Friday August 19 2016 Housing and Economic stories

TOP STORIES:

Government Loaned Billions To Start Failing Obamacare Co-ops With No Plan To Repay – (www.dailycaller.com) Affordable Care Act (ACA) — “Obamacare” — Co-Ops will likely never repay taxpayer money lent to them, according to an audit from the Inspector General’s office at the Department for Health and Human Services (HHS). The investigators found that the Center for Medicare and Medicaid Services (CMS) did not account for how the federal government would recover the loans if the Co-Ops failed. Obamacare authorized the CMS to loan money to support Consumer Operated and Oriented Plans, or Co-Ops. The Co-Ops were to be treated like startups, and repay the loans once they received business through Obamacare’s glitchy online marketplaces.

High-Risk ‘Shadow’ Credit in China Put at $2.9 Trillion by IMF - (www.bloomberg.com) International Monetary Fund staff said that 19 trillion yuan ($2.9 trillion) of Chinese “shadow” credit products are high-risk compared with corporate loans and highlighted the danger that defaults could lead to liquidity shocks. The investment products are structured by the likes of trust and securities companies and based on equities or on debt -- typically loans -- that isn’t traded, staff members John Caparusso and Kai Yan said in a report released Friday. The commentary highlighted the potential for risks bigger to the nation’s financial stability than from companies’ loan defaults. While loan losses can be realized gradually, defaults on the shadow products could trigger risk aversion that’s harder to manage, the report said. The “high-risk” products offer yields of 11 percent to 14 percent, compared with 6 percent on loans and 3 percent to 4 percent on bonds, the commentary said. The lowest-quality of these products are based on “nonstandard credit assets,” typically loans, it said.

Value of negative-yielding bonds hits $13.4tn - (www.ft.com) The value of negative-yielding bonds swelled to $13.4tn this week, as negative interest rates and central bank bond buying ripple through the debt market. The universe of sub-zero yielding debt — primarily government bonds in Europe and Japan but also a mounting number of highly-rated corporate bonds — has grown from $13.1tn last week, according to figures compiled by Tradeweb for the Financial Times. “It’s surreal,” said Gregory Peters, senior investment officer at Prudential Fixed Income. “It’s clear that central banks are dominating markets. There’s a race to the bottom. Central banks are the main drivers of this, it’s not fundamental.” The New Zealand central bank became the latest to cut interest rates again, while the Bank of England recently restarted its quantitative easing programme to combat the economic slowdown that is expected to follow the UK’s vote to leave the EU. About a quarter of the global economy now has negative interest rates.

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Nightmare at the Mall: Brick-and-Mortar Retail Totally Loses it - (www.wolfstreet.com) On the surface, it was the same lackadaisical data we’ve become inured to in this wondrous economy. But beneath the surface, there lurked a nightmare for the already struggling brick-and-mortar retailers. Total retail sales in July, at $457.7 billion, remained stubbornly flat from June, and ticked up a measly 2.3% from a year ago, adjusted for seasonal variation and holiday and trading day differences, but not inflation, according to the Commerce Department. As crummy as it was, it was propped up by sales of motor vehicles and parts, the largest category at 21% of total retail sales. They rose 1.1% for the month and 2.4% year-over-year to $93.2 billion. Auto sales have been booming. In terms of unit sales, they set an all-time record last year, funded by cheap debt and loosy-goosy underwriting standards; so comparisons this year are on top of a year that may be hard or impossible to beat for a while, with the industry already talking about a “car recession.”

Chicago Records Deadliest Day In 13 Years As City Spirals Out Of Control - (www.zerohedge.com) Last week the Chicago Tribune pointed out that nearly 100 people had been shot in Chicago in less than a week.  9 people were killed on Monday alone marking the deadliest day for the city in 13 years.  Now, with weekend data out, turns out the story is even worse.  For the week ended 8/13, a total of 110 people were shot in Chicago with 24 of them killed.  YTD statistics indicate the city is spiraling out of control with total shootings up to 2,621, a mere ~50% YoY increase, with 445 total homicides. The current homicide rate through August indicates the city is on pace for over 700 homicides in 2016, a 63% increase from 2015 (see chart below). A stunning map reveals Chicago's deadliest neighborhoods.  Chicago's Austin neighborhood has recorded the most shootings in 2016 at 313 but Englewood wins the prize for most homicides at 54. 

OTHER STORIES:

Home Equity Loans Come Back to Haunt Borrowers, Banks - (www.wsj.com)
Russia announces war games after accusing Ukraine of terrorist plot - (www.reuters.com)

Brexit could be delayed as govt departments not ready - Sunday Times
The Bank of Japan's Unstoppable Rise to Shareholder No. 1 - (www.bloomberg.com)
BOE Policy Action Is ‘Short-Term Balm,’ Haldane Writes in Times - (www.bloomberg.com)
Gulf Stocks Rise on Oil’s Best Week Since April; Egypt Retreats - (www.bloomberg.com)

Japan Plans to Develop Missiles to Protect Islands, Yomiuri Says - (www.bloomberg.com)
Bond Funds Turn to Emerging Markets - (www.wsj.com)

Turkish PM says Ankara sees no compromise with the U.S. over Gulen extradition - (www.reuters.com)