Monday May 1 2017 Housing and Economic stories

TOP STORIES:            

Nearly $1 billion in side deals for California gas tax approved - (www.mercurynews.com) Nearly $1 billion in controversial side deals that may have persuaded key California lawmakers to get behind a controversial gas tax this month cleared the Legislature Monday. In the lead-up to the April 6 gas-tax vote, funding for a handful of transportation projects surfaced in a separate bill, Senate Bill 132. The projects will benefit the districts represented by Assemblyman Adam Gray, D-Merced; Sen. Anthony Cannella, R-Ceres; Assemblywoman Sabrina Cervantes, D-Corona, and Sen. Richard Roth, D-Riverside. All four lawmakers voted in favor of the gas tax — which passed narrowly, without a vote to spare. Also part of the deal — and passed Monday — was Senate Bill 496, by Cannella, that would protect architects, engineers and other “design professionals” against legal claims made by public agencies. Cannella is an engineer. The gas tax will generate more than $5 billion per year for road repairs and local transit projects by indefinitely increasing gas and diesel taxes and hiking vehicle registration fees. The increases will cost the average driver roughly $10 per month or less, the state estimates.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds  - (www.bloomberg.com) The turbulence has centered on so-called entrusted investments -- funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China's financial system and reducing transparency.

The banks' withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking Group Ltd. predict the selloff will deepen this year.

4 Short Sellers Explain Why They Target Tesla – But Don’t Try to Do this at Home - (www.wolfstreet.com) The bloodletting among Tesla shorts has become legendary. Tesla has been shorted for years by some very smart money betting the overvalued shares will tank any moment. At the end of March, short interest was 31.4 million shares. This short interest amounts to 26% of the “float,” which is the number of shares available to trade (shares outstanding minus restricted stock). This is huge! Yet, at $308 a share, the stock brushes up against its all-time high, giving Tesla a market capitalization of $50 billion, just shy of GM’s $51 billion. But they don’t even compare. In March, GM sold 63 times as many cars in the US as Tesla. Over the past eight years, GM earned $47.1 billion; Tesla lost $2.7 billion. With this valuation, Tesla has been a logical short. But the bloodletting among Tesla shorts has become legendary. So the Los Angeles Times asked these four short sellers why they’d venture into this trade:

Parent Plus Student Loans: How to Screw Parents and Kids in a Single Shot - (www.mishtalk.com) It’s easy to get student loans thanks to the aptly named “Parent Plus” program, a subprime loan trap that ensnares parents plus their college-age children. The program was enacted by Congress in the 1980s, but president Obama promoted it heavily. The results speak for themselves: Nearly 40% of the loans are subprime. The default rate exceeds the rate for U.S. mortgages at the peak of the housing crisis. Kids graduate from college with useless degrees, plus parents and kids are stuck with massive bills that cannot be paid back.  “Student loans made through parents come from an Education Department program called Parent Plus, which has loans outstanding to more than three million Americans. The problem is the government asks almost nothing about its borrowers’ incomes, existing debts, savings, credit scores or ability to repay. Then it extends loans that are nearly impossible to extinguish in bankruptcy if borrowers fall on hard times.

Could Lack Of Transparency Hurt Aramco's Trillion Dollar Valuation? – (www.zerohedge.com) With officials calling Saudi deputy crown prince bin Salman's $2 trillion estimate of Saudi Aramco valuation as "unrealistic and mind blowing," OilPrice.com's Cyril Widdershoven notes the primary discussion taking place is the overall level of transparency offered by Aramco’s leadership, which is supported by the Saudi government. Saudi Aramco’s IPO, slated to raise between $100 billion and $400 billion from a 5 percent stake in the company, will continue to make headlines until its launch. Lately, discussions on the valuation of Aramco have been intense, and the jury is still out regarding an exact price. Aramco’s IPO will be a game-changer, propelling the world’s largest National Oil Company (NOC) into a league of its own on the financial markets. The current market capitalization estimates of $1-2 trillion are based on valuations of Aramco’s hydrocarbon reserves carried out by independent consultants. These estimates put the giant oil company far ahead of any other publicly owned company. Two major questions remain to be answered however, one of which has been largely ignored by the mainstream media. The primary discussion taking place is the overall level of transparency offered by Aramco’s leadership, which is supported by the Saudi government. 

