Tuesday May 17 2016 Housing and Economic stories

TOP STORIES:

Blackstone Is Pulling the Plug on Online Consumer Loans  - (www.bloomberg.com)  Seven months after Blackstone Group LP said it planned to expand into online consumer lending, the firm is pulling back. Several executives at Blackstone’s B2R Finance, including Chief Executive Officer Jason Hogg, have left as the company reorganized to focus more on its original mission, real estate financing, according to people familiar with the business. The moves were in the works before shares of online lender LendingClub Corp. fell more than 40 percent this week. Blackstone is aborting its foray into an industry that was going to rewrite the rules of banking, yet is now facing scrutiny after a scandal at LendingClub. Prospects for marketplace lenders have darkened as investors reassess the quality of their loans, shares of publicly traded companies have fallen and a study released Tuesday by the U.S. Treasury Department said the lenders needed stricter oversight.

The Big Unwind of US Merger Bubble Bloodies Hedge Funds - (www.wolfstreet.com) Hedge funds are getting bloodied in one of their favorite games, after years of a giddy boom in mergers and acquisitions with ever sillier valuations, made possible by an endless flow of easy money from yield-starved investors and fee-hungry banks, under the eyes of regulators who’d conveniently fallen asleep. But that M&A bubble is now collapsing. And many hedge funds that were into merger arbitrage got caught on the wrong side of the bet. Merger arbitrage is a bet that an announced acquisition gets completed. With the announcement, the share price of the target company shoots up to somewhere near the bid. If there’s hope that the bid will be raised, the share price might overshoot the bid. Once the target company agrees to be taken over, shares usually trade slightly below the acquisition price until the acquisition is completed. These price differentials can be exploited by merger arbitrage.

Two banks borrow $1 billion from ECB's emergency dollar line - (www.reuters.com) Two banks borrowed $1 billion at the European Central Bank's weekly dollar auction on Wednesday, a rare use of a source of emergency cash created to help troubled lenders during the financial crisis. The banks were not identified and their reason for tapping relatively expensive ECB funding is not known. But dealers contacted by Reuters said they might have not have been able to source dollars more cheaply on the market because they lacked good collateral. The ECB declined to comment. More than five years since the start of the euro zone's debt crisis, the region's banking system remains fragmented. Many banks in richer countries, such as Germany, sit on excess cash but some in crisis-hit economies still rely on ECB funding.

Hedge Funds Look for Hard Hats in a Year of Collapsing Mergers - (www.nytimes.com) While last year set a record for the amount of money spent on corporate mergers — $4.7 trillion — this year is so far setting a very different record: the dollar amount of deals that have come undone. Since the beginning of January, $400 billion worth of corporate mergers have been withdrawn in the United States, almost three times the previous record for the same period, set in 2007, according to Dealogic, which analyzes such data. On Tuesday, the retailers Staples and Office Depot called off their $6.3 billion deal. The collapse came about a week after the dismantling of the proposed $35 billion merger of the oil services companies Halliburton and Baker Hughes, and one month after the death of the drug giant Pfizer’sproposed $152 billion merger with Allergan — all canceled because regulators raised concerns.

Hayman's Bass Says Hong Kong Property Market Is in `Free Fall' – (www.bloomberg.com) Kyle Bass, the hedge-fund manager who’s wagering on a slowdown in China’s economy, said Hong Kong’s property market is in “free fall” and the credit expansion in Southeast Asian emerging markets will unravel. “Hong Kong’s in a worse position than it was in prior to the ’97 crisis today,” Bass said at the SkyBridge Alternatives Conference in Las Vegas on Wednesday. He said credit in Asian emerging markets has grown “recklessly,” citing Malaysia and Thailand. Hong Kong property prices have declined and sales are hovering near a 25-year low as the city grapples with the repercussions of a slowing Chinese economy. Home prices have dropped about 13 percent from a peak in September, according to data compiled by Centaline Property Agency Ltd.

OTHER STORIES:

Japanese Stocks Slump as Toyota Drops on Earnings, Yen Advances - (www.bloomberg.com)
Most Asian Stock Futures Drop Amid U.S. Retreat; Yen Holds Gain - (www.bloomberg.com)
The middle class is shrinking just about everywhere in America - (www.washingtonpost.com)
Nightmare on Wall Street: Busted Deals - (online.wsj.com)
Australian PM Turnbull named in Panama Papers: AFR - (www.reuters.com)

Defying debt fears, China bets on infrastructure, property - (www.reuters.com)
Hayman's Bass Says Hong Kong Property Market Is in `Free Fall' - (www.bloomberg.com)
The Latest: Brazil Impeachment Debate Drags Past 10 Hours - (www.reuters.com)
Milton Berg: We're at the Cusp of a 30-Year Bear Market - (www.bloomberg.com)