Monday June 27 2016 Housing and Economic stories

TOP STORIES:

Performance Is Trumping Safety in the Low-Volatility ETF Craze - (www.bloomberg.com) The low volatility exchange-traded fund (ETF) craze has little to do with investors seeking less volatility. Instead, the billions of dollars flowing into ETFs that track stocks exhibiting the least amount of volatility is a classic case of performance-chasing. Like little kids playing soccer, many investors follow the outperformance ball, so to speak, wherever it goes. It happens with stocks, bonds, active mutual funds, hedge funds, and increasingly with ETFs. Right now, the soccer ball is in the low-volatility part of the field, where nearly all low-vol ETFs are outperforming their respective markets—be they large-caps, small-caps, or international equities.

Worst “Zombie States” in America “Deteriorate Faster, Further” - (www.wolfstreet.com) During the Financial Crisis, it was California that made the headlines with “out-of-money dates” and fancy-looking IOUs with which it paid its suppliers. The booms in the stock market and the startup scene – the state is desperately hooked on capital-gains tax revenues – but also housing, construction, etc. sent a flood of moolah into the state coffers. Now legislators are working overtime to spend this taxpayer money. Gov. Jerry Brown is brandishing recession talk to keep them in check. Everyone knows: the next recession and stock-market swoon will send California back to square one. Now Puerto Rico is in the headlines. It’s not even a state. And it’s relatively small. But look at wild gyrations by the federal government and Congress to deal with it, to let the island and its bondholders somehow off the hook.

Home ownership rates drop to 63.4%, lowest since 1967 - (www.cnbc.com) This is what happens when government tries to increase home ownership ;-) 

The U.S. homeownership rate fell to 63.4 percent in the second quarter of 2015, according to the U.S. Census. That is down from 63.7 percent in the first quarter and from 64.7 percent in the same quarter of 2014. It marks the lowest homeownership rate since 1967. Homeownership peaked at 69.2 percent at the end of 2004, when the housing market was in the midst of an epic boom. The 50-year average is 65.3 percent. "It is now just five-tenths from the record low seen in 1965 in data going back also to 1965," noted Peter Boockvar, an analyst with The Lindsey Group. "All the governmental attempts (certainly aided and abetted by many players in the private sector) at boosting homeownership has gotten us to this point in time with all the havoc it wreaked over the past 10 years. It's just another governmental lesson never learned, of don't mess with the free market and human nature."

Heroin Use In The United States Reaches A 20 Year High - (www.zerohedge.com) Whatever the war on drugs is accomplishing, it certainly was not keeping one million people in 2014 from using heroin in the United States, which according to the UN report is almost three times as many users as in 2003. Additionally, heroin related deaths have increased five-fold since 2000. Angela Me, the chief researcher for the report said "There is really a huge epidemic (of) heroin in the US. It is the highest definitely in the last 20 years." According to Reuters, Me named two potential reasons for the uptick in usage. One being that the US legislation introduced in recent years has made it harder to abuse prescription opioids such as oxicodone, a powerful painkiller that can have similar effects to heroin. A second reason is that the supply in the US from Mexico and Colombia is greater, and prices have been depressed in recent years. In 2014, at least 207,000 deaths globally were drug related, with heroin use and overdose-related deaths increasing sharply also over the last two years according to the UN Office on Drugs and Crime (UNODC)

China bankruptcies surge as government targets zombie enterprises - (www.ft.com) Chinese bankruptcies have surged this year as the government uses the legal system to deal with “zombie” companies and reduce industrial overcapacity as part of a broader effort to restructure the economy. Courts in China accepted 1,028 bankruptcy cases in the first quarter of 2016, up 52.5 per cent from a year earlier, according to the Supreme People’s Court. Just under 20,000 cases were accepted in total between 2008 and 2015. China’s legislature approved a modern bankruptcy law in 2007 but for years it was little used, with debt disputes often handled through backroom negotiations involving local governments.“Bankruptcy isn’t just about creditor-borrower relations. It also touches on social issues like unemployment,” said Wang Xinxin, director of the bankruptcy research centre at Renmin University law school in Beijing. “For a long time many local courts weren’t willing to accept them, or local governments didn’t let them accept.” 

OTHER STORIES:

Brexit or not, EU questions will linger after vote, strategist says - (www.cnbc.com)
Citi says close 'In' vote could still undermine EU and UK stability - (www.reuters.com)
U.S. Home Prices Increased 5.9% in April From Year Earlier - (www.bloomberg.com)
Renters Are Making More, And Landlords Get It All - (www.bloomberg.com)

U.S. regulators keep eye out for risks from marketplace lending - (www.reuters.com)
Default Swaps Broken for U.K. Bank Bonds as Brexit Vote Nears - (www.bloomberg.com)
Le Pen seeks mileage from Brexit debate - (www.ft.com)
Italy’s 5 Star Movement Calls for Euro Referendum - (www.wsj.com)