OTHER STORIES:

Asia Stocks Set to Extend Global Rally; Yen Steady: Markets Wrap - (www.bloomberg.com)
Equity markets, euro rally in wake of French election - (www.reuters.com)
Trump Wants Tax Plan to Cut Corporate Rate to 15% - (www.wsj.com)

How Marine Le Pen can steer a narrow path to victory in France - (www.ft.com)
U.S. submarine makes South Korea port call, North remains defiant - (www.reuters.com)
U.S., North Korea Flex Military Muscles as Tensions Simmer - (www.bloomberg.com)

Friday April 28 2017 Housing and Economic stories

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New Poll Finds Record Number Of Americans Want More Government In Their Lives In a poll conducted a few days ago by NBC News / Wall Street Journal, a record 57% of Americans responded that they want MORE government in their lives, and that the government should be doing more to solve people’s problems. That’s the highest percentage since they started asking this question in 1995. In fact, 57% is nearly double what people responded in the mid-90s. What ever happened to self-reliance? The pioneering spirit? Good ole’ American can-do ingenuity? In truth there are countless ways for a motivated person to solve problems. Or at least to make forward progress. For example, to all these kids that have their hands out demanding free university education, I always ask the same questions: How many books did you read in the last twelve months?

How many FREE online courses from Harvard and MIT did you take? Are you actually doing anything to help yourself? Or are you just whining on social media about how no one is giving you anything for free? America was founded as a place where people take responsibility for themselves.

But this now seems to be an outdated, minority view. The Land of the Free is truly becoming the Land of Getting Free Stuff.

What’s Wrong with the American Craft-Beer Boom? - (www.wolfstreet.com) One of my many favorite craft brews used to be Lagunitas IPA, brewed in Petaluma, about 40 miles north of San Francisco. I used to be a regular buyer for home use – though when I’m out, I try beers I don’t know. In 2015, Heineken International, one of the world’s largest multinational brewing conglomerates with 180 or so brands, from Tiger to Tecate, bought a 50% stake, following in the footsteps of other multinational brewing conglomerates: they’re all on an acquisition binge of American craft brewers. Why? Because craft beer sales have been soaring, even as sales of the big brands, despite costly marketing and Super Bowl ads, have been sagging. The market is tilting toward craft brews, and the conglomerates figured this out too. Conglomerates are cost-cutters. They buy a brewer and try to make it work by cutting costs. One way they cut costs is by using cheaper commodity ingredients that their other breweries buy, which pushes down costs. This is American corporate theology.

Cheaper Mortgages Could Spur Housing Market - (www.foxbusiness.com) Mortgage rates dropped below 4% for the first time since November, providing more kindling to an already hot housing market as the crucial spring selling season gets under way. The average rate on a 30-year fixed-rate mortgage dropped to 3.97% for the week ended April 20, from 4.08% a week earlier and 4.3% in mid-March, according to data released Thursday by mortgage company Freddie Mac. The drop could help encourage buyers who had been put off by rising mortgage rates to dive into the market and prompt others to rush to buy homes before rates rise again. "We are in the spring, and people are out looking to buy homes," said Len Kiefer, deputy chief economist at Freddie Mac. "These low rates are really going to help out with affordability." For most of 2016, mortgage rates, which generally move together with yields on the benchmark 10-year U.S. Treasury note, hovered just above 3.5% for the 30-year fixed-rate mortgage.

