Tuesday May 31 2016 Housing and Economic stories

TOP STORIES:

Lending in China Is So Risky That Cows Are Now Collateralized - (www.bloomberg.com) In the creative world of Chinese lending, there’s a new trade in town: the cow leaseback. China Huishan Dairy Holdings Co., which operates the largest number of dairy farms in the country, is selling about a quarter of its herd -– some 50,000 animals -- to Guangdong Yuexin Finance Lease Co. for 1 billion yuan ($152 million) and then renting them back. With an estimated $1.3 trillion of risky loans in the country, Chinese banks are becoming more cautious about lending, forcing some companies to look for new ways to borrow. Finance leasing has been growing in popularity, especially for purchases of equipment. But cows? "It’s not very common to use cows as collateral," said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. "The value of a cow would fluctuate depending on milk prices and other factors, so it’s a risky asset for lenders. It would be hard to do forced selling -- there’s no liquid market for a large number of cows."

Global conditions echo post-Lehman crisis, Abe warns G7 – (www.ft.com)  The global economic outlook is as grim as it was after the Lehman Brothers crisis in 2008, Shinzo Abe claimed on Thursday, as the Group of 7 revealed its stark divisions on economic policy. Seeking to rally support for a global fiscal stimulus at the G7 summit, the Japanese prime minister showed his fellow world leaders a series of alarming graphs comparing today’s economic conditions with those of 2008. But, according to people close to the discussions, Mr Abe struggled to win over opponents such as Germany’s chancellor Angela Merkel or UK Prime Minister David Cameron. Given the implausibility of his comparison with 2008 — the world economy is growing steadily, rather than falling apart — the fact that he used it suggests Mr Abe plans to delay a scheduled rise in Japan’s consumption tax from 8 to 10 per cent.

Euro zone hails 'breakthrough' with Greece, IMF debt deal - (www.reuters.com) SOUND FAMILIAR?? We have heard this 4-5 times since 2011. Euro zone governments on Wednesday offered Greece debt relief in 2018, but left key details for later in a bid to bridge Germany's view that no immediate action was needed and the International Monetary Fund's call for decisions now. The late-night compromise spared the battered European Union the risk of another Greek crisis this year, less than 12 months after Athens was on the brink of ejection from the currency area by rejecting austerity measures and defaulting on an IMF loan. After talks that lasted into early Wednesday, Eurogroup ministers agreed to release 10.3 billion euros (7.8 billion pounds) in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras's leftist-led coalition, subject to some final technical tweaks.

Wells Fargo launches 3% down payment mortgage - (www.cnbc.com) First-time buyers and low- to moderate-income buyers have largely been sidelined by today's housing recovery. The common cry is too-tight credit. Lenders have kept the credit box restrictive because they are gun-shy from the billions of dollars in buy backs and judicial settlements stemming from the mortgage crisis that they still face today. Now, the nation's largest lender, Wells Fargo, says it is opening that box with a new low down payment loan — a loan it claims is low-risk to the bank. "We are fully underwriting the borrowers, we are partnering with Fannie Mae to originate and sell these loans, we are ensuring the borrowers have an ability to repay and that they're qualified for home ownership, but we're simplifying things for the homebuyer," said Brad Blackwell, executive vice president and portfolio business manager at Wells Fargo.

Saudi Arabia Probes Bank Currency Trades as Peg to Dollar Strains  - (www.bloomberg.com) Banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter. The Saudi Arabia Monetary Agency has asked lenders to explain why they are offering dollar-riyal forward structured products to customers less than four months after the regulator banned options contracts that let speculators place wagers on a currency devaluation, the people said. The authority, known as SAMA, didn’t reply to requests for comment. Hedge funds such as PointState Capital and Pershing Square Capital Management have made bets that the country’s peg to the dollar will be broken as oil revenue plunges, even as the country maintains it has no plans to devalue and analysts including Capital Economics say such a move would be a last resort. Riyal forwards surged to 660 points, the highest since Feb. 15.

OTHER STORIES:

Households in Fed Survey Felt Vulnerable Despite Economic Gains - (www.bloomberg.com)
Hedge Funds May Lose 25% of Assets, Blackstone’s James Says - (www.bloomberg.com)
Europe’s Troubles Pile Up at Home as Leaders Cross Globe for G-7 - (www.bloomberg.com)

One Year After Bubble Burst, China’s Stock Market Has Gone Quiet - (www.bloomberg.com)
Hedge funds: Overpriced, underperforming - (www.ft.com)
Global conditions echo post-Lehman crisis, Abe warns G7 - (www.ft.com)
G7 agrees need strong message on South China Sea, China says don't 'hype' - (www.reuters.com)