KeNo's Housing and Economic Portal: Saturday January 23 Housing and Economic stories

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TOP STORIES:

Devaluation Sparks Chaos in Caracas - (online.wsj.com) President Hugo Chávez's decision to devalue Venezuela's bolivar and impose a complicated new currency regime may paper over some growing cracks in the economy, but it is also setting the stage for bigger problems down the road for the country's oil-rich nation and its populist leader. Over the weekend, there were signs that Mr. Chávez's slashing of the "strong bolivar" currency could create as many problems as it solves in Venezuela's economy, provoking a wave of anxiety that sent Venezuelans scurrying to spend cash they feared could soon be worthless. At Caracas's middle-class Sambil shopping mall, lines at cashiers reached 50-deep. Carmen Blanco, a 28-year-old accountant, waited to buy a 42-inch flat-screen television she doesn't need because she already has one at home. "It doesn't make any sense to keep my savings," Ms. Blanco said Saturday. "I'd love to see how things work in a normal country." On Sunday, Mr. Chávez vowed to fight speculation and price increases that could result from the devaluation, which raises the price of imports. Harried by recession and sliding popularity, Mr. Chávez on Friday weakened the bolivar to 4.3 per dollar from 2.15 in a bid to shore up government finances, which have been hit by weaker oil prices, and to stimulate economic growth ahead of key elections. In order to protect the poor, his main constituency, from the move, Mr. Chávez announced the creation of another exchange rate of 2.6 bolivars per dollar for imports of food, medicine and other essential goods. Those rates will compete with a black-market rate, where the bolivar had plunged, forcing the official devaluation. On Friday, that black-market rate stood at about 6.25 per dollar.

Lenders reopen credit lines to hedge funds - (www.ft.com) A year ago today the hedge fund market was on its knees. Average annual returns were touching -19 per cent, at least 150 European funds had been axed in the preceding 12 months, and hedge fund lending had dried up. Twelve months on and the situation is much improved. According to figures from Credit Suisse/Tremont, annual returns have rebounded to 17.5 per cent – the best year-on-year figures since 1994 – fund openings rather than closures are once again the norm, and, importantly, prime brokers have reopened their credit lines. “Lending to hedge funds has definitely returned,” confirms Andrew Shrimpton, a partner at hedge fund consultancy Kinetic Partners. “The redemption surge is over and that, coupled with the state money that has been poured into the banking system, has meant there is more willingness to lend from prime brokers.” The fall in volatility and how leverage limits are set have also played their part, Mr Shrimpton adds. “If lending targets are based around value-at-risk measurements, then a key component of that is volatility – and as this comes down, which it has, leverage limits go up.” Bob Sloan is managing partner of S3 Partners, a prime brokerage risk manager. A year ago he declared it was impossible for the hedge fund community to get loans against many asset-backed securities and that a “time of deleveraging” had arrived. Today, he is significantly more buoyant. “The balance sheet is still tight, but nowhere near as tight as it was,” he says.

Rethinking Vacation Homes - (www.nytimes.com) IN the heart of the winter, many homeowners may be romanticizing about a vacation home in warmer climes. Fewer people had the opportunity to buy one last year, what with the mortgage crisis. Lenders now appear more willing to finance second homes, but borrowers must be patient, eminently qualified and strategic about their housing choices. “People are beginning to see some opportunities, but they have to be strong borrowers,” said John Walsh, the president of Total Mortgage Services in Milford, Conn. The improving conditions for borrowers, Mr. Walsh said, come mainly from the drop in vacation home prices, not any relaxation in lending standards. The lower prices, and lower loan amounts, make it easier for people to afford a second mortgage payment. Fannie Mae and Freddie Mac, the government-owned companies that essentially dictate the lending standards for mortgages, have actually tightened requirements on second homes. Borrowers must now have credit scores of at least 660 and down payments of 20 percent to qualify; a year ago, the industry standard was a 620 or better credit score and at least 10 percent down. While all borrowers have faced more scrutiny, lenders consider loans on second homes riskier than those on primary homes.