Spring housing: 'Strongest seller's market ever' - (www.cnbc.com) Spring homebuyers are pounding the pavement at a furious pace, but the pickings are getting ever slimmer. Even as more homes come on the market for this traditionally popular sales season, they're flying off fast, with bidding wars par for the course. Home prices have now surpassed their last peak, and at the entry level, where demand is highest, sellers are firmly in the driver's seat. "I've been selling real estate for 25 years and this is the strongest seller's market I have ever seen in my entire real estate career," said David Fogg, a real estate agent with Keller Williams in Burbank, California. "A lot of our sellers are optimistically pricing their homes in today's market, and I have to say in most cases we're getting the home sold anyway." Fogg listed a three-bedroom, two-bathroom, 1,240-square-foot home in Burbank for $789,000 and had three offers before the first open house Sunday. In the Los Angeles-area market, that is considered an entry-level home. The open house drew more than 100 potential buyers, most of them already weary of the competition.

Mayor to subsidise 'naked' homes solution to London housing crisis  - (www.theguardian.com) the Enfield homes would be about 15% cheaper to build than standard new homes because of their basic design. "They will have a functioning sink and bathroom, but what they won't have is every interior wall or things like fitted coffee machines [which housebuilders often include]," he said. Costs will be cut further because buyers will not have to pay for the land in the purchase price. The freehold will be retained by the council and owners will pay annual ground rent. The plan is to ensure that the homes are cheap enough that buyers will only need to spend a third of their gross income on mortgage payments -- a widely used definition of "genuinely affordable" housing. Subject to planning consent, the apartments could be ready for occupation in 2020. The austere designs fit with a trend for minimal living among millennials forced upon them in part by a lack of disposable income because of high rents and property prices.

OTHER STORIES:

Equity markets, euro rally in wake of French election - (www.reuters.com)
Trump Wants Tax Plan to Cut Corporate Rate to 15% - (www.wsj.com)
Trump pushes Democrats on border wall as government shutdown looms - (www.reuters.com)

Retailers Are Going Bankrupt at a Record Pace - (www.bloomberg.com)
Fed Model Says `Neutral' Interest Rate Dips Back to Zero: Chart - (www.bloomberg.com)
Banks Are Backing Out of $1.7 Trillion in Chinese Investments - (www.bloomberg.com)

Thursday April 27 2017 Housing and Economic stories

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I’m in Awe of How Fast Brick-and-Mortar Retail is Melting Down - (www.wolfstreet.com) Mall traffic is sagging. Department store sales have been in decline since 2001. Most retailers are loaded up with debt. Many have been losing money. Now they’re running out of options. Store closings numbered in the thousands last year. This year they promise to get much worse. “Zombie malls” have become reality, their vast parking lots rented to car dealers to store their excess vehicle inventory. But ecommerce sales are booming, including online sales by some brick-and-mortar retailers, such as Walmart and Macy’s. Over-indebted retailers are notoriously difficult to restructure and many end up being liquidated. Unsecured creditors, such as suppliers and junior bond holders, are often left out in the cold. Even secured creditors can end up holding the bag.

Wayfair Tumbles After Amazon Launches Furniture Seller Program - (www.zerohedge.com) It looks like another 'retailer' is about to be 'Amazon'-ed. Wayfair - the retail household goods seller - is tumbling this morning after Amazon reportedly pitches a new furniture seller program. Additionally, not helping the stocks, Citron's Andrew Left goes negative on the stock, comparing the company's controls to Madoff. As FurnitureToday reports, Speaking to about 40 retailer members of the Furniture Marketing Group buying group here, Amazon representatives in the furniture category said the e-commerce giant hopes to launch the new “Unified Delivery with Services” change to its platform late in the third quarter. Under the plan, furniture sellers, such as stores, won’t be required to sell nationwide. The retailers will set their own pricing that can change with the services an Amazon customer chooses. White glove delivery (to a dry room) is the bare minimum service requirement — no drop-off at the door — but retailers can offer additional services, including delivery to the customers’ “room of choice,” set-up and haul away.

Canadian Housing Optimism Hits Record Amid Curbs on Toronto - (www.bloomberg.com) Optimism about home prices reached an all-time high in Canada just as policy makers stepped in to curb runaway prices in the country’s largest city. The share of respondents in the weekly Bloomberg Nanos Canadian Confidence Index who see home prices rising in the next six months climbed to 48.5 percent, the most in records back to mid-2008. The overall confidence index reached 59.1, the highest since March and exceeding the 12-month average of 57.4. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” said Nanos Research Group Chairman Nik Nanos. Ontario Premier Kathleen Wynne and her Finance Minister Charles Sousa introduced a 15 percent foreign buyers tax in the Greater Toronto Area on Thursday, and said the province would allow Mayor John Tory to charge a vacant property levy. Similar moves in Vancouver last year helped slow rapid gains.

