. Even if Greek people accepted IOUs, they could only function for a very short period. Before long, those receiving incomes in IOUs could only afford to pay their taxes through the same medium. And given that the Government’s international creditors would not accept IOUs as repayment, this would still lead to a debt default. Effectively, the IOUs would become a parallel currency whose value was deemed lower than that of a normal euro. This would be akin to a euro-zone exit.

Oil layoffs hit 100,000 and counting – (www.bdlive.co.zaLIKE many other oil-field workers, Chris Sabulsky spent years working a schedule known as "14 on, 14 off": two weeks at an oil or gas well somewhere followed by another 14 days at home in East Texas, fishing for bass and crappie. But now Mr Sabulsky, 48 years old, is spending his days sending out résumés, calling acquaintances to see if they know of job openings, and pondering his future. The closer your job is to the actual oil well, the more in jeopardy you are of losing that job," said Tim Cook, oil and gas recruiter and president of PathFinder Staffing in Houston. "Each time an oil rig gets shut down, all the jobs at the work site are gone. They disappear." The number of working US oil and gas rigs has dropped 46% so far this year to 988, the lowest level in more than five years, according to data from Baker Hughes''



Sunday, April 26, 2015

Monday April 27 Housing and Economic stories


Contagion Arrives: European Peripheral Bond Risk Soars - (www.zerohedge.com) Just yesterday, German FinMin Schaeuble bent the truth, proclaiming that there was no sign of contagion from Grexit concerns. Today, it appears, he will be eating his words, as Italian, Spanish, and Portuguese bond spreads have exploded higher (up 15-30bps this week) amid the collapse of Greek sovereign and bank bonds. It's not just Greek Sovereigns that are plunging, Greek Bank Bonds have collapsed... It's not just Schaeuble that doesn't see any problems. Stan Druckenmiller, the Chairman and CEO of Duquesne Family Office, said that with regard Greece leaving the euro: "Draghi has QE at his disposal.  My guess is there won’t be contagion, but even if there is, he can contain it, and soon as market participants see that, you won’t get contagion." However, it's no longer about bonds or Draghi, it's about redenomination risk once again and who gets what idea next (because if there is one thing that is not allowed in the EU, it's thinking for yourself).

CBS4 Investigation: TSA Screeners At DIA Manipulated System To Grope Men's Genitals – (denver.cbslocal.com)  A CBS4 investigation has learned that two Transportation Security Administration screeners at Denver International Airport have been fired after they were discovered manipulating passenger screening systems to allow a male TSA employee to fondle the genital areas of attractive male passengers. It happened roughly a dozen times, according to information gathered by CBS4. According to law enforcement reports obtained during the CBS4 investigation, a male TSA screener told a female colleague in 2014 that he “gropes” male passengers who come through the screening area at DIA. “He related that when a male he finds attractive comes to be screened by the scanning machine he will alert another TSA screener to indicate to the scanning computer that the party being screened is a female. When the screener does this, the scanning machine will indicate an anomaly in the genital area and this allows (the male TSA screener) to conduct a pat-down search of that area.” Although the TSA learned of the accusation on Nov. 18, 2014 via an anonymous tip from one of the agency’s own employees, reports show that it would be nearly three months before anything was done.

Schaeuble Warns Greece to Ditch False Hopes, Do Reforms - (www.bloomberg.com) German Finance Minister Wolfgang Schaeuble ruled out further concessions to Greece, saying it’s up to the Greek government to commit to the reforms needed to release aid rather than give false hopes to its people. Schaeuble, speaking in a Bloomberg Television interview in New York on Wednesday, said that another debt restructuring wasn’t up for discussion now, and that Greek demands for war reparations from Germany were “completely unrealistic.” “It’s entirely down to Greece,” said Schaeuble, 72. While some kind of restructuring might be on the agenda in 10 years, “today the issue for Greece is reforming its economy in such a way that it becomes competitive at some point.” Greece’s plight is deepening with no end in sight to the standoff with creditors over releasing the final installment of bailout aid, which has been stalled since the January election of Prime Minister Alexis Tsipras’s anti-austerity government. Greek bonds plunged Thursday after Standard & Poor’s cut the country’s rating to CCC+ from B-, citing the country’s deteriorating outlook.

Greece in 'slow-death scenario' amid defaults fears - (www.cnbc.com) A U.K. bookmaker has stopped taking bets on Greece leaving the euro zone, saying it is increasingly likely that the country could "begin the process of departing" very shortly. William Hill closed their book on whether Greece will leave the euro zone during 2015, and on which country would be first to leave the euro zone, the bookmaker said Wednesday evening. "Greece had been heavily backed down to 1/5 to be the first to quit the euro zone, and we'd also been shortening the odds for Greece to leave during 2015. They'd come down from 5/1 to 3/1.' William Hill spokesman Graham Sharpe said in a press release. He added that "it is now looking increasingly likely that they could begin the process of departing very shortly." It comes as one analyst told CNBC Thursday that the country faced a "slow-death scenario"—including a default and messy exit from the euro zone—as the country's economic crisis took another turn for the worse following a credit rating downgrade.

Ratings Shopping Run Amok in U.S. Property Debt Fuels Buyer Ire - (www.bloomberg.com) Some of the biggest buyers of bonds financing U.S. commercial properties are asking regulators to help stop a Wall Street practice of shopping for the highest credit ratings that they say has gotten excessive. MetLife Inc., Genworth Financial Inc. and Deutsche Bank AG’s investment arm are among at least nine firms that have discussed their concerns with regulators, according to four people with direct knowledge of the situation. Their main gripe is that underwriters are increasingly dropping credit raters such as Moody’s Investors Service and Fitch Ratings that demand the securities be structured to offer more protection from defaults. Barclays Plc analysts say banks are instead favoring upstarts that are more willing to give higher grades. That’s upsetting big bond buyers, many of whom can’t purchase the debt unless it’s graded by one of the three major bond raters -- Moody’s, Fitch and Standard & Poor’s. That means they’re getting squeezed out of deals, losing out to investors who face no such restrictions as a global hunt for high-yielding assets creates a seller’s market.