Thursday September 1 2016 Housing and Economic stories

TOP STORIES:

Puerto Rico’s Pensions: $2 Billion in Assets, $45 Billion in Liabilities - (www.wsj.com) Soon-to-be-named members of an oversight board are tasked with balancing the island’s huge pension deficit with its $70 billion debt load. One of the thorniest tasks awaiting a seven-member board charged by Washington with cleaning up Puerto Rico’s debt crisis is deciding how to balance a $70 billion debt load with nearly $43 billion in unfunded pension liabilities. The issue is coming to a head now because the White House is set to name as soon as next week the members of that oversight board, drawn from lists of candidates submitted by congressional leaders in both parties. Puerto Rico’s constitution calls for the island to pay its general-obligation bonds ahead of public services or pensions, but a lawsigned by President Barack Obama in June clouds that hierarchy by directing the new board to ensure pensions are adequately funded.

Oil Slide Lifts Corporate Defaults to Seven Year High - (www.wsj.com) Stronger oil prices offer little respite to debt defaults in the energy sector. Oil, gas and natural resource companies accounted for 56% of this year’s corporate defaults as 65 companies missed payments on their debt, according to a report from S&P Global on Thursday. The oil and gas sector also has the largest share of high yield bonds trading at distressed levels, at 31%. Trouble in the oil sector is also translating into higher global corporate defaults. This year’s tally totals 117 companies, up 60% from the same period of 2015. Global corporate defaults are currently at the highest level since 2009, when 213 companies defaulted in the same period amid the global financial crisis, S&P said. Many commodities companies tapped debt markets to take advantage of the long period of low interest rates, CFO Journal recently reported. Since some of those loans are tied to the value of commodity reserves, the drop in energy prices cuts the value of those in-ground reserves and sometimes pushes a company into default.

Did Moody’s Just Sever Energy Giant’s Last Life Line? – (www.wolfstreet.com) Few companies epitomize the failings, follies and foibles of today’s age of hyper-financialized, super-crony capitalism quite like Spain’s teetering green-energy giant Abengoa. The firm came within inches of becoming Spain’s biggest ever bankruptcy last year after embarking on a suicidal multi-year international expansion program fueled by exceedingly generous renewable energy subsidies and massive helpings of bank and corporate debt. But the subsidies were abruptly taken away when the Spanish government changed. When it had trouble dealing with its debt, the company began hiding it through increasingly complex financial vehicles set up, of course, in the City of London. As Abengoa’s then-CEO Manuel Sánchez Ortega crowed at the time, when things get serious, you need to have your wits about you, and “Abengoa has always been at the leading edge of financialization.”

Why Is FaceBook Funding "Anti-Fed" Activists - (www.zerohedge.com)  That's what St. Louis Fed president James Bullard would like to know. Moments after revealing that the Fed is very close to admitting that the stock market is in a bubble when he told Steve Liesman that "I think we are on the high side of fairly valued, I could see the process getting away from us, maybe tech stocks, maybe others", he shifted to something totally different: the so-called Fed Up "activist protests" which have been taking place at Jackson Hole. And, as the WSJ reported earlier, a day after an unprecedented gathering between left-leaning activists and many Federal Reserve officials, at least one central banker is questioning the group's motives. Bullard said funding of the Center for Popular Democracy's Fed Up campaign, which draws in large part on a charity supported by ex- Facebook founder Dustin Moskovitz, whose net worth of $8 billion in 2015 made him the youngest billionaire according to Forbes - has raised questions for him about what the activists are really up to.

Central bankers eye public spending to plug $1 trillion investment gap - (www.reuters.com) As central bankers converge on this mountain resort Thursday for an annual conference on monetary policy, a couple of top Federal Reserve officials took the chance to renew a push for interest-rate hikes, citing improvement in employment and inflation. "The case is strengthening" for a rate hike, Dallas Fed President Robert Kaplan told CNBC television, whose open-air studio here overlooks the craggy peaks of the Grand Teton National Park. "And you should conclude from that in the not-too-distant future ... I think we're moving toward being able to take another step."

OTHER STORIES:

Stocks, Bonds, Dollar Run Out of Steam Before Yellen’s Speech - (www.bloomberg.com)
Years of Fed Missteps Fueled Disillusion With the Economy and Washington - (www.wsj.com)
Deutsche CEO: Negative rates have 'fatal consequences' - (www.cnbc.com)

There's Basically No Alternative to U.S. Corporate Bonds Right Now - (www.bloomberg.com)

As central bankers gather, some at Fed make interest rate rise case - (www.reuters.com)
August U.S. auto sales seen down 5.2 percent; 2015 was peak: forecasters - (www.reuters.com)