Retailers Are Going Bankrupt at a Record Pace - (www.bloomberg.com) Retailers are filing for bankruptcy at a record rate as they try to cope with the rapid acceleration of online shopping. In a little over three months, 14 chains have announced they will seek court protection, according to an analysis by S&P Global Market Intelligence, almost surpassing all of 2016. Few retail segments have proven immune as discount shoe-sellers, outdoor goods shops, and consumer electronics retailers have all found themselves headed for reorganization. Meanwhile, America’s retailers are closing stores faster than ever as they try to eliminate a glut of space and shift more business to the web. S&P blamed retailer financial struggles on their inability to adapt to rising pressure from e-commerce. Urban Outfitters Chief Executive Officer Richard Hayne said as much on a conference call with analysts last month. There are just too many stores, especially those that sell clothing, he said.

The Fund Is Over EXCLUSIVE: Clinton Foundation Loses Chief Fundraiser – (www.dailycaller.com) The Clinton Foundation quietly parted ways with its top fundraiser “earlier this year,” the foundation’s spokesman told The Daily Caller News Foundation’s Investigative Group, while knowledgeable outsiders questioned why she was ever hired in the first place. Danielle Stilz, whose official title since 2015 was chief development officer, is still listed on the foundation’s website, and the foundation has yet to publicly acknowledge the change in personnel. Stilz, who now has the odd distinction of being at the center of two federal corruption investigations, also served from 2005 to 2007 as chief fundraiser for former Illinois Gov. Rod Blagojevich. The boyish-looking Democrat who is more popularly known as “Blago” is now serving a 14-year federal prison sentence on corruption charges, including 11 counts related to his attempt to sell then-President-elect Barack Obama’s former seat in the Senate.

OTHER STORIES:

Equity markets, euro rally in wake of French election - (www.reuters.com)
Trump pushes Democrats on border wall as government shutdown looms - (www.reuters.com)
Fed Model Says `Neutral' Interest Rate Dips Back to Zero: Chart - (www.bloomberg.com)

The Electric Car Revolution Now Faces Its Biggest Test - (www.bloomberg.com)

France faces national fight over global order - (www.ft.com)

Cheaper Mortgages Could Spur Housing Market - (www.wsj.com) 

Wednesday April 26 2017 Housing and Economic stories

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Desperate Malls Turn to Concerts and Food Trucks  - (www.bloomberg.com) With customer traffic sagging, U.S. retail landlords are using their sprawling concrete lots to host events such as carnivals, concerts and food-truck festivals. They're aiming to lure visitors with experiences that can't be replicated online -- and then get them inside the properties to spend some money. .. The idea is gaining traction. Next month, Simon Property is having the first carnival in its Round Rock Premium Outlets parking lot, about 20 miles (32 kilometers) north of Austin, Texas. Similar events are being held for the first time at locations such as Central Mall in Port Arthur, Texas, managed by Jones Lang LaSalle Inc., and a Cheyenne, Wyoming, mall owned by CBL & Associates Properties Inc. In July, Simon Property's Orland Square Mall, southwest of Chicago, will be holding its first parking-lot food-truck festival, with plans for live music performances, Herkimer said.

Mexico’s Economy Is Being Plundered Dry - (www.wolfstreet.com) The government of Mexico has a new problem on its hands: what to do with the burgeoning ranks of state governors, current or former, that are facing prosecution for fraud or corruption. It’s a particularly sensitive problem given that most of the suspects belong to the governing political party, the Institutional Revolutionary Party (PRI), which ruled Mexico uninterruptedly from 1929 to 2000. It returned to power in December 2012 with the election of Enrique Peña Nieto. And it clearly hasn’t changed its ways. Some of the accused governors were so compromised they went on the run. In the last few weeks, two of them, Tomás Yarrington, former state governor of Tamaulipas, and Javier Duarte, former governor of Veracruz, were tracked down. Yarrington, accused of laundering proceeds from drug trafficking as well as helping Mexico’s Gulf Cartel export “large quantities” of cocaine to the United States, was ensnared by Italian Police in the Tuscan city of Florence. He faces possible extradition to the United States.

