Tuesday July 19 2016 Housing and Economic stories

TOP STORIES:

Corporate bond defaults cross 100, highest level since crisis - (www.cnbc.com) Corporate bond defaults have just crossed an ominous milestone. Fully 100 companies have defaulted on debt, 50 percent more than for the same period in 2015 and the highest level since 2009, according to S&P Global Ratings. Low oil and commodity prices, along with financial market volatility in the United States and abroad, have been the primary problems for thebond market this year. While the actual ratio of distressed issues is on the decline, the level of defaults has climbed. While the defaults have been weighted heavily to the energy sector, analysts at S&P said there's no guarantee things will stay that way.

When Energy Loans Go Bad: Why America's Largest Bank Is Sliding - (www.zerohedge.com)  Wells' long overdue admission that it is woefully under-reserved for what may be a deluge of loan defaults should oil fail to rebound strongly... and certainly if oil continues to decline, has finally arrived in the form of this chart showing its LTM loan loss provision expense. It is, in a word, soaring. But the biggest problem facing Wells is a well-known one: its extensive exposure to oil and gas companies, read shale, whose loan quality - as we all know - is deteriorating by the day and will continue to do so as long as oil refuses to rebound strongly to where it is actually profitable for highly levered companies, so somewhere north of $60. Recall what we wrote last quarter, when Wells finally disclosed its "dire" energy portfolio. Finally, we get to the real meat - Wells' Oil and Gas loan portfolio and total exposure. Here are the details: Oil and gas loan portfolio of $17.8 billion, or 1.9% of total loan outstanding.

The Housing Market Is Waving a Red Flag - (www.bloomberg.com) Almost nine years after the housing-market bust helped trigger the most recent recession, RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag. The same fervent speculation that abetted the housing bubble is showing up in the bloated share of foreclosures snapped up by third-party investors at auction — a record 31 percent in June, according to RealtyTrac data that starts in 2000. Many of those third-party buyers are "mom and pop" investors with less experience, said Blomquist. At the same time, institutional investors, a subset of the third-party investors who purchase at least 10 properties a year, are ducking out of the market. "It's somewhat counterintuitive — as the market gets better and there are fewer foreclosures available, demand for those good deals, those bargains in the market goes up," said Blomquist. "When you see this high percentage of the properties going to third-party investors, that is a sign that these speculators may be over-inflating the market."

Bernanke Floated Japan Perpetual Debt Idea to Abe Aide Honda - (www.bloomberg.com) Ben S. Bernanke, who met Japanese leaders in Tokyo this week, had floated the idea of perpetual bonds during earlier discussions in Washington with one of Prime Minister Shinzo Abe’s key advisers. Etsuro Honda, who has emerged as a matchmaker for Abe in corralling foreign economic experts to offer policy guidance, said that during an hour-long discussion with Bernanke in April the former Federal Reserve chief warned there was a risk Japan at any time could return to deflation. He noted that helicopter money -- in which the government issues non-marketable perpetual bonds with no maturity date and the Bank of Japan directly buys them -- could work as the strongest tool to overcome deflation, according to Honda. Bernanke noted it was an option, he said. Though Honda said he thought Japan was already engaged in a strategy that involved helicopter money, he wanted to convey the idea to Abe and asked Bernanke to meet with the premier in Japan. While this didn’t happen in the spring, Bernanke joined central bank chief Haruhiko Kuroda over lunch this Monday and on Tuesday he attended a gathering with Abe and key officials, including Koichi Hamada, another influential economic adviser.

Stock-picking active managers having their worst year ... ever - (www.cnbc.com) So much for 2016 being the year of the stock picker. In fact, this has been the year investors wanted to do anything but try to pick stocks. Active fund managers had their worst first half ever, with fewer than one in five beating a basic market benchmark, according to data from Bank of America Merrill Lynch that go back to 2003. Stock pickers were done in by two major factors: following the crowd and an uneven pattern of correlations among stocks. The 10 most-crowded stocks lagged the 10 least-owned by a whopping 18 percentage points, which BofAML called "an atypically high spread." The opportunities are there for stock picking, but the pros still have faltered. Correlations, or the tendency of stocks to move up and down together, had been falling but rose in June to 35 percent, a number that is still low compared with levels of 90 percent or higher in recent years but high enough to be disruptive.

OTHER STORIES:

Stocks Rise as Talk of Helicopter Money Sinks Yen; Pound Jumps - (www.bloomberg.com)
As Markets Reach New Highs, World’s Top Investors Sound Alarm - (www.bloomberg.com)
Yuan Trades Near Six-Year Low as Imports Add to Economy Concern - (www.bloomberg.com)
BoE surprises markets by keeping rates on hold, signals August move - (www.reuters.com)

Boris Johnson Heads for Brussels as EU Criticizes Brexit Tactics - (www.bloomberg.com)
Emerging market outflows to halve in 2016 to $350 bln-IIF - (www.reuters.com)
Bond Traders See Helicopters Loaded With Money - (www.bloomberg.com)
Japan’s Population Falls by Most Since Records Began in 1968 - (www.bloomberg.com)