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It
Gets Ugly in Brazil - (www.wolfstreet.com) In
a stunning deterioration, the unemployment rate in Brazil spiked to 12.6% in
the rolling three-month period through January, a record in the new data series
going back to 2012, according to Brazil’s statistical agency IBGE.
Up from 11.8% in the three-month period through October. Up from an already
terribly high 9.5% a year ago. And more than double the 6.2% in December 2013. Economists
had expected the unemployment rate to rise to 12.4%. After three years of
underestimating the political, fiscal, and economic fiasco in Brazil, they’re
still underestimating it.
Barclays
Server Crash Leaves Customers Unble To Withdraw Cash, Use Debit Cards - (www.zerohedge.com) Having
managed to stem its recent earnings rout, reporting a Q4 rebound in income from
continuing operations which rose to £380 million after reporting a loss of
£2.24 billion a year ago, UK's Barclays is facing a more traditional problem:
on Saturday Barclays customers have reported problems using their cards in
shops and withdrawing money from some cash machines according to the BBC. Barclays customers tweeted about problems
using their cards when out shopping or trying to access online banking on
Saturday afternoon. "Wondered why my card was declined when paying for
lunch. Barclays servers have crashed. Brilliant," said one customer,
James. Other echoed his sentiments.
Germany
and Italy back Brussels on Brexit - (www.ft.com) Berlin
and Rome are backing the European Commission’s plan to rule out starting trade
talks with Britain until the UK gives assurances on a multibillion-euro Brexit bill and citizens’ rights. German and
Italian officials say they support Michel Barnier, the chief EU negotiator, in
seeking progress on divorce terms as an opening step. France is uncompromising
on the estimated €60bn bill, while Spain is more wary of attempts to “punish”
Britain. Such stances are preliminary, since EU member states have still to
take a formal position.
J.C.
Penney to Shut as Many as 140 Stores as Industry Slumps - (www.bloomberg.com) J.C. Penney Co. plans to shutter as many as 140 stores
and trim thousands of jobs, becoming the latest department-store chain to make
big moves in a world of lower mall traffic and fierce online competition. The
closings represent as much as 14 percent of the company’s store base and less
than 5 percent of total sales, J.C. Penney said Friday. The moves, which also include
shutting two distribution centers, will save about $200 million a year.
Bundesbank
braces for QE losses after lowest profit in decade - (www.reuters.com) Germany's
central bank posted its smallest profit in more than a decade in 2016 as it set
aside more money against potential losses on the bonds it is buying as part of
the European Central Bank's stimulus programme, data showed on Thursday. The
Bundesbank recorded a net profit of 399 million euros, the lowest since 2004
and a sharp drop from the 3.2 billion euros bagged in 2015, largely due to
higher provisions and writedowns.
China's
New Banking Regulator Chief Faces Daunting Challenges - (www.bloomberg.com)
China
steams past U.S., France to be Germany's biggest trading partner - (www.reuters.com)
Canadian
Inflation Surges to 2.1% in January on High Gas Prices - (www.bloomberg.com)
The
Big Question for the U.S. Economy: How Much Room Is There to Grow? - (www.nytimes.com)
China
Names Guo Shuqing, a Rapid-Fire Regulator, to Oversee Troubled Banks - (www.nytimes.com)
Fed
Isn’t Ready to Cut Balance Sheet Yet - (www.wsj.com)
Trump
Team Broadens Search for Fed Regulatory Post - (www.wsj.com)
Landlords
Are Taking Over the U.S. Housing Market - (www.bloomberg.com) As
rising home prices, slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of
renters—and landlords. Last year, 37 percent of homes sold were acquired by
buyers who didn’t live in them, according to tax-assessment data compiled in a new report published by Attom Data Solutions and
ClearCapital.com Inc. That number may include second homes, or properties
acquired by investors who seek to fix up old homes and resell them at a profit.
But it’s also a strong indication that landlords are playing a larger role in
the U.S. housing market.
The
Inevitable Turn in World’s Most Important Property Market - (www.wsj.com) China’s
housing prices are weakening once again. While the bubble may not be getting
bigger, the problems haven’t gone away. It’s déjà vu in China’s housing market.
After more than a year of frenzy, the all-important property market—the beating
heart of the Chinese economy and the driver of global commodity demand—is
cooling down. Prices for new homes edged up 0.2% in January from the previous
month, the slowest growth in more than a year, according to the country’s statistics
bureau. Average prices in the biggest cities—including Shanghai and
Shenzhen,...