Meter Maids Up, Citations Down; MTA Woes in San Francisco; Schwarzenegger Proposes "Red Light" Revenue Sharing - (Mish at globaleconomicanalysis.blogspot.com) Here is an interesting Email from "JL" on the bloated employee salary system in California and meter revenue in San Francisco. "JL" writes ... The ever incompetent San Francisco hired more metermaids and made more metered areas to bust commuters, visitors and taxpayers. What happened? Everyone got wise and there's a DECREASE in citations despite more metermaids running around looking for a 4-wheeled ATM machine. Moreover, the police and CHP have been running around busting taxpayers for minor infractions for obvious revenue enhancement needs. The freeways have CHP officers hiding in the bushes-sometimes a fleet of 5 squad cars-to catch 5 cars in a row. There's a sudden interest in carpool infractions with a whopping 280 dollar fine. The governor, looking to save the budget, wants to add speed sensors to red lights for obvious revenue enhancement needs. Sadly, commuters going to work-the few and proud remaining people who work and generate "GDP"-are getting taxed to death with laws and infraction dogma. It's all an obvious hat tip to Orwell that those who work have to take care of the bloated state employee salary system. The middleclass, like a gerbil in the engine of the economy, is getting killed to support the lower classes, the unemployed, the overleveraged, the banker classes and,of course, the government class. Parking citations on the decline: Inquiring minds are reading Parking citations on the decline. Since The City flooded the streets with additional parking control officers in the last two years, the number of parking citations has been on the decline, prompting city officials to take some of the ticket cops off the streets. In fiscal year 2007-08, the number of parking control officers in San Francisco increased from 261 to 282 — an 8 percent jump. But that hiring surge did not stem an ongoing slide in annual parking citations — which peaked at 1.9 million in the 2005 fiscal year — and is projected to drop to 1.6 million this fiscal year, according to the Municipal Transportation Agency, which oversees parking policies and enforcement. The MTA has attributed the 16 percent drop in citations to cash-strapped drivers becoming more wary of parking regulations, a decrease in street-sweeping operations and fewer motorists out on the road because of the weakened economy. The MTA faces a midyear projected deficit of $49.1 million — $4 million more than first reported in November. The agency has proposed laying off 108 workers and eliminating 142 positions — saving $12.5 million in salaries and benefits — as a way to cut into that shortfall. While all 108 layoffs have been met with resistance, the decision to let go of the 24 parking control officers has attracted the most indignation, since those employees generate revenue for The City. However, the MTA believes there won’t be a revenue drop, so long as the remaining 254 parking control officers step up their production. If each one of those officers gives out 540 monthly citations — nine less than the 2007-08 fiscal year monthly average of 549 — the agency won’t lose parking-ticket money.

JAL Nears Bankruptcy Protection - (online.wsj.com) Momentum is gathering for Japan Airlines Corp. to file for the Japanese equivalent of Chapter 11 bankruptcy protection, even as Delta Air Lines Inc. and American Airlines remain locked in negotiations with the carrier. The move would mark one of the country's biggest insolvencies ever and signals that the new administration in Tokyo, led by Prime Minister Yukio Hatoyama, is set to deal with JAL—which has received three public bailouts in the last decade—swiftly and decisively. The state-backed turnaround body has proposed that JAL, Asia's leading carrier by revenue, undergo a modified version of a court-led rehabilitation process, according to ...

OTHER STORIES:

FSB’s Draghi Warns Markets Against Excess Optimism, Risk Taking - (www.bloomberg.com)

For Top Bonuses on Wall Street, 7 Figures or 8? - (www.nytimes.com)

US commercial property attracts new wave of money - (www.ft.com)

China says active fiscal policies to stay - (www.reuters.com)

China’s Exports Surge, Imports Rise to Record as Trade Rebounds - (www.bloomberg.com)

China vows to keep "hot money" out of property market - (www.reuters.com)

China's commodity imports soar in December - (www.reuters.com)

China banks eclipse US rivals - (www.ft.com)

Lending slowdown, provisions hit Saudi banks in Q4 - (www.reuters.com)

Japan's high debt not a problem short-term: IMF - (www.reuters.com)

Recession Spurs Interest in Graduate, Law Schools - (www.nytimes.com)