When Low-Wage Workers Are Better Than Robots - (www.zerohedge.com) Automation is not always the best course of action and, as cost effective as automation has proved in many areas of our life, we are finding a rise of businesses beginning to automate for reasons other than improved productivity or cost effectiveness. Time and time again, these pages have listed numerous benefits of automation and robotics. The discussions point out that mechanization doesn’t make us poor, that attempting to tax machines is counter-productive. Automation even makes our jobs safer as we can offload dangerous tasks to a metal creation. However, automation is not always the best course of action and, as cost effective as automation has proved in many areas of our life, we are finding a rise of businesses beginning to automate for reasons other than improved productivity or cost effectiveness.

The latest news is that a company called Miso Robotics has developed an automatic burger flipper called Flippy. Naturally, media outlets are already writing headlines of how this is replacing jobs. The issue in this case is that this particular form of automation isn’t being driven by any kind of cost effective plan but as a result of government action.

"Liquidity supernova" keeping markets afloat, Europe in demand - BAML - (www.reuters.com) The $1 trillion of financial assets that central banks in Europe and Japan have bought so far this year is the best explanation for the gains seen in global stocks and bonds despite lingering political risks, Bank of America Merrill Lynch said on Friday. If the current pace of central bank buying, dubbed the "liquidity supernova" by BAML, continues through the year, 2017 would record their largest financial asset purchases in a decade, the broker said in its weekly report on investment flows. Shorter-term investor flows pointed to a mild "risk-off" with $3.8 billion pumped into bond funds and $0.6 billion pulled from equities over the past week, BAML said. A run of disappointing U.S. economic data, questions about whether the Trump administration can push through tax cuts and uncertainty around the French election have dented some of the enthusiasm for risky assets in recent weeks.

Traders Are Losing Faith in European Banks as Earnings Loom - (www.bloomberg.com) Investors in European lenders are getting cold feet. Riding on a wave of optimism over the economic and earnings outlook, an index of the region’s banks rallied to a 15-month high in March -- before posting the second-biggest decline among industry groups this month. At the same time, bets for swings in lenders’ stocks have jumped, and options reached their highest prices since February 2016 relative to those for euro-area blue chips. There’s little doubt the environment for European banks has brightened, with profits forecast to grow at the fastest pace in three years in 2017 as quicker inflation fuels expectations for monetary tightening. Yet higher valuations are now unnerving investors, especially ahead of an uncertain French election in which far-right candidate Marine Le Pen is campaigning on leaving the euro.

OTHER STORIES:

U.S. Stocks Pare Drop, Bonds Trim Gain on Tax Plan: Markets Wrap - (www.bloomberg.com)
Sales of Existing U.S. Homes Rise to Fastest Pace in a Decade - (www.bloomberg.com)

Fannie-Freddie Overhaul Is 'Very Important' Goal, Mnuchin Says - (www.bloomberg.com)
Quants Fire Back at Paul Tudor Jones After His Attack on Risk Parity - (www.bloomberg.com)

Tuesday April 25 2017 Housing and Economic stories

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What, Bid-Rigging at Foreclosure-Crisis Auctions? - (www.wolfstreet.com) The Foreclosure Crisis, spawned by the Financial Crisis and the Housing Bust, became a veritable money machine for some folks. And it just keeps on giving. This one is still happening in the Bay Area of California where home prices have shot through the roof since the Foreclosure Crisis. The folks who could buy homes cheaply at auction during the Foreclosure Crisis have made a killing. And buying them cheaply was apparently very important for some folks… Yesterday, after a week-long trial, a federal jury in Oakland, California, convicted real estate investor Glenn Guillory for “his role in a conspiracy to rig bids at public foreclosure auctions held in Contra Costa County,” according to the California Department of Justice.

