KeNo's Housing and Economic Portal: Friday July 3 Housing and Economic stories

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TOP STORIES:

Insiders Exit Shares at the Fastest Pace in Two Years - (www.bloomberg.com) Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago. Insiders of Standard & Poor’s 500 Indexcompanies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc.Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years. Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects. “If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”

Likely Pullback By Stocks Strengthens Treasuries - (news.ino.com) Treasuries are seeing considerable strength in morning trading on Monday, as traders look to the guaranteed returns of government backed bonds amid a likely sell-off on Wall Street and another light day on the economic front. The benchmark ten-year note opened higher and is hovering near its best levels of the day. Subsequently, the yield on the note, which moves opposite of its price, is trading at 3.728 percent, a drop of 6.1 basis points on the day. Overall, the benchmark yield moved up by only a tenth of a basis point last week, giving back most of its gains in a plunge seen on Thursday. The flat performance for the week came even though traders expressed some supply concerns after the Treasury Department announced that it would sell $40.0 billion worth of two-year notes on Tuesday, $37.0 billion of five-year notes on Wednesday and $27.0 billion of seven-year notes on Thursday. Today, some traders may remain on the sidelines today amid a lull in economic data, looking instead toward the results of the Federal Reserve's policy meeting, along with some key housing, employment and personal spending figures set to be released later this week. In addition, the Federal Reserve is set to continue its treasury buyback program this morning. The New York arm of the Fed will purchase bonds with maturity dates ranging from December of 2013 to April of 2016. The buyback is scheduled to begin at 10:15 a.m. ET.
Also on tap for today is the Treasury Department's weekly sale of short-term bills. The Treasury will sell $31.0 billion worth of three-month bills and $30.0 billion worth of six-month bills.

Historic NM hotel closes 5 years after remodel - (news.ino.com) For sale: A bit of the Old West. The historic Eklund Hotel _ complete with refurbished guest rooms, a saloon with bullet holes in the tin ceiling and a resident ghost _ has closed its doors. Worried townspeople in Clayton, population 2,100 in far northeastern New Mexico, are looking for someone to buy the downtown landmark and reopen it. "It's been here since 1892. It's just the center of our town," banker Craig Reeves said. The Eklund's closing comes just five years after completion of a $2.3 million renovation of the stately, three-story sandstone block building, which is listed in the National Register of Historic Places. The small hotel has been a popular stop for travelers, from nearby Texas and Oklahoma, in particular, as they shuttle back and forth to the cool mountains of New Mexico and Colorado. "It's heartbreaking," said Brian Moore, a former state lawmaker and a Clayton grocery store owner. "It's especially a blow to downtown. It was our main restaurant, our main bar." Kendyl Monroe, chairman of the Eklund Association, Incorporated _ the group of mainly local investors that has owned the hotel since 1992 _ said business shrank with the struggling economy and debt from the renovation was hefty. "Where we are, at the moment, is right in the middle of the downturn," said Monroe, who grew up in Clayton and was a Wall Street lawyer for 34 years before returning to the area. "That presumably will turn around some day ... but right now we're just suffering through the continuing decline," he said. Monroe said the owners struggled to keep it open until this summer, typically the peak season, but couldn't. It closed April 24. The economic slump has sharply hurt travel as consumers and businesses cut back on discretionary spending, said Patrick Ford, president of Lodging Econometrics in Portsmouth, N.H., who tracks the hotel industry. "Smaller hotels, particularly hotels that don't have a nationally recognized brand, have tremendous difficulty in a down market," Ford said. The Eklund's renovation created 26 rooms with private baths. The renovation was financed by a $2.16 million loan from the First National Bank in Clayton that was guaranteed by the U.S. Department of Agriculture's Rural Development business program. The State Historic Preservation Office loaned an additional $200,000 for the project. Reeves, the bank's president, won't say what's still owed on the bank loan, citing customer privacy considerations. According to the historic preservation office, there's still $147,600, plus 3 percent interest, owed on the $200,000 state loan. Clayton started in 1888 as a tent town for cattle drovers and then became a bustling railroad stop for the Fort Worth & Denver City Railroad halfway between Amarillo, Texas, and Trinidad, Colo.

