Sunday December 7 Housing and Economic stories

TOP STORIES:

Embattled, Fund Shifts Cost of Suits to Investors - (www.cnbc.com) The Reserve Primary Fund has presented its deeply frustrated shareholders with a stark choice. If they are patient, they might ultimately get back 98.5 cents for each dollar they had in the money market fund, which in September became only the second such fund to ever “break the buck,” or report a share price below a dollar. But if they continue to wage legal battles against the fund and its managers, the company will use investors’ own money to defend itself against their accusations of mismanagement and deception.

California May Pay With IOUs for Second Time Since Depression - (www.bloomberg.com) California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said. In a letter to legislative leaders Dec. 2, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may run out of cash by March, state officials say. Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow. “It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

Legal fight with Deutsche Bank offers glimpse into Trump's dealings - (www.iht.com) Guess who is complaining that condominiums in Donald Trump's latest big project are ridiculously overpriced. Donald Trump is. But he isn't cutting the prices. He says the banks won't let him. The project is the Trump International Hotel. The project is the Trump International Hotel and Tower in Chicago, which is to be the second tallest building in that city. By Trump's account, sales were going great until "the real estate market in Chicago suffered a severe downturn" and the bankers made it worse by "creating the current financial crisis." Those assertions are made in a fascinating lawsuit filed by Trump, the real estate developer, television personality and best-selling author, in an effort to get out of paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable. Rather than his having to pay the $40 million, Trump thinks the bank should pay him $3 billion for damaging his reputation. He points to a "force majeure" clause in the lending agreement that allows the borrower to delay completion of the building if construction is delayed by things like riots, floods or strikes. That clause has a catchall section covering "any other event or circumstance not within the reasonable control of the borrower," and Trump figures that lets him out, even though construction is continuing. "Would you consider the biggest depression we have had in this country since 1929 to be such an event? I would," he asked in an interview, adding, "A depression is not within the control of the borrower." He wants a state judge in New York to order the bank to delay efforts to collect the loan until "a reasonable time" after the financial crisis ends. Deutsche Bank thinks the idea that an economic downturn should free people from the obligation to pay their debts is laughable. Trump, it may be noted, does not want everyone to be treated in the same way. When I asked him if he would let remorseful buyers walk away from contracts to buy condominiums at pre-depression prices, he said he would not. "They don't have a force majeure clause," he explained.

The squawk-boxers at CNBC still sucking in naïve investors:
· Trading the Housing Bottom - (www.cnbc.com) Cramer pointed to the PHLX Housing Sector Index [HGX 82.28 -1.55 (-1.85%) ] , which includes stocks like Toll Brothers [TOL 20.70 0.15 (+0.73%) ] , and which looks to be bottoming right now. If history is any guide, then home prices should follow six months from now. “That’s exactly how the market works,” Cramer said. Cramer added that despite the negative press about Sears, the “news isn’t bad there” and that the company is “not going out of business.”
· Huge Job Losses Could Be Signal That Worst Is Over - (www.cnbc.com) Once the initial knee-jerk doom-and-gloom reaction is over, something resembling optimism will prevail in the conclusion that the worst is over for the economy. If there was ever a time to remind investors that the labor market is a lagging economic indicator, economists say today is such a day. Once the knee-jerk, doom-and-gloom reaction is over, something resembling optimism will prevail with the conclusion that the worst is over for the economy. “This is history,” says veteran Wall Street economist Ram Bhagavatula. “December payrolls will be weak as well. The leading indicators will come from a slow re-activation of the credit markets and increases in consumer spending. You should begin to see that in the next couple of months.”

The Political bopsy twins in action, sleeping on the job for the last 8 years:
• Rep. Frank says failure of Big 3 would be disastrous - (www.marketwatch.com)• Dodd says government must find way to save Detroit - (www.marketwatch.com)




OTHER STORIES:

U.S. Stock Futures Drop as Job Cuts Top (www.economist.com)s’ Forecasts - (www.bloomberg.com)
Bond Risk at Record on Concern Job Losses to Show Deeper Slump - (www.bloomberg.com)
Oil Falls to Lowest in Almost Four Years as Fuel Demand Tumbles - (www.bloomberg.com)
European Stocks Fall on Economy Concerns; U.S. Futures Gyrate - (www.bloomberg.com)
Dollar mixed ahead of Nov. jobs data - (www.marketwatch.com)
Taxpayers: Furious over homeowner bailouts - (money.cnn.com)
Citadel's Losses Add to Mr. Griffin's Pain - (online.wsj.com)
Citadel Funds Lose 13% in November, 47% This Year - (www.bloomberg.com)
MBS Markets Skeptical of Mortgage Plans - (online.wsj.com)
Housing Market Faces Broader Ills - (online.wsj.com)
Algorithmic trades heighten volatility - (www.ft.com)
Russia Weakens Ruble Defense After Record Drop in Crude to $39 - (www.bloomberg.com)
Central banks cut rates in struggle to spark economy - (www.iht.com)
China: Factory owners protest for payment of debts - (finance.yahoo.com)
Trichet Under Pressure to Outline Plan for Deflation - (www.bloomberg.com)

Employers in U.S. Cut 533,000 Jobs; Jobless Rate Rises to 6.7% - (www.bloomberg.com)
California May Pay With IOUs for Second Time Since Depression - (www.bloomberg.com)
Steep Job Cutbacks Add To Bleak Economic Picture - (www.washingtonpost.com)
All eyes on job losses - (www.reuters.com)
Employers shedding jobs as recession deepens - (finance.yahoo.com)
Washington’s New Tack: Helping Homeowners - (www.nytimes.com)
Retail Sales Are Weakest in 35 Years - (www.nytimes.com)
Retailers Report a Crisis in All Aisles - (www.washingtonpost.com)
Detroit Bailout Hits a Bumpy Road - (online.wsj.com)
U.S. Auto Chiefs Make Plea as Congress Tries to Break Deadlock - (www.bloomberg.com)
Cisco, Dell Risk Losing Sales as Recession Fuels Gray Market - (www.bloomberg.com)
Ski resorts hope to ride out economy's downhill slide - (www.usatoday.com)
AT&T to Cut 12,000 Jobs as Landline Losses Grow - (www.nytimes.com)
Popping sounds - (www.economist.com)
Waiving or drowning? - (www.economist.com)
When the golden eggs run out - (www.economist.com)