KeNo's Housing and Economic Portal: Thursday May 26 2016 Housing and Economic stories

Wednesday, May 25, 2016

Thursday May 26 2016 Housing and Economic stories

Lost Seals And Other Excuses Used By Defaulting Chinese Firms - (www.bloomberg.com) Missing corporate stamps, shuffled assets and disappearing executives have become the hallmarks of debt distress in China. Investors are starting to lose patience. China Shanshui Cement Group Ltd. said this month it couldn’t distribute interest without its company seal, only for the underwriter to report payment later saying the stamp isn’t needed. Shenyang City Utility Group Co. said it couldn’t publish a repayment statement as the holder of its chop was traveling. China City Construction Holding Group Co.’s bonds slumped to 79 yuan out of 100 yuan face value on May 6 after its controlling shareholder changed. Fosun International Ltd. was among issuers to report lost contact with executives. A lack of transparency and protections in bond documentation are adding to the angst among investors in China, where a record 10 companies have failed to make payments this year amid the weakest economic growth in a quarter century. This has prompted authorities to tighten regulation and scrutinize underwriters’ due diligence work.

Liquid alternative mutual funds leave investors disappointed - (www.ft.com) The asset management industry’s hopes of bringing hedge fund strategies to the American mass market have stalled in the face of miserable returns and scepticism from investors. Assets in so-called liquid alternative mutual funds in the US, which doubled between 2011 and 2014, have stagnated for two years, and new data show that the average fund lost money, regardless of whether the sector is measured over one, three, five or 10 years. The scale of the disappointment has become apparent because Morningstar, the research group tracking mutual funds, began categorising liquid alts funds separately from some bond funds this month.

The High Cost of Ultralow Interest Rates - (online.wsj.com) These policies are toxic for financial stability. They force retired people to curtail spending and discourage the young from saving for retirement. They force people into making risky investments and don’t stimulate economic growth. Worse, they gradually undermine personal responsibility and ensure that future generations are more dependent on government programs. The Fed has kept interest rates near zero for more than seven years. Experts generally recommend that U.S. households accumulate savings sufficient for 25 years of spending at 80% of earnings the year before retirement. Some savings will be in the form of Social Security benefits. But unconventional monetary policies are making it nearly impossible for most households to achieve the rest.

Abu Dhabi Stocks in Worst Run Since October as Gulf Markets Drop - (www.bloomberg.com) Abu Dhabi stocks posted their longest losing streak since October amid a slump in trading across Gulf Arab equity markets as investors held out for more than a $1 billion worth of rights issues. The ADX General Index fell 1.1 percent, declining for the sixth straight day. Emirates Telecommunications Group Co., or Etisalat, the largest phone company in the Middle East, led the retreat with a 2.6 percent drop. Traders exchanged shares in about a third of companies on the gauge. The Bloomberg GCC 200 Index slipped for a third day, with volumes on the main gauges in the six-nation Gulf Cooperation Council languishing at less than half the 20-day average.

Hedge Funds Are Betting Record Amounts on Meltdown of Australian Banks and Housing Bubble - (www.wolfstreet.com) It has been called the “widow maker trade,” based on how short sellers have been dealt with over the past few years. The fundamentals have been inviting: Australia has been in a fully blooming housing bubble. Households are the most indebted in the world, based on debt to disposable income. To maintain the housing bubble, the central bank slashed interest rates to record lows (1.75%). The government wants to keep the bubble going for as long as possible. So regulators close their eyes, according to media reports, to questionable or even illegal lending practices. Home prices, after soaring for years, are clearly unsustainable. But just because it’s a bubble doesn’t mean it has to implode on schedule. It will implode, as all bubbles do, but on its own time. If short sellers get the timing wrong, they’ll get run over by market euphoria. Hence, “widow maker trade” for betting against the housing bubble by shorting the banks.

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