California’s Solution to $24 Billion Budget Gap Is Going to Bring Some Pain - (www.nytimes.com) here are not a multitude of ways to close a $24 billion state budget gap, but in California, the answer is probably going to come down to who gets hurt the most. While Democrats struggle to preserve programs for the state’s neediest residents through one-time accounting maneuvers and by passing some of the pain to smokers and oil companies through fees and taxes, Republicans are holding the line on new taxes and trying to force large cuts that will have an effect on policies like health care for children in poor families and the early release of thousands of prisoners. Lawmakers passed a budget for both 2009 and 2010 in February, but the legislation, which covered 17 months’ worth of spending, was dependent on the passage of several ballot propositions that voters overwhelmingly sank in May. As a result, the state’s budget gap expanded. In response, Gov. Arnold Schwarzenegger threatened to allow the government to come to a “grinding halt,” rather than authorize more borrowing to cover shortfalls, and proposed $16 billion in cuts. Those cuts would largely be carried out through the state’s programs for the poor: the Healthy Family Program, the health insurance program that covers more than 900,000 children; the main welfare program, known as CalWorks, which provides temporary financial assistance to poor families; and Cal Grants, a college financial aid program. Mr. Schwarzenegger also seeks $750 million in cuts to prisons, the slashing of the budgets for state parks and other agencies and a 5 percent pay cut for state workers. And he has proposed a plan to borrow $2 billion from local governments, which has enraged local leaders. Republican lawmakers do not care for taking money from local governments, nor do they like the prison plan in its entirety, because it would include the early release of some prisoners; they are otherwise on board with the governor on this go-round. Democratic legislators countered with a plan still thick with cuts — $11 billion — to social programs but proposed several accounting maneuvers that would push the deficits into the future to compensate for less-severe reductions to the social programs. For example, the state would push workers’ last paychecks of this fiscal year, ending June 30, by one day into the next fiscal year, saving $1 billion. Another proposal calls for withholding 3 percent taxes from independent contractors, who lawmakers say often fail to pay taxes, putting $2 billion back in the coffers.

States Turning to Last Resorts in Budget Crisis - (www.nytimes.com) In Hawaii, state employees are bracing for furloughs of three days a month over the next two years, the equivalent of a 14 percent pay cut. In Idaho, lawmakers reduced aid to public schools for the first time in recent memory, forcing pay cuts for teachers. And in California, where a $24 billion deficit for the coming fiscal year is the nation’s worst, Gov. Arnold Schwarzenegger has proposed releasing thousands of prisoners early and closing more than 200 state parks. Meanwhile, Maine is adding taxes on candy and ski tickets, Wisconsin on oil companies, and Kentucky on alcohol and cellphone ring tones. With state revenues in a free fall and the economy choked by the worst recession in 60 years, governors and legislatures are approving program cuts, layoffs and, to a smaller degree, tax increases that were previously unthinkable. All but four states must have new budgets in place less than two weeks from now — by July 1, the start of their fiscal year. But most are already predicting shortfalls as tax collections shrink, unemployment rises and the stock market remains in turmoil. “These are some of the worst numbers we have ever seen,” said Scott D. Pattison, executive director of the National Association of State Budget Officers, adding that the federal stimulus money that began flowing this spring was the only thing preventing widespread paralysis, particularly in the areas of education and health care. “If we didn’t have those funds, I think we’d have an incredible number of states just really unsure of how they were going to get a new budget out.”

Platinum deal for Delphi may face detour - (www.latimes.com) The private equity firm's $3.6-billion offer is opposed by creditors of the parts maker. Other suitors may emerge. Platinum Equity, the Beverly Hills investment firm, is hitting a few speed bumps in its quest to buy bankrupt auto parts maker Delphi Corp. The proposed $3.6-billion acquisition has the backing of Delphi's former owner and largest customer, General Motors Corp., as well as the federal government. But opposition from some of Delphi's creditors has raised the possibility that other bidders may emerge to challenge Platinum. Whether these head winds combine to scuttle the deal won't be known for at least a month. The judge in Delphi's Chapter 11 bankruptcy case has scheduled a July 23 hearing, at which he could approve the company's reorganization plan and approve a new owner. Platinum's deal to acquire Delphi was announced June 1, the same day that GM filed for Chapter 11 bankruptcy protection. Failing to snag Delphi would be an unwelcome setback for Platinum, which specializes in acquiring distressed companies. With big pieces of the U.S. economy in shambles, Platinum and its chief executive, 44-year-old billionaire Tom Gores, have had plenty of rubble to pick through lately. Not including Delphi, Platinum has launched or completed deals to acquire half a dozen companies this year in industries including computers, commercial real estate services and garbage equipment. The firm displayed a genuine taste for risk, however, when it waded into the troubled newspaper business with its March purchase of the San Diego Union-Tribune.

OTHER STORIES:

Consumer spending returns to the spotlight - (www.latimes.com) Investors will closely watch reports on personal spending and incomes in May and consumer sentiment in...

Fed needs to make convincing case on recovering bank rescue funds - (www.latimes.com) Rising Treasury bond yields show Wall Street is concerned that the agency's policy may lead to an...

S&P Says India Budget Deficit May Reach 19-Year High - (www.bloomberg.com)

Wen Pledges to Add More Money to China’s Economy to Spur Growth - (www.bloomberg.com)

German Business Confidence Increased for Third Month - (www.bloomberg.com)

Recovery's Missing Ingredient: New Jobs - (www.washingtonpost.com)

A 'Significant' Market Correction Is Coming: Roubini - (www.cnbc.com)

World Bank Sees Most Economies in Deeper Slump - (www.cnbc.com)

Hiring to Rebound in 2010: US Manufacturing Survey - (www.cnbc.com)

Fed plans repo markets revamp - (www.ft.com)

Housing Eludes Recovery as Job Losses, Foreclosures Climb - (www.bloomberg.com)

World Bank cuts 2009 global growth forecast - (finance.yahoo.com)

Fed Faces A Tough Balancing Act - (www.washingtonpost.com)