Sunday July 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

The world is swimming in oil - (www.hellenicshippingnews.com) Oil tankers are anchored off the Dutch coast, unable to deliver their cargo to the port of Rotterdam because its oil facilities are filled to capacity, but also because it is more profitable. Last Friday, a total of eight supertankers - very large crude carriers (VLCC) – had anchored off the Dutch coast, half of them fully loaded. Each of them can carry up to 2 million barrels of crude oil, enough to fill up 6 million small cars. These supertankers could reach the port of Rotterdam, Europe's biggest oil refining and trade centre, in less than an hour. But they don't. There just isn't enough room, says Jeroen Kortsmit, commercial manager at Royal Dirkzwager, a maritime advisory company. "The port of Rotterdam is filled to capacity." Rotterdam is being flooded with crude oil, which has become superfluous because of the economic slowdown. The port can normally hold up to 12.8 million cubic metres of crude oil. That's 80 million barrels, or enough to supply all 27 member states of the European Union for five days. Now the Rotterdam port is full and companies active in oil shortage, like Vopak, Oiltanking and Eurotank, are doing good business these days. It is the same in other world ports. The global on-shore supply of crude oil reached 2.75 billion barrels in the first quarter of 2009, 180 million barrels more than a year earlier, according to the International Energy Agency (IEA) in Paris. That's only half a million barrels shy of the 1998 record at the time of the Asian crisis. The IEA says an additional 100 to 115 million barrels were stored at sea at the end of April. "We counted 28 tankers off the Dutch coast last Friday," says Kortsmit, "and only a quarter of them were empty." Floating oil storage is now back at the March level of 85 million barrels, but that's still the total global oil production for one day. Capacity problems at the ports are not the only reason why so many oil tankers are bobbing aimlessly off the coasts. A number of them have thrown anchor there deliberately. Their cargo belongs to traders who have bought surplus oil at low prices, and are waiting for the right time to bring it on the market. Contango: There has always been a certain amount of floating oil storage, but never in such quantities. The reason is that for a number of months oil has been cheaper on the spot market than on the futures market. "It is what we call a contango," says Pieter Kulsen, who has been working in the oil trade for thirty years. Traders buy cheap oil on the spot market and later sell it for much more on the futures market. The price difference is more than enough to pay for the cost of floating storage, especially since the tariffs on land are higher because of the capacity problems. Lots of people are taking advantage of this situation. "It's no use naming names," says Kulsen, "it is a widespread phenomenon in the oil business." Meanwhile, oil prices are on the rise again. When the "contango" becomes smaller - because the spot price rises faster than the futures price - the profits will gradually decrease until there is nothing more to be gained. "At that point huge quantities of oil will become available on the market, which in turn will affect the price of oil," says Kulsen. It could take up to six months until the floating storage has trickled back into the market. Once the economy picks up again, sailing - instead of speculating - will once again become the main activity for oil tankers. Gradually, the idle oil tankers in the North Sea should disappear as well.

California manufacturing jobs cross state lines - (www.sfgate.com) California has been losing manufacturing jobs faster than comparable states, according to a new report that argues it is possible and necessary to arrest the decline of a sector that pays an average wage of $66,200 a year. "There is hope for California, but we don't have too much time," said Perry Wong of the Milken Institute, which was commissioned to conduct the report by the California Manufacturers and Technology Association. Wong said the study found that the state lost nearly 26 percent of its total manufacturing employment from 1990 to 2007, and 35 percent of its high-tech jobs. The 96-page report said that competition from cheap foreign factories cannot solely explain California's losses. The analysis found that seven other states - Arizona, Indiana, Kansas, Minnesota, Oregon, Texas and Washington - lost just 3.6 percent of their total manufacturing employment from 1990 to 2007, and 13 percent of their high-tech jobs. Wong said state policies and incentives have to explain at least part of the differences in job losses between California and its U.S. competitors. "Everyone says the regulatory burden in California is too much," said Gino DiCaro, spokesman for the Manufacturers Association. "Over time, we're dropping off the list of states that companies are willing to consider." The report is not specifically connected to any bill, but manufacturers ultimately want lawmakers to change state policies that, they say, kill jobs. For instance, DiCaro said, California makes companies pay sales tax on new factory equipment, a practice followed by only two other states: Wyoming and South Carolina. About 1.3 million Californians still hold manufacturing jobs, or 9.1 percent of total payroll employment, according to current state figures. As recently as 2000, manufacturing accounted for 12.8 percent of all payroll jobs in the state, according to the Milken Institute report.

Mortgage bankers cut U.S. loan origination forecast - (www.latimes.com) Mortgage originations in the U.S. may total $2.03 trillion this year, 27 percent less than earlier forecast, as rising interest rates reduce home refinancings, the Mortgage Bankers Association said. Today's forecast cuts $700 billion from the Washington- based group's March estimate, a change MBA Chief Economist Jay Brinkmann said came because the Federal Reserve's pledge to buy as much as $300 billion in U.S. Treasuries hasn't been enough to keep Treasury yields and mortgage rates down. The Fed's in a difficult spot, said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. If I were the Fed, I would try very hard to do everything in my power to keep that long-end down. The new estimate for 2009 mortgage originations includes about $737 billion for home purchases and $1.297 trillion in refinancings, the mortgage bankers said in a statement. While home sales have been higher than expected, home prices have fallen more than expected, leading to smaller loans, Brinkmann said. Rising mortgage rates began to choke off the refinance wave in May, much earlier than anticipated. MBA now projects existing home sales for 2009 of 4.8 million units, a drop of 1.2 percent from 2008. New home sales will be 352,000 units, a decline of 27 percent from 2008, MBA said. Federal Reserve Chairman Ben S. Bernanke is trying to lower consumer borrowing costs with a $1.25 trillion program to purchase mortgage-backed securities in addition to buying Treasuries. After initially succeeding in cutting 30-year home loan rates to a record 4.78 percent in April, the program stalled in May. Mortgage rates rose in five of the last seven weeks, according to McLean, Virginia-based mortgage buyer Freddie Mac. Mortgage rates and Treasury yields are climbing on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation. The average 30-year mortgage rate was 5.38 percent in the week ended June 18, down from 5.59 percent a week earlier, which was the highest since November, according to Freddie Mac. Rising mortgage defaults and slumping prices have prompted government programs to stem foreclosures and spur demand for homes. Federal Housing Finance Agency Director James Lockhart said June 18 that mortgage buyers Fannie Mae and Freddie Mac may soon get permission to purchase mortgages for loan amounts of more than a home is worth.

