KeNo's Housing and Economic Portal: Friday December 2 2016 Housing and Economic stories

Thursday, December 1, 2016

Friday December 2 2016 Housing and Economic stories

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Strongest Pillar of Shaky US Economy has Cracked – (www.wolfstreet.com) A “car recession,” as the industry is calling it, or the “so-called car recession,” as Ford called it on July 28 in its 10-Q filing, is taking hold. The more politically correct term that Ford also used is the “plateauing” of industry volume. Which means, after six boom years, sales are going down. They’re not crashing, for the moment. They’re facing tough headwinds, and so they’re drifting lower, despite enormous industry efforts to prevent it, and they’re now expected to drift lower next year as well. Steven Szakaly, chief economist of the National Automobile Dealers Association (NADA), which represents about 16,500 new vehicle dealers in the US, forecast that sales of new cars and light trucks in 2017 will drop to 17.1 million.

CalPERS Weighs Pros/Cons Of Setting Reasonable Return Targets Vs. Maintaining Ponzi Scheme - (www.zerohedge.com) In just a couple of months, the largest pension fund in the United States, the California Public Employees' Retirement System (CalPERS), will have to decide whether they'll rely on sound financial judgement and math to set their rate of return expectations going forward or whether they'll cave to political pressure to maintain artificially high return hurdles that they'll never meet but help to maintain their ponzi scheme a little longer. The decision faced by CALPERS is whether their long-term assumed rate of return on assets should be lowered from the current 7.5% down to a more reasonable 6%. As pointed out by Pensions & Investments, the decision has far-reaching consequences. First, a lower rate of return will equate to higher contribution levels for municipalities throughout California, many of which are on the verge of bankruptcy already. Second, given that CALPERS is the largest pension fund in the United States, a move to lower return hurdles could set a precedent that would have to be followed by other funds around the country in even worse shape (yes, we're looking at you Illinois).

Monte dei Paschi’s Future Hangs on Sunday Vote - (www.wsj.com) The day of reckoning for Banca Monte dei Paschi di SienaSpA, Italy’s No. 3 lender by assets and one of Europe’s most troubled, is drawing near. Long-simmering political, financial and market tensions promise to come to a head next week when it becomes clear whether Monte dei Paschi will be able to succeed in executing a make-or-break plan to bring itself back to health. This weekend will be decisive, when Italians vote on a referendum that could open the door to political instability and unnerve investors, threatening to derail Monte dei Paschi’s rescue plan. That in turn could force a state bailout of the lender, perhaps by year-end—deeply complicating Italy’s efforts to clean up its banking sector.

Exclusive: ECB ready to buy more Italian bonds if referendum rocks market - sources - (www.reuters.com) The European Central Bank is ready to temporarily step up purchases of Italian government bonds if the result of a crucial referendum on Sunday sharply drives up borrowing costs for the euro zone's largest debtor, central bank sources told Reuters. Italian government debt and bank shares have sold off ahead of the Dec. 4 referendum on constitutional reforms because of the risk of political turmoil. Opinion polls suggest the 'No' camp is heading for victory, which could force out Prime Minister Matteo Renzi in the latest upheaval against the ruling establishment sweeping the developed world. The ECB could use its 80-billion-euro ($84.8 billion) monthly bond-buying programme to counter any immediate, further spike in bond yields after the vote, smoothing market moves and supporting bonds, according to four euro zone central bank sources who asked not to be named.

Auto Loans Get Even Dicier - (www.wsj.com) After a yearslong boom in lending, signs of trouble are popping up in auto loans. In the past few weeks, some auto lenders have warned that default rates are creeping up. Used-car prices are also falling faster than many anticipated, leading to lower recovery amounts when borrowers do default. The latest stress signal comes from auto research firm Edmunds.com, which said in a recent report that record numbers of shoppers are trading in old cars for new ones when they still have substantial amounts due on their existing car loans. In the first three quarters of 2016, the number of these new-car purchases with negative equity on previous loans reached a record 32% of all trade-ins, according to Edmunds data. That is up from 30% in the same period a year earlier and just 22% five years ago. The average amount of negative equity also reached a record, at $4,832.

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