Monday July 1 Housing and Economic stories

TOP STORIES:

Greece back in crisis mode on state TV shutdown, downgrade - (www.reuters.com) Greek Prime Minister Antonis Samaras faced a political revolt on Wednesday from his ruling coalition partners after the government abruptly switched the state broadcaster off the air in the middle of the night. Screens went black on state broadcaster ERT, cutting newscasters off mid-sentence only hours after the decision was announced, in what the government said was a temporary measure to staunch a waste of taxpayers' money. Unions called a 24-hour nationwide general strike in protest, and journalists across all media called an indefinite strike. Some newspapers were shut and private TV stations broadcast reruns of soap operas and sitcoms instead of the news.

Oil product glut coming as refineries mushroom: IEA - (www.reuters.com) The world is heading for a glut of refined products as new Asian and Middle East refineries increase oil processing in a move likely to force less advanced competitors in developed countries to close, the West's energy agency said on Wednesday. The International Energy Agency said in its monthly report it expected 9.5 million barrels per day (bpd) of new crude distillation capacity, representing more than a 10th of global demand, to come on stream in 2013‐2018, substantially more than the forecast increase in crude production capacity and global demand growth.

Metacapital in Worst Slide as Bloodbath Roils Funds - (www.bloomberg.com) Deepak Narula rose to fame as manager of the best-performing hedge fund last year by navigating the government’s stimulus efforts. He’s having a harder time as the Federal Reserve moves closer to an exit. Metacapital Management LP’s flagship $1.5 billion fund lost an estimated 6.4 percent last month, the worst decline since it started in 2008, according to a letter to investors obtained by Bloomberg News. That followed drops of 0.5 percent in April and 0.1 percent in March, after 17 months of consecutive gains including a 41 percent return last year. Narula, like other investors in government-backed mortgage bonds, is being punished by speculation the Fed will scale back its debt-buying program. That has caused the securities to underperform Treasuries by the most since 2008. Rising home prices, President Barack Obama’s nomination of Democratic congressman Mel Watt to oversee Fannie Mae and Freddie Mac, and other issues have further roiled the market.

Analysis: After emerging corporate bond boom, default risks on rise - (www.reuters.com) The $1 trillion market in emerging corporate bonds could be headed for a surge in defaults if company earnings in swiftly depreciating roubles or pesos fail to keep pace with dollar-based debt repayments. As the U.S. Federal Reserve considers when to turn off its printing presses, emerging currencies have crashed to multi-year lows against the dollar. That rout is a big risk for corporate debt, which has gone from being a sideshow of the sovereign bond market to an asset class that surpasses U.S. junk debt in size.

The long-term negative impact of temporary mortgage interest rate stimulus - (www.ochousingwire.com) Banks are in survival mode. They must reflate the housing bubble, or the losses on their non-performing single-family residential loans will wipe them out. In order to reflate the bubble, the banks must keep these properties off the MLS, a task they are currently succeeding at, and mortgage interest rates must remain low so buyers can bid up prices to peak levels so banks can liquidate without a loss. The chart above shows the $144.75 billion exposure they have just on their non-performing loans. Since these non-performing loans only represent 9% of the total number of underwater borrowers, the total potential exposure is more than 10 times larger. As I noted, banks are still exposed to $1 trillion in unsecured mortgage debt.

OTHER STORIES:

Greeks strike over state TV closure as backlash grows - (www.bloomberg.com)

ECB Court Probe Focuses on Limits to Monetary Policy - (www.bloomberg.com)
Indonesia Raises Fasbi Rate as Martowardojo Acts on Rupiah Drop - (www.bloomberg.com)

India’s Slower Industrial Growth Adds Policy-Change Pressure - (www.bloomberg.com)

JPMorgan’s Dimon Says There Was No Lying, Hiding on Whale - (www.bloomberg.com)

JPMorgan Chase Credit-Rating Outlook Changed to Negative by S&P - (www.bloomberg.com)

Emerging-Market Bond Anxieties Surging by Most Since 2008 - (www.bloomberg.com)
Stock-Market Volatility Bets at Record Amid Fed Concern: Options - (www.bloomberg.com)
Analysis: FX intervention default policy in Asia as Fed fears rise - (www.reuters.com)

Friday June 28 Housing and Economic stories

TOP STORIES:

BofA could still put Countrywide into bankruptcy, executive says - (www.reuters.com) Bank of America Corp  could put its Countrywide Financial unit into bankruptcy if it fails to win court approval for an $8.5 billion settlement with mortgage investors, a bank executive said on Monday. Chief Risk Officer Terrence Laughlin was testifying at a hearing in New York state court on whether to approve the deal, which would settle claims by investors who said Countrywide misrepresented the mortgages underlying bonds they bought. During negotiations leading up to the June 2011 settlement, Bank of America threatened to put Countrywide, which it had rescued at the height of the financial crisis in 2008, into bankruptcy. That possibility was still on the table, Laughlin said on Monday. "One of the options that was available to us and continues to be available to us was to put Countrywide into bankruptcy," Laughlin said.

