Thursday August 25 2016 Housing and Economic stories

TOP STORIES:

New SEC Money-Market Fund Rules Forcing a Liquidity Squeeze? - (www.wolfstreet.com) On Oct. 17th new SEC rules will come into play that’ll affect money market funds and liquidity across the financial sphere. These rules are an attempt to prevent an 08’ style crisis by controlling money market liquidity, but in reality, they may actually cause another financial crisis. The regulations say that prime and municipal money market funds (the funds invested in riskier assets than T-bills) will have to float their net asset values (NAV). They’ll also be required to impose liquidity fees and redemption gates. The problem with these new rules is the massive shift they’re causing in the money markets. Investors are moving en masse from riskier prime funds that will be forced to abide by these new rules, to safer government funds which are exempt. So far $500 billion has already moved from prime to government funds, and it’s expected another $500 billion will follow suite in the next few months.

 

In Scramble for Yield, Pension Funds Will Try Almost Anything - (www.wsj.com) Some pension funds are seeking to profit from others’ fear. Pension funds in Hawaii and South Carolina are plying an arcane options strategy called cash-secured put writing. In a typical trade, the investor sells a contract, known as a put, to someone who owns stocks and is willing to pay up for protection in case they decline. If, within a certain time, the shares fall below a given price, the investor buys the stocks at that price, or covers their lost value. The upside for the pension funds, which are writing options on the S&P 500 index, is that they earn regular income. The strategy aims to work like a volatility dampener. If stocks fall, the income the funds have collected on the options contracts should help cushion any hit they take on the puts and their own separate stockholdings. The pension funds set aside some cash-like instruments such as Treasurys for the payouts, so they aren’t caught without money if the market goes against them.

Seller’s Paradise: Companies Build Bonds for European Central Bank to Buy - (www.wsj.com) The European Central Bank’s corporate-bond-buying program has stirred so much action in credit markets that some investment banks and companies are creating new debt especially for the central bank to buy. In two instances, the ECB has bought bonds directly from European companies through so-called private placements, in which debt is sold to a tight circle of buyers without the formality of a wider auction. It is a startling example of how banks and companies are quickly adapting to the extremes of monetary policy in what is an already unconventional age. In the past decade, wide-scale purchases of government bonds—a bid to lower the cost of borrowing in the economy and persuade investors to take more risk—have become commonplace. Central banks more recently have moved to negative interest rates, flipping on their head the ancient customs of money lending. Now, they are all but inviting private actors to concoct specific things for them to buy so they can continue pumping money into the financial system.

From Soccer Stars To Bahrain Princes: New Emails Reveal Hillary Clinton Gave Special Access To Foundation Donors - (www.zerohedge.com) The farce continues as a detailed reckoning of Hillary Clinton's State Department emails reveals former top aide Huma Abedin provided influential Clinton Foundation donors special, expedited access to the secretary of state. In many instances, as Judicial Watch exposes, the preferential treatment provided to donors (from a British soccer player to the crown prince of Bahrain) was at the specific request of Clinton Foundation executive Douglas Band. As JudicialWatch.com details, the new documents included 20 Hillary Clinton email exchanges not previously turned over to the State Department, bringing the known total to date to 191 of new Clinton emails (not part of the 55,000 pages of emails that Clinton turned over to the State Department).  These records further appear to contradict statements by Clinton that, “as far as she knew,” all of her government emails were turned over to the State Department.

Business Loan Delinquencies Rock Past Lehman Moment Level - (www.wolfstreet.com) This afternoon, somewhat obscured by the Fed’s media-savvy and endless flip-flopping about rate hikes, the Board of Governors of the Federal Reserve released its second quarter delinquencies and charge-off data for all commercial banks. It shows that if the Fed wanted to raise rates before serious signs of trouble emerged, it might have missed the train. Consumer loans are still doing well, though delinquencies have ticked up 10% from a year ago to $26.8 billion. Loans are considered “delinquent” when they’re 30 days or more past due. Credit card loans are also still doing well, though delinquencies have jumped 11% from a year ago to $13.8 billion.

OTHER STORIES:

Rajan’s Deputy Patel Named as India’s Central Bank Governor - (www.bloomberg.com)
Turkey asks Germany for help with Gulen crackdown: report - (www.reuters.com)

Fed guessing game moves up a gear as Yellen takes stage - (www.reuters.com)
Bond Bulls Have Most at Stake as India Gets New Central Banker - (www.bloomberg.com)

U.S. Stocks Approach Record as Dollar Declines; Oil Advances - (www.bloomberg.com)
Emerging Markets Lead Gains in Stocks, Currencies; Pound Falls - (www.bloomberg.com)
Dollar Extends Drop as Faltering Economy Pares Rate-Boost Wagers - (www.bloomberg.com)