Friday April 22 2016 Housing and Economic stories

TOP STORIES:

Big U.S. banks grapple with costs as they face an ominous 2016 - (www.reuters.com) Five large U.S. banks cut more than $5 billion from their expenses during the first three months of the year, but it was still not enough to stop the financial bleeding in what was by many measures the worst quarter for Wall Street since the financial crisis. Volatile stock and bond markets, a rout in energy prices and stubbornly low interest rates left big banks' earnings in the dumps. As they reviewed results over the past week, some bank executives said conditions have improved in the early days of the second quarter, but there was little optimism that 2016 will be a year to celebrate. Goldman Sachs Group Inc and Morgan Stanley, whose earnings are more reliant on markets than peers, both saw their profits drop by more than half. Their returns on equity of around 6 percent were well below what investors and analysts say is acceptable. "They're not cutting costs fast enough to keep ahead of revenue declines," said Paul Miller, FBR Capital Markets.

Intel Cuts 12,000 Jobs, Forecast Misses as PC Blight Takes Toll - (www.bloomberg.com) Intel Corp. will eliminate 12,000 jobs, or 11 percent of its workforce, embarking on the deepest cutbacks in a decade to gird for a fifth year of declines in the personal-computer market. The world’s biggest maker of semiconductors said it’s shifting focus to higher-growth areas, such as chips for data center machines and Internet-connected devices. Intel also posted disappointing first-quarter revenue and gave a second-quarter sales forecast that fell short of analysts’ estimates. Shipments of PCs, a market that provides Intel with more than half of its sales, fell to their lowest level in a decade in the first three months of 2016. The depth and duration of the slump mean Intel can no longer fall back on booming demand for server chips or market-share gains against weaker rival Advanced Micro Devices Inc. The job cuts mark the most radical action yet by Chief Executive Officer Brian Krzanich, who has brought in new executives and shaken up his team as he works to reduce Intel’s dependence on PCs and rekindle growth by pushing into newer businesses.

Canada’s Financial Sector just Crapped on its Bondholders, Hoping They Don’t Care - (www.wolfstreet.com)  Canadian financial companies issued a total of $45 billion of a special kind of hybrid bonds. And now that Great-West has become the trailblazer, they might all be subjected to the same treatment. These bonds come with an option to be called after 10 years. If the option is not exercised, maturity is extended by another 30 years and the coupon is converted from the nice fixed-rate payment of yore to a floating-rate coupon based on an interest rate of “Libor plus,” in a world of ZIRP and NIRP. “Canadian investors never believed a Canadian bank or issuer would do that kind of thing in Canada,” Marc Goldfried, CIO at Canoe Financial LP in Toronto which manages $3.5 billion, told Bloomberg. But Great-West decided to become a trailblazer by not exercising this option on US$300 million in notes issued in 2006. Now the coupon converts to a floating rate based on the 3-month US-dollar Libor (currently 0.63%) plus 2.54 percentage points, so at the moment 3.17%. And investors have to wait another 30 frigging years before they get their money back! 40 years in total. And they believed they had a 10-year note! And had priced it like one!

China Default Chain Reaction Looms Amid 192 Day Cash Turnaround – (www.bloomberg.com) Chinese companies have never had to wait so long to get paid, as stockpiles build and customers delay sending funds. Firms now take a record 192 days to collect payment for their goods or services from when they pay for the inputs, according to data compiled by Bloomberg on non-financial corporations traded in Shanghai and Shenzhen. The cash conversion ratio is up from 125 days five years ago. Liquidity is tightening in China after company profits declined for the first time in three years and as debtors face their hardest time ever paying interest. “The longer the cash conversion cycle, the higher the risk of corporates not having enough cash to repay their debts,” said Iris Pang, senior economist for greater China at Natixis SA in Hong Kong. “That creates a chain reaction.”

US banks endure biggest drop in revenues since 2011 - (www.ft.com)  JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo generated total revenues of $98bn in the first quarter, down 9 per cent from a year earlier - the steepest fall in five years, according to a Financial Times analysis of Bloomberg data. Deep cost cuts failed to counteract the fall in revenue so the six lenders also saw their collective net income plummet 24 per cent year on year to $18bn. Goldman on Tuesday became the latest victim of the slowdown in trading and dealmaking when the investment bank posted its lowest first quarter revenue since Lloyd Blankfein became chief executive in 2006. The aggregate figures for the big six banks illustrate the sector’s reliance on turbulent securities businesses. Banks that have sizeable consumer divisions held up significantly better. Net income at the retail arms of JPMorgan Chase and Bank of America rose 12 per cent and 22 per cent, respectively.

OTHER STORIES:

Asian Stocks Extend Four-Month High as Commodities Shares Jump - (www.bloomberg.com)
PBOC Signals Less Appetite for Stimulus as Outlook Strengthens - (www.bloomberg.com)
Weaker Dollar Sparks Commodities Rally; Earnings Weigh on Stocks - (www.bloomberg.com)

China Faces Make-or-Break Moment, Says Forecaster of Japan Slide - (www.bloomberg.com)
Rio Warns of Fiscal Collapse as Brazil States Seek Debt Relief - (www.bloomberg.com)
BoC's Poloz Says Global Monetary Stimulus Is Reaching its Limit - (www.bloomberg.com)