Greece confirms no bids for natural gas firm DEPA - (www.reuters.com)  Greece confirmed on Monday it failed to attract any binding offers for natural gas company DEPA and said it would launch a new tender in the future for the firm. Deputy Energy Minister Asimakis Papageorgiou said Greece received only one binding bid for the privatisation of natural gas grid operator DESFA, a unit of DEPA, from Azerbaijan's SOCAR by the 1000 GMT deadline.

Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says - (www.bloomberg.com) Citigroup Inc. (C) could lose as much as $7 billion on currency swings if Charles Peabody is right, putting the analyst at odds with peers who say the stock will be the best performer among big U.S. banks in the year ahead. Peabody, who leads research at Portales Partners LLC, is among only four analysts out of 34 tracked by Bloomberg who recommend investors sell Citigroup shares. He estimates the bank may lose $5 billion to $7 billion in regulatory capital this year if the dollar gains against the yen, euro and currencies inemerging markets, which provide about half the firm’s profit. That would be its worst translation loss in five years, exceeding the $3.5 billion deficit in 2011. Former Chief Executive Officer Vikram Pandit expanded Citigroup’s overseas businesses to help it recover from 2008’s U.S. credit crisis. Peabody, who predicted the mortgage market’s plunge as early as January 2005, said the firm’s reliance on revenue from abroad is now driving his concern that a global economic slowdown will hurt the bank more than U.S. rivals.

Emerging market assets suffer in fierce sell-off - (www.ft.com) Emerging market currencies, stocks and bonds suffered a fierce sell-off on Tuesday on rising investor concerns over the prospect of the US Federal Reserve reining in its programme of bond-buying to drive down long-term interest rates. Emerging economies have been among the prime beneficiaries of ultra-loose global monetary policy as central banks led by the Fed have flooded financial markets with more than $12tn of extra liquidity since the financial crisis. But signs of an economic slowdown spreading from China and indications that the Fed could reduce the pace of its $85bn-a-month bond purchases have triggered a sharp correction in emerging markets.

Detroit Rescue Plan Vetted as City Confronts Bankruptcy - (www.bloomberg.com) Detroit residents condemned and praised Emergency Manager Kevyn Orr at a forum he used to drive home the severity of the city's fiscal crisis, which has pushed it to the brink of bankruptcy. One step he plans to take as Detroit’s financial overseer is to lease the Belle Isle municipal park to the state to save $6 million a year, Orr said late yesterday at the hearing on his roadmap to revival. The City Council rejected a similar proposal from Republican Governor Rick Snyder earlier this year. Leasing the park is just one step proposed by Orr to help the city deal with a budget deficit nearing $386 million and to restructure $9.4 billion in long-term debt. In a report last month, Orr also called for altering benefits for city workers as a way to cope with $5.7 billion in projected unfunded obligations for retiree health care. He says the city may owe billions of dollars more to the retirement system because of skipping payments to preserve cash. “People had their differences but they listened and were respectful,” said Sheila Cockrel, a former city councilwoman who teaches at Wayne State University, where the meeting took place. “This was democracy in action.”

OTHER STORIES:

Turkish Police Retakes Square Amid Clashes - (www.bloomberg.com)

In Bond Case, German Court Debates Fate of Euro - (www.nytimes.com)

Exclusive: EU to seek WTO ruling against Chinese steel duties - sources - (www.reuters.com)

ECB Case Pits Market Stability Against Democracy, Lawyer Says - (www.bloomberg.com)

Kuroda Stares Down Bond Volatility With Stimulus Unchanged - (www.bloomberg.com)

JPMorgan’s Dimon Says There Was No Lying, Hiding on Whale - (www.bloomberg.com)

JPMorgan Chase Credit-Rating Outlook Changed to Negative by S&P - (www.bloomberg.com)

Hedge funds battered in quant arms race - (www.ft.com)

Corporate Credit Risk Rises to Two-Month High on BOJ Decision - (www.bloomberg.com)
Erdogan Crisis Driving Bond Risk Closer to Russia: Turkey Credit - (www.bloomberg.com)

Thursday June 27 Housing and Economic stories

TOP STORIES:

Florida governor signs bill to speed up state's foreclosure process - (www.housingwire.com) Florida’s governor signed a much-discussed foreclosure bill Friday, enacting a series of provisions aimed at speeding up the default process in the state. While the legislation is considered a response to Florida's untimely foreclosure timelines, it's a big shift that has attracted a great deal of attention. Attorneys working within the foreclosure space note House Bill 87 comes with new legal and procedural requirements. Critics refer to it as the 'rocket docket' legislation, in reference to the quickened foreclosure review system previously in place. However, there are many procedural caveats that could make that comparison less appropriate. The office of Florida attorney Daniel Consuegra even published an alert for attorneys advising them that HB 87 reduces the statute of limitations for filing a deficiency action to only one year from the sale or date of the acceptance of a deed-in-lieu. That section of the bill takes effect July 1.