China
Insurance Watchdog Vows to Severely Punish Speculators - (www.bloomberg.com) The
chairman of China’s top insurance regulator vowed to impose “stringent”
rules and “severely” punish short-term speculation by insurers, the latest sign
of tightening controls on the nation’s industry. The watchdog will also curb
“aggressive” pricing and the “unreasonably” high returns of some insurance
products, Xiang Junbo, Chairman of the China Insurance Regulatory Commission,
told reporters in Beijing on Wednesday. Insurers shouldn’t attempt to
interfere in the management of listed companies, Xiang said. The CIRC “will
never allow insurance to become a rich man’s club, let alone allow financial
crocodiles to use insurance as their channel or hideout,” Xiang said.
Hedge
Funds Continue to Chase the Herd With Record Momentum Bets - (www.bloomberg.com) Hedge
funds can’t get enough of momentum -- even if it means embracing an investing
strategy they hate. Loosely defined as betting on shares that went up the
fastest over the preceding nine-to-12 months, hedge funds are the most reliant
on momentum strategies since at least 2010, according to an Evercore ISI
analysis of 13F filings with the Securities and Exchange Commission. Meanwhile,
they’ve reduced their bearish bet on value stocks, which are priced at deep
discounts to earnings and assets, for the first time in nine quarters, the
study shows.
Euro
Hedging Costs Surge as Traders Respond to Political Risk - (www.bloomberg.com)
China
Home Prices Rise in Fewest Cities in a Year Amid Curbs - (www.bloomberg.com)
China's
Public-Private Projects Pose State Debt Risks - (www.bloomberg.com)
Germany's
'man of the streets' Schulz plots path to defeat Merkel - (www.reuters.com)
Exclusive:
China finishing South China Sea buildings that could house missiles - U.S. officials
- (www.bloomberg.com)
Fed
Minutes Could Offer Hints on Timing of Rate Rises, Balance Sheet Moves - (www.wsj.com)
Dallas
Police Pension Board Approves Benefit Cuts; Asks For More Taxpayer Money To
Avoid Collapse - (www.zerohedge.com) For
the past several months we've warned that the taxpayers of the City of Dallas,
despite all of the tough talk coming out of their elected city council members,
would ultimately be forced to bail out the failing Dallas Police and Fire
Pension (DPFP) system. And just last night the DPFP board voted 9-0 to
approve a plan that would do just that. The plan to save the DPFP was
proposed by Dan Flynn, chair of the pensions committee in the Texas House of
Representatives, and calls for Dallas taxpayers to contribute 34.5% of police
and firefighter salaries each year into the failing pension system, up from 27%
in 2015, plus an incremental $11 million per year. In total, the
adopted plan will cost Dallas taxpayers an extra $22 million per year.
So
Who’s Pumping Up this “New Normal” Housing Market? - (www.wolfstreet.com) “A
housing recovery that is highly dependent on real estate investors is a bit of
a double-edged sword,” explained Daren Blomquist, senior VP at ATTOM Data
Solutions. “Rapidly rising home values have been good for homeowner equity, but
also have caused an affordability crunch for the first-time homebuyers the
housing market typically relies on for sustained, long-term growth.” So the
housing market is “starkly different than a decade ago,” said Alex Villacorta,
VP of research and analytics at Clear Capital. “As such, it’s imperative for
all market participants to understand the nuances of the New Normal Real Estate
Market.”
Bundesbank
Prepares For Record Losses Once ECB Starts Hiking Rates – (www.zerohedge.com) Germany's
central bank reported its smallest profit in more than a decade in 2016 after
setting aside a record amount of provisions against future losses on the bonds
it is buying as part of the ECB's stimulus program, its annual report showed on Thursday. "It is fair to ask ...
when we can take our foot off the monetary policy pedal," Bundesbank
President Jens Weidmann said while presenting the report. The Bundesbank
recorded a net profit of 399 million euros (£337 million), the lowest since
2004 and far below the the €3.2 billion profit it booked in 2015. The fall was
largely due to higher provisions against paper bought as part of the ECB's
asset buying, which since June includes corporate bonds, and against cheap
loans extended to banks.
As
an Age of Nationalism Dawns, a Multinational Deal Collapses - (www.nytimes.com) Kraft Heinz’s $143 billion bid for Unilever would have been the biggest cross-border
deal in nearly two decades. But instead of being a triumph of global
capitalism, it induced only whiplash as the offer was withdrawn just
days after its disclosure. The short life span of the deal can be blamed in
large part on national barriers — which are likely to rise even further as a
new mercantilism emerges. Kraft Heinz is controlled by the crafty Brazilian
deal makers of 3G Capital. There’s no doubt the company and its advisers were
well aware that it would be forced to come out with a public statement if word
of its approach to Unilever got out.