AP source: Ford, Nissan, Tesla to get govt loans - (finance.yahoo.com) The Energy Department is expected to announce Tuesday it is lending money to the Ford Motor Co. and two other automakers from a $25 billion fund to develop fuel-efficient vehicles. Energy Secretary Steven Chu was scheduled to announce the loan funding for Ford, Nissan Motor Co. and Tesla Motors Inc. in Dearborn, Mich., congressional officials said. They requested anonymity because an official announcement was pending. Dozens of auto companies, suppliers and battery makers have sought a total of $38 billion from the loan program. Ford has asked to receive $5 billion in loans by 2011, but it was unclear how much money the automaker would receive. Nissan has applied for an undisclosed amount of assistance, while Tesla has sought $450 million. The Energy Department declined to comment on the plans. Chu has not yet announced the first recipients of the loans, which have been closely watched by members of Congress from states with auto plants and suppliers. Congress approved the loan program last year to help car companies and suppliers retool their facilities to develop green vehicles and components such as advanced batteries. The loans were designed to help the auto manufacturers meet new fuel-efficiency standards of at least 35 miles per gallon by 2020, a 40 percent increase over current standards. General Motors Corp. and Chrysler Group LLC have received billions of dollars in federal loans to restructure their companies through government-led bankruptcies, but Ford avoided seeking emergency aid by mortgaging all of its assets in 2006 to borrow about $25 billion. General Motors has requested $10.3 billion in loans from the program, while Chrysler has asked for $6 billion in loans. Energy officials have said the loans could only go to "financially viable" companies, preventing GM and Chrysler to qualify for the first round of the loans.

2 Agencies Seek Joint Control Over Derivatives Markets - (www.nytimes.com) The leaders of two agencies on Monday pressed Congress for joint regulation of the over-the-counter derivatives market, representing a face value of $592 trillion, in the wake of the role derivatives played in contributing to the global financial crisis. Primary responsibility for derivatives tied to securities, includingcredit-default swaps, should go to the Securities and Exchange Commission, its chairwoman, Mary L. Schapiro, told a Senate subcommittee. Other derivatives, including those related to interest rates and commodities, should be regulated by the Commodity Futures Trading Commission, said its chairman, Gary Gensler. “The C.F.T.C. and S.E.C. should have clear, unimpeded oversight and enforcement authority to prevent and punish fraud, manipulation and other market abuses,” Mr. Gensler said. Ms. Schapiro and Mr. Gensler are mainly seeking authority to subject derivatives dealers to capital, margin and disclosure requirements, and position limits. President Obama and Congress are trying to sort out how best to regulate the industry. “The full, mandatory regulation of all derivatives dealers would represent a dramatic change from the current system in which some dealers can operate with limited or no effective oversight,” Mr. Gensler told the Senate Banking Subcommittee on Securities, Insurance and Investment. Congress may pass new derivatives laws with Mr. Obama’s regulatory overhaul this year. Ms. Schapiro said the S.E.C. was considering whether disclosure rules for stocks should apply to security-based derivatives that do not trade on exchanges. The agency also is weighing whether an equity swap tied to a company’s performance should be treated the same as holding the shares, she said.

OTHER STORIES:

Don't believe the hyperinflation hype - (www.telegraph.co.uk)

India enters deflation as economy slows - (news.yahoo.com/s/afp)

World Bank Says Global Economic Recession to Deepen - (www.bloomberg.com)

California Collapsing - (www.moneyandmarkets.com)

Too Big to Fail, or Too Big to Handle? - (www.nytimes.com)

Belt-Tightening by States Squeezes Cities and Towns - (online.wsj.com)

Obama's False Financial Reform - (www.thenation.com)

Why the Fed Isn't Igniting Inflation - (www.businessweek.com)

Emerging-Market Stocks in ‘Correction’ After 10% Drop in 2009 - (www.bloomberg.com)

Two-Year Treasuries Decline Before $40 Billion Auction of Notes - (www.bloomberg.com)

Yen Rises to One-Month High Against Euro on Recession Concern - (www.bloomberg.com)

Broad Agreement Reached on Derivative Oversight - (www.washingtonpost.com)

Recession worries rattle world markets - (www.ft.com)

VIX, VStoxx Surge as World Bank Report Sends Equities Tumbling - (www.bloomberg.com)

Economist Phelps Says U.S. Wealth May Take 15 Years to Rebound - (www.bloomberg.com)

ECB set for record ‘stimulus by stealth’ - (www.ft.com)

Hypo Real Estate warns of heavy losses - (www.ft.com)

European Manufacturing, Services Contraction Weakens - (www.bloomberg.com)

Despite Law, Job Conditions Worsen in China - (www.nytimes.com)

Bernanke Set to Defend Record as Reappointment Debate Begins - (www.bloomberg.com)

What exit strategy? The drama isn't over - (www.marketwatch.com)

Why all regulatory roads lead to the Fed - (www.ft.com)

Reforming financial regulation - (www.ft.com)