That hissing noise out of Greece could mean trouble for the euro zone  - (www.marketwatch.com) The Greek Composite index  GR:GD -4.69%, which has been slowly sliding south since mid-last month, dropped nearly 5% on Monday after the Greek government  failed to attract any binding bids for Depa, the state-owned gas company. Russia’s Gazprom had been the one key contender, but reportedly pulled the plug.  Some blamed the government’s bumbling of the whole thing, while others described it as a “bolt out of the blue”.  The Guardian noted there has been speculation that Gazprom pulled out after hearing the European Commission would end up vetoing the deal anyway. So why is this so important? “Depa is one of the host of big-ticket assets the Greeks need to get rid of in order to meet the EU privatization target of 2.6 billion euros by the end of the year. So this is a big setback for the government, as it hasn’t been able to muster up confidence [among] foreign investors to attract a successful sale,” says Ishaq Siddiqi, market strategist at ETX Capital. “The failure to do so not only undermines the confidence of the Greek government but also [underlines] that notion that Greek state-owned assets are too risky and too toxic to snap up, despite the relatively cheap price-tags.”

Battery maker Exide Technologies files for bankruptcy - (www.bloomberg.com) U.S. battery maker Exide Technologies(XIDE.O) filed for Chapter 11 bankruptcy protection early on Monday, court documents showed, with the aim of cutting debt and implementing a restructuring plan to better compete in the market. Exide, which makes lead-acid batteries, said in the court filing that a combination of rising production costs, intense competition and the economic downturn in Europe had led to liquidity constraints. Also, higher spent-battery costs and lead-related price increases have put pressure on the company's margins, Exide said, adding that taking the Chapter 11 route would be the best option to restructure its finances and operations.

China state auditor warns over local government debt levels - (www.reuters.com)  China's state auditor warned on Monday that debt levels among local governments are rising and the financial burdens and risks are not being properly managed, adding to concerns over the health of the country's financial system. The National Audit Office, responsible for overseeing state finances, said in a report that the total debt at 36 local governments had risen 13 percent to stand at 3.85 trillion yuan ($627.70 billion) at the end of 2012 from two years before. Debt levels had risen as much as over 20 percent in some of the areas surveyed, it said, requiring "effective measures to strengthen debt management" and the establishment of an early-warning mechanism to effectively guard against risk.

Dont Read This if You Thought the Economy Was Improving - (smallbusiness.yahoo.com) The Bureau of Labor Statistics reported this morning that the U.S. unemployment rate is now 7.6% percent, with 175,000 new jobs created in May. At the same time, the Bureau revised its April numbers down, saying 149,000 jobs were created in April, and not the initial 165,000 it reported. The unemployment situation in the U.S. in May was essentially the same as in April. (I wonder how the Federal Reserve looks at this. Does it say, “Wow, imagine what would have happened to the jobs market in May if you didn’t create $85.0 billion in new money during the month”?) My readers know I don’t care much for the “official” unemployment numbers we get from the government statistics office. I believe the official rate doesn’t show the real picture, because it does not include people who have given up looking for work in the jobs market and people who want full-time jobs but can only find part-time jobs. When we take into consideration these two important figures that the official numbers leave out, the underemployment rate, as it is referred to, was 13.8% in May—it’s been hovering around 14% for years now.

OTHER STORIES:

Hungary Contains Danube Flooding as German Levee Bursts - (www.bloomberg.com)

Turkey's Erdogan warns patience with protests will run out - (www.reuters.com)

Tanks in Beirut as Syria protest leaves one dead - (www.reuters.com)
Tens of thousands on streets, Turkish PM Erdogan defiant - (www.reuters.com)

Insight: Threat of break-up looms over Mexican telecoms tycoon Slim - (www.reuters.com)

Italy Contracted More Than Initially Reported as Exports Fell - (www.bloomberg.com)

German Top Court Likely to Say ‘Yes, But’ to ECB Policy - (www.bloomberg.com)

Insight: Rapid growth of U.S. mortgage servicers draws scrutiny - (www.reuters.com)

Analysis: Euro bailout Troika nears end of road with patchy record - (www.reuters.com) 

Insight: Big debts loom over Thai tycoons' bold bets  - (www.reuters.com) 

Debt Risk Heads for Third Weekly Rise as Yields Surge in Europe - (www.bloomberg.com) 