Tesla Tumbles After Recalling Over 50,000 Vehicles; Faces "Demonstrably Dangerous" Autopilot Lawsuit - (www.zerohedge.com) Tesla just issued a voluntary recall for approximately 53,000 examples of the Model S hatchback and the Model crossover vehicles, sending the stock back down to $300... And additionally, Tesla owners filed a class-action lawsuit against the automaker for allegedly mischaracterizing the capabilities of its Autopilot 2 feature to consumers. As CNET reports, the problem lies with the electric parking brakes that help secure the vehicles when placed in Park. The parking brakes contain a small gear that might fracture, which would prevent the parking brake from releasing. Thus, a car that enters Park may not be able to move again. This has no bearing on the vehicles' regular brakes, and Tesla has received no reports of the parking brake system failing to hold a car in place. Tesla estimates that about 2 percent of the vehicles recalled contain the improperly manufactured gear. It should be noted that the parking brake assembly is from a third-party supplier, as well.

Oil suffers suffer largest one-day loss in six weeks - (www.marketwatch.com) Oil prices suffered their largest one-day loss in six weeks as a steep drop ahead Wednesday’s settlement pushed prices to their lowest finish in 2½ weeks. An unexpected weekly climb in U.S. gasoline supplies—the first in about two months—had fueled earlier losses, which worsened amid volatile trading tied to Thursday’s expiration of the May West Texas Intermediate crude contract. WTI prices dropped below $51 after the release of the Federal Reserve’s Beige Book. There was “generally nothing in the Beige Book that would stop the Fed from raising rates in June, so the dollar rallied and added to oil’s expiration lows,” said Phil Flynn, senior market analyst at Price Futures Group.

Ocwen Crashes Over 50% After N.C. Bank Commissioner Issues Cease And Desist Letter - (www.zerohedge.com) Former hedge fund hotel-darling and mortgage servicer Ocwen Financial plunged over 50% after the North Carolina Commissioner of Banks and state mortgage regulators from over 20 states issued a Cease and Desist order to subsidiaries of Ocwen to address mishandling of consumer escrow accounts and a deficient financial condition. Specifically, the order prohibits the acquisition of new mortgage servicing rights and the origination of mortgage loans by Ocwen Loan Servicing.

The summary findings from the C&D (link): The Commissioner of Banks (“Commissioner”) having determined that Ocwen Financial Corporation has engaged in, or is engaging in, or is about to engage in, acts or practices constituting violations of state and federal law and applicable regulations, hereby issues the following FINDINGS OF FACT and ORDER TO CEASE AND DESIST.

Markets Start to Ponder the $13 Trillion Gorilla in the Room - (www.bloomberg.com) After heading into the uncharted territory of quantitative easing, the world’s central banks are starting to plan their course through the uncharted waters of quantitative tightening. How the Federal Reserve, European Central Bank and -- eventually -- the Bank of Japan handle the transition could make the difference between a global rerun of the 2013 "taper tantrum," or the near undetectable market response to China’s run-down of U.S. Treasuries in recent years. Combined, the balance sheets of the three now total about $13 trillion, equating to greater than either China’s or the euro region’s economy. Former Fed Chair Ben S. Bernanke -- who triggered the 2013 sell-off in risk assets with his quip on tapering asset purchases -- has argued for a pre-set strategy to shrink the balance sheet. 

OTHER STORIES:

Stocks Slide as Oil Tumbles, Dollar Strengthens: Markets Wrap - (www.bloomberg.com)
ETFs Create Stock Markets That Are Both Mindless and Too Expensive, Study Says - (www.bloomberg.com)

Minsheng Bank says branch chief suspected of illegal conduct - (www.reuters.com)
IMF says debt binge leaves US corporate assets exposed - (www.ft.com)

Fed June Hike Odds Below 50% After Inflation Expectations Tumble - (www.bloomberg.com)
Ryan's Best Hope to Avoid a Shutdown: Making Friends With Pelosi - (www.bloomberg.com)