KeNo's Housing and Economic Portal: Monday March 27 2017 Housing and Economic stories

Sunday, March 26, 2017

Monday March 27 2017 Housing and Economic stories

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Sears Enters Death Spiral: Vendors Halt Shipments, Insurers Bail - (www.zerohedge.com) As it turned out, we wouldn't have long to wait, because overnight Reuters reported that the worst case Sears scenario we envisioned for Sears is now taking shape and that suppliers to Sears have told Reuters they are doubling down on defensive measures, such as reducing shipments and asking for better payment terms, to protect against the risk of nonpayment as the company warned about its finances. The company's disclosure turned the focus to its vendors as tension is expected to mount ahead of the key fourth-quarter selling season amid rising concern about a potential bankruptcy, they said. Quoted by Reuters, the managing director of a Bangladesh-based textile firm said his company is using only a handful of its production lines to manufacture products for Sears' 2017 holiday sales. Last year, nearly half of the company's lines in its four factories were producing for Sears. "We have to protect ourselves from the risk of nonpayment," said the managing director, who declined to be identified for fear of disrupting his company's relationship with Sears.

Is this the Sound of the Bottom Falling Out of the Auto Industry? - (www.wolfstreet.com) Not quite, not yet, but it’s not good either. Let’s hope that the problems piling up in the used vehicle market — and their impact on new vehicle sales, automakers, $1.1 trillion in auto loans, and auto lenders — is just a blip, something caused by what has been getting blamed by just about everyone now: the delayed tax refunds. In its March report, the National Association of Auto Dealers (NADA) reported an anomaly: dropping used vehicle prices in February, which occurred only for the second time in the past 20 years. It was a big one: Its Used Car Guide’s seasonally adjusted used vehicle price index plunged 3.8% from January, “by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble.”

The Four Biggest U.S. Banks Top $1 Trillion - (www.bloomberg.com) The four biggest U.S. banks were worth the most on record versus China’s "Big Four" this month, as JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp. and Citigroup Inc. rallied 30 percent since Donald Trump was elected president. The American quartet’s combined market value closed above $1 trillion for the first time last month, a milestone Industrial & Commercial Bank Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. surpassed in 2015. The four Chinese banks, the world’s most profitable, were worth about the same as the U.S. foursome as recently as June.

Debt piles add to risk for China’s property groups - (www.ft.com) Balanced between their reliance on ballooning debt markets, which Beijing wants to bring under control, and a housing boom that authorities want to cool, developers have defied predictions of collapse for years. Even now, few analysts are predicting disaster but they say high leverage is a rising risk as margins come under pressure. “China’s more heavily indebted developers are living on a knife’s edge,” says Andrew Collier, managing director of Orient Capital Research, an investment research group in Hong Kong. Real estate developers are facing a funding squeeze just as they are entering their first downturn in three years. House prices rose 40 per cent in big cities last year but have stalled in 2017. Single-digit price declines are expected this year and sales revenues for the bigger developers could fall by as much as 10 per cent, according to S&P Global Ratings, as transaction volumes decline. Last year, revenues rose 20 per cent.

Iron Ore Takes a Battering as Bear Market Engulfs China Futures - (www.bloomberg.com) Iron ore is getting battered. After rounds of warnings that this year’s rally may be overdone, the raw material is in retreat as doubts gather about the strength of demand in China as steel sells off and record port stockpiles put a spotlight on rising supplies. In China, futures on the Dalian Commodity Exchange sank into a bear market as steel in Shanghai posted the longest run of declines this year, while the SGX AsiaClear contract in Singapore fell for a fourth day. Benchmark spot prices from Metal Bulletin Ltd. extended a loss below $90 a dry metric ton to the lowest since Feb. 9. “Steel demand in China is clearly robust, but iron ore prices remain very elevated versus fundamentals, and it’s only a matter of time before they normalize to below $60,” Ian Roper, an analyst at Macquarie Group Ltd., said in an email. “We’ve had a negative view on prices for a while but they’ve held up longer than we expected.”

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