It’s
Like the Financial Crisis Never Happened...
- (www.wsj.com) It’s
10 years since the U.S. subprime crisis began, and everything’s wonderful on
Wall Street. A decade after the world began to notice the losses on derivatives
linked to the toxic waste of structured subprime mortgages, American stocks
have produced such big returns that the biggest crash in generations barely
registers. The 10-year average compound return on U.S. shares was 4.9% a year
above inflation at the start of 2016, only slightly below the average for world
stocks since the end of the Gilded Age in 1900, according to calculations for
Credit Suisse by Elroy Dimson, Paul Marsh and Mike Staunton of London Business
School. The same isn’t true for the rest of the world. British stocks made only
3% above inflation, including dividends, in the past decade, while real
Japanese returns were barely positive and French shares delivered less than 2%.
German stocks weren’t quite so bad thanks to its export powerhouses, and their
4.3% return over inflation is in line with the very long-term return from the
world outside the U.S.
ETF
Investors Miss Out on the Best Commodity Trade of the Year - (www.bloomberg.com)
Dallas
Police and Fire Pension Backs Cutbacks to Avoid Collapse - (www.bloomberg.com)
Hedge
Funds Can't Sue Over Investments in Fannie and Freddie - (www.bloomberg.com)
This
is Why World Trade is the Weakest Since 2009 - (www.wolfstreet.com) World
Trade has been on our worry-list for a while, most recently in December [World Trade Falls to 2014
Level, just in Time for a “Trade War”]. Why has world trade refused to boom
recently? And it wasn’t just last year. But last year was particularly crummy.
Lackluster global demand gets blamed. But that’s using a broad brush to
sketch a troublesome development. Now the alarmed World Bank, in its report, Trade Developments in 2016 (PDF), barely blames the usual suspects
for this lackluster global demand, but identifies a new and dominant one:
“policy uncertainty.” It points out that 2016 was the fifth year in a row of
“sluggish trade growth.” 2015 had already been the weakest year since 2009,
when global trade collapsed as a result of the Financial Crisis. But 2016 was
even worse than 2015.
Millennium
Tower homeowners association to sue developer, nearby project - (www.constructiondrive.com) The two instances of legal action taken on
behalf of some or all of the tower’s condo owners join a civil suit filed against the developer in November by San Francisco City Attorney Dennis
Herrera alleging that it knew the tower was sinking but sold units anyway,
failing to let buyers know of the structural concerns. City officials began
investigating the tower this summer and amped up their efforts following an anonymous citizen call to
the city’s 311 line in August. Initially, the developer claimed the settling
was due to water drainage from construction activity on a neighboring $4.5
billion transit center project site. Transit officials, however, have since
said that the sinking is due to foundation piles failing to reach bedrock. Homeowners
likely face a protracted battle to resolve the issue after it emerged earlier this month that the insurance policies held by the
developer and other project team members may not fully cover the cost to remedy
damages caused by the sinking in addition to the measures required to prevent
further settling.
Billions
Wasted: Structures Built For 2016 Olympics In Brazil Are Now In Ruins – (www.zerohedge.com) Like
many others, the government ignored the economic realities of the country, betting on inflation and cronyism in order to throw an unforgettable party.
The 2016 Summer Olympics in Brazil cost Brazilian taxpayers $4.6 billion,
conservative estimates show. But once related expenses covered by the Brazilian
government are factored in, the overall costs hit the $12 billion mark, which
equates to about 0.72 percent of Brazil’s national budget. Prior to the
Olympics, however, the Brazilian government had already spent BR$39.5 billion on infrastructure, or
about $12 billion. Stadiums and urban projects designed to ensure the country
was ready for the sports event were built, but aside from the events scheduled
for 2014 and 2016, there seemed to be little to no demand for such public
investments, which prompted the country to wonder whether the expenses were worth the
trouble.
Banks
back off multifamily financing as apartment market cools - (www.constructiondrive.com) News that banks are getting cold feet over
multifamily projects further underlines a softening in the apartments category
as developers bring more schemes online than there are demand for. The slowdown
is being seen acutely in country's biggest metros, with rents in San
Francisco and New York dipping in February while rents nationwide inched up
slightly. Much of the oversupply and subsequent price reduction is occurring at
the upper end of the market. MPF Research reported last month that the luxury apartment market is
weakening due to oversupply. In New York alone, 85% of the 30,000 new
apartments set to be delivered in 2017 will be on the high end of the market.
