Monday May 22 2017 Housing and Economic stories

TOP STORIES:            

Global property bubble is ready to pop - (www.fool.co.uk) Ever since interest rates were slashed to near zero in the wake of the financial crisis, the world has gone property mad. Residential house prices from Abu Dhabi to Zurich have spiralled as hot money travelled the world looking for a home. For those who got in early it has been incredibly rewarding, even if – whisper it – stock markets have actually done far better. The global property bubble cannot blow much bigger. The best we can hope is that it deflates slowly… but it could burst. China crisis? Property is still going crazy in China, where prices have been pumped up by yet another bout of government stimulus. Guangzhou, close to Hong Kong on the Chinese mainland, leapt a whopping 36% in the past 12 months, according to Knight Frank. Prices rose around 20% in Beijing and Shanghai, as well as in Toronto, Canada. Seoul in South Korea continues to boom, as does Sydney and Stockholm, both up 10.7% over the last year. Berlin (8.7%), Melbourne (8.6%) and Vancouver (7.9%) are also performing strongly.

The Backlash to Spain’s New Property Boom Has Begun - (www.wolfstreet.com) Spain is in the grip of a property boom. Whereas the last bubble was driven largely by the rampant construction and sale of new homes, with the country at one point accounting for more housing starts than Germany, France, Britain and Italy combined, the focal point of the new boom is the smaller but fast-growing rental apartment market. Spain has traditionally been a country of home-owners, with an average ownership rate of 78.5%, 10 percentage points above the EU average. But things are changing. “The concept of owning a home in Spain was almost religious, but that’s changed for an entire generation of young people who have seen people losing their homes, (their house) prices dropping, and losing access to credit,” said Fernando Encinar, co-founder and head of research at the online real estate marketplace Idealista. “That has made renting a more attractive option, especially in big cities such as Madrid and Barcelona.”

New Theory Behind Stalled Economy: Retirees Are Hoarding Too Much Cash – (www.zerohedge.com) For years we've written about the fact that Americans, young to old, are lousy savers (see "Retirement Crisis Looms As Average U.S. Household Has Saved $2,500 For Retirement"). Of course, they have to be because how else can a mature economy continue to grow unless every single person levers every asset they own to the maximum extent possible and then spends all of that money?  Anything less would mean that all of Janet Yellen's efforts have been a colossal waste. Meanwhile, this inherent inability to save is awful news for a nation that faces a massive wave of baby boomer retirements over the next 20 years.  All that said, we were somewhat shocked to come across a report from money manager United Income which effectively argues that American retirees are saving too much money rather than too little.  To summarize the thesis, United Income argues that retirees become more conservative as they grow older which causes them to save more and allocate less to equities...which is, of course, a somewhat self-serving conclusion but never mind that.

 

Large hedge funds moved out of financial stocks in first quarter - (www.reuters.com) Several big-name hedge fund investors trimmed their stakes in financial companies in the first quarter as hopes for immediate tax cuts and loosening of regulations after President Donald Trump’s victory in November began to fade. Boston-based Adage Capital Management cut its position in Wells Fargo & Co, which has come under fire for its sales practices, by 3.9 million shares, according to regulatory filings, while John Burbank’s Passport Capital cut its stake in the company by 947,000 shares. Third Point cut its stake in JPMorgan Chase & Co by 28 percent, to 3.75 million shares, while Suvretta Capital Management sold all of its shares of Morgan Stanley, JPMorgan Chase and Citigroup Inc.

 

Behind China's Silk Road vision: cheap funds, heavy debt, growing risk - (www.reuters.com) Behind China's trillion-dollar effort to build a modern Silk Road is a lending program of unprecedented breadth, one that will help build ports, roads and rail links, but could also leave some banks and many countries with quite a hangover. At the heart of that splurge are China's two policy lenders, China Development Bank (CDB) and Export-Import Bank of China (EXIM), which have between them already provided $200 billion in loans throughout Asia, the Middle East and even Africa. They are due to extend at least $55 billion more, according to announcements made during a lavish two-day Belt and Road summit in Beijing, which ends on Monday. Thanks to cheaper funding, CDB and EXIM have helped to unblock what Chinese president Xi Jinping on Sunday called a 'prominent challenge' to the Silk Road: the funding bottleneck.

OTHER STORIES:

U.S. Stocks Hit Records as Oil Rallies, Bonds Slip: Markets Wrap  - (www.bloomberg.com)
Red Hot Emerging-Market Stocks Are Showing Signs of Overheating - (www.bloomberg.com)
Optimism for Sales Prospects Propels U.S. Homebuilder Sentiment - (www.bloomberg.com)

Fed's new normal balance sheet could be huge - (www.cnbc.com)

Hedge Funds Are Dumping Gold Bets at Fastest Rate Since 2008 - (www.bloomberg.com)
Home Sales Jump to Near-Boom-Era Levels - (www.wsj.com)