Wednesday January 25 2017 Housing and Economic stories

TOP STORIES:

The Man Who Called The Last Bond Bear Market 40 Years Ago Says "Buy Bonds" – (www.zerohedge.com) 74-year-old bond guru Lacy Hunt is among a rare breed in finance today: people who actually traded during a period when bonds continuously lost value. As a young bond manager coming of age during the Great Inflation and Richard Nixon’s wage and price controls, Bloomberg reports that Hunt saw the bear market in bonds coming in the late 1970s, and made a fortune for his clients. Today, as hints of inflation start to bubble and calling the next bear market becomes the industry’s favorite pastime, Hunt says no, "I’m still long bonds, especially the long-end." Hoisington Investment Management’s Hunt shrugs it off and says “it’s just more of the same.”

Using an out of fashion metric known as the velocity of money, the Austin, Texas-based economist says he’s convinced the rout since the election of Donald Trump is just a bump in the road for an extended rally.

Sear’s Bankruptcy, Who Gets the Real Estate, and How the Pension Fund Got Hung Out to Dry (at Taxpayer Expense) Invade Mnuchin’s Senate Confirmation Hearing - (www.wolfstreet.com) That Sears Holdings will file for bankruptcy appeared to be taken for granted in the confirmation hearings before the US Senate on Thursday. And when it does file, it’s going to get very complicated for Steven Mnuchin, the Trump administration’s appointment for Treasury Secretary. But the most fascinating part, for us as a non-political finance and economics site, is the dissection of the whole Sears deal. Senator Bob Menendez (D-NJ), as he proceeds with his questioning, lays out how Sears Holding’s CEO “Eddie” Lampert, his hedge fund ESL, and some other entities have worked hard to get their hands on the real estate, while the pension fund, when Sears Holdings goes through bankruptcy, will be left behind as a sinkhole that taxpayers might be shanghaied into filling. I postulated at the end of December that Sears Holdings will try to stay out of bankruptcy at least through July to avoid running afoul of fraudulent conveyance provisions in the bankruptcy code. But after that, all bets are off. So this  might transpire pretty soon.

USGov Has Been Massively Under-Reporting Student Loan Delinquencies Due To "Glitch" - (www.zerohedge.com)  The latest unfabricated data [suggests] that loan delinquencies are rapidly rising toward 50% across most of America's colleges... the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

In lawmakers' first hearing on state budget, Gov. Jerry Brown's staff gets grilled on a $1.5-billion mistake - (www.latimes.com) Gov. Jerry Brown's budget team offered a seemingly simple explanation on Tuesday for an almost $1.5-billion accounting error in California's healthcare program for the poor. "The math was wrong," said Amy Costa, the chief deputy director of Brown's state Department of Finance, in a Senate committee hearing. The mistake drew sharp criticism from some state senators, who suggested it should be viewed it in the context of Brown's projected $1.6-billion deficit and the $3.2 billion in spending cuts he has proposed to help balance the books.

In Davos, Financiers Bewildered by Global Uncertainty - (www.nytimes.com) For the investors and market-movers at the annual World Economic Forum here, a threat lurks. At cocktail parties where the Champagne flows, financiers have expressed bewilderment over the rise of populist groups that are feeding a backlash against globalization. In the halls of the Davos Congress Center, where many of the meetings this week are taking place, investors have tried to make sense of the political upheaval. The world order has been upended. As the United States retreats from the promise of free trade, China is taking up the mantle. The stark shift leaves investors trying to assess the new risk and opportunities in the global economy. “This is the first time there is absolutely no consensus,” said William F. Browder, a co-founder of Hermitage Capital Management who has been coming to Davos for 21 years. “Everyone is looking into the abyss.”

OTHER STORIES:

Mnuchin Says He’ll Tag China an FX-Manipulator If Warranted - (www.bloomberg.com)
Schaeuble Says He’d Balk at New Greek Bailout Without the IMF - (www.bloomberg.com)
China is working hard to support its currency — it sold US government bonds for six straight months - (www.cnbc.com)

Mnuchin Hearing Does Little to Clear Trump Fog of Uncertainty - (www.wsj.com)
New Wall Street Conflict: Analysts Say ‘Buy’ to Win Special Access for Their Clients - (www.wsj.com)
Currency traders see tug of war over the dollar - (www.ft.com)