Nationwide, roughly the same share of the 189,100 units added from the fourth
quarter of 2015 to the fourth quarter of 2016 were luxury.
HSBC
Plunges After Missing Profit Estimates on Revenue Drop - (www.bloomberg.com) HSBC Holdings Plc dropped the most in 18 months in London
trading after reporting fourth-quarter profit that missed estimates on a
surprise drop in revenue, which it warned could fall again this year. HSBC
reported a $3.4 billion pretax loss for the quarter that it blamed on slowing
growth in its core markets of Hong Kong and the U.K., while its adjusted profit
fell $1.2 billion short of analyst estimates. The lender said it will buy back
$1 billion of stock in the first half and signaled it may repurchase more later
this year. Chief Executive Officer Stuart Gulliver is battling to reverse five
years of declining revenue as he pares back HSBC’s sprawling global footprint and
reduces expenses.
Philadelphia
Soda Tax Leads To 30-50% Plunge In Sales, Mass Layoffs - (www.zerohedge.com) When
Philadelphia became the first US city to pass a soda tax last summer, city officials were eagerly looking forward
to the surplus-tax funded windfall to plug gaping budget deficits (and, since
this is Philadelphia, the occasional embezzlement scheme). Then, one month ago,
after the tax went into effect on January 1st we showed the tax applied in practice: a receipt for a 10 pack of flavored water
carried a 51% beverage tax. And since PA has a sales tax of 6% and Philly
already charges another 2%, the total sales tax was 8%. In other words, a
purchase which until last year came to $6.47 had overnight become $9.75. Two
months into Philadelphia's soda tax, supermarkets and distributors are
reporting a 30% to 50% plunge in beverage sales, preparing for a legal fight
with city hall, and are planning for mass layoffs.
Is
the US Restaurant Recession Becoming Structural? - (www.wolfstreet.com) National
restaurant data and anecdotal evidence has been piling up. “T Vogel,” a
commenter on WOLF STREET, put it this way: My wife and I make almost
30k more than the median family income in my town (northern CA) with no kids.
Our rent just went up by 1k a month – landlord selling – starter houses are
selling at 500k. We are not spending a dime more than needed. I plan to skip
our weekly night eating out now. They’re not the only ones to skip restaurants.
Costs are going up, not just of restaurant meals, but of life in general.
Incomes are lagging behind. And consumers are adjusting…. That’s what a Reuters/Ipsos opinion poll of more than 4,200 U.S.
adults confirmed today.
Chinese
Banks' Off-Book Wealth Products Exceed $3.8 Trillion - (www.bloomberg.com) Chinese
banks had more than 26 trillion yuan ($3.8 trillion) of wealth-management
products held off their balance sheets at the end of December, a 30 percent
increase from a year earlier, according to the central bank.
The expansion of this form of shadow banking, with money eventually being
diverted to quasi-loans and bonds, outpaced the 10 percent growth for normal
lending during the same period, raising risks for the broader economy and
undermining the country’s “deleveraging” efforts, the People’s Bank of China
said Friday in its quarterly monetary policy
report.
Greek
Bond Drama Meets Realpolitik - (www.bloomberg.com) Monday’s
meeting of European finance ministers looks like the last chance for some form
of agreement on the next leg of Greece's 86 billion euro ($91.4 billion)
bailout, before Dutch and French election complicate negotiations. Anything can
still go wrong with seemingly unsolvable differences between the European
authorities, the International Monetary Fund, and the Greeks. The worries are
certainly reflected in the sharp selloff of Greece's 2 billion euro bond
maturing July 2017. As befits a serious credit event, Greece's yield curve has
inverted, where soon-to-mature debt yields rise above those for longer-dated
bonds, reflecting the view that if Greece can make it past the next couple of
years it is more likely to make it in the longer term.
Schaeuble
denies 'Grexit' threat, says Greece on right path - (www.bloomberg.com) German
Finance Minister Wolfgang Schaeuble denied on Sunday that he had said Greece
would have to leave the euro zone if it failed to implement economic reforms. Schaeuble
said in an ARD television interview that Greece would not have problems if it
implemented agreed reforms, but would if it fails to carry these out. "I
never made any ('Grexit') threats," Schaeuble told ARD's Bericht aus
Berlin program just before the network played recent comments in which he said
Greece was "not yet over the hill" and the "pressure needed to
stay on" Greece or it "couldn't stay in the currency union".