Wednesday June 26 Housing and Economic stories

TOP STORIES:

The Government's Plan To Save Housing Will Cause People To Default Over And Over - (www.businessinsider.com) Here We Go Again: On March 27, 2013, the Federal Housing Finance Administration (FHFA) announced the introduction of still another mortgage modification program.  Entitled the Streamlined Modification Program, it was intended to enable distressed borrowers to more easily qualify for a modification. Unlike the HAMP modification program, borrowers will not have to show any financial hardship whatsoever in order to qualify.  If their first lien is owned or guaranteed by either Fannie Mae or Freddie Mac, the only requirement is that they be delinquent for 90 days or more and complete a 3-month trial period.  Also – they cannot be delinquent for more than two years and cannot have had two or more previous modifications. Nice deal, huh?  The obvious criticism is that it will only encourage borrowers to default in order to qualify.  FHFA’s answer is that it will minimize losses to Fannie and Freddie by reducing foreclosures.  Really?

1.7 million borrowers are seriously delinquent on government-backed loans - (www.ochousingnews.com) The US taxpayer (you) paid for the mess the bank’s made. Back in late 2008, the Department of Treasury took the GSEs under conservatorship and injected about $150 billion into them to make them solvent. And although the FHA has not officially requested a bailout yet, it’s no secreta bailout is coming. The only mystery so far is when the bailout will come and how large the ultimate price will be. Politicians have consistently lied to us about housing bailouts. The first batch of lies surrounded the GSEs: “There is no guarantee. There’s no explicit guarantee. There’s no implicit guarantee. There’s no wink-and-nod guarantee. Invest and you’re on your own.” — Barney Frank, senior Democratic congressman, notable Fannie supporter, later chairman of the House Financial Services Committee. We do not believe there is any government guarantee, and we go out of our way to say there is not a government guarantee.” — John Snow, Republican and secretary of the Treasury. “The facts are that Fannie and Freddie are in sound situations.” — Christopher Dodd, senior Democratic senator, prominent Fannie supporter, chairman of the Senate Banking Committee. “We have no plans to insert money into either of those two institutions [Fannie and Freddie].” — Henry Paulson, Republican and secretary of the Treasury

Japan says no panic over yen spike; few policy options - (www.reuters.com) Japan's government showed little concern on Friday to a spike in the yen, but the calm response masks a lack of solid policy options should the recently floundering currency surge further. The yen marked its biggest one-day climb against the dollar in three years on Thursday, underscoring the fragility of the early benefits from Prime Minister Shinzo Abe's aggressive reflationary policies. Stock and currency markets in recent days have taken back a significant chunk of the feel-good effect of "Abenomics," a policy prescription of sweeping fiscal and monetary expansion aimed at breaking years of deflation and reviving the world's third-biggest economy.

Turkish PM returns, declares protests must stop now - (www.reuters.com) Prime Minister Tayyip Erdogan flew back to a Turkey rocked by days of anti-government unrest on Friday and declared before a sea of flag-waving supporters at Istanbul airport: "These protests must end immediately." "No power but Allah can stop Turkey's rise," he told thousands who gathered in the early hours to greet him in the first pro-Erdogan rally since demonstrations began a week ago. At Istanbul's Taksim Square, centre of the protests now occupied by thousands around the clock, some chanted "Tayyip resign" as they watched a broadcast of the address. In the capital Ankara, the Kugulu Park echoed to anti-government slogans, while protesters danced or sang the national anthem.

Samsung Electronics loses $12 billion market value on smartphone worries - (www.reuters.com) Samsung Electronics Co lost $12 billion in market value on Friday, hit by brokerage downgrades that have underscored concerns about slowing sales of its flagship Galaxy S4 smartphone. The share slide of more than 6 percent comes after it recently introduced two stripped-down versions of the S4, fanning worries that profit margins for its mobile business will suffer. It also follows a report that arch-rival Apple will begin a trade-in program for iPhones. The new stripped-down S4 models will help it widen its lead in the global smartphone market and fend off Chinese competitors, but some fear that the South Korean tech giant is trading in profits for volume.

Market turbulence hits mortgage investors - (www.ft.com) US borrowers who take out the country’s traditional 30-year fixed-rate mortgages win both ways. If rates fall, they can refinance for lower monthly payments; if they rise, they can sit back and boast of their good fortune at having locked-in a great rate. The risk of rising rates is shouldered by others – and risk is the operative word. The humble mortgage has a history of humbling the biggest names on Wall Street. In the $1.3tn a year market for mortgage-backed securities, where loans are pooled together and traded, small changes in interest rates can mean the difference between big gains and big losses. And the sudden return of market turbulence is a foretaste of what could come if the Federal Reserve puts the brakes on monetary stimulus. Moreover, while this market has previously been the preserve of sophisticated traders and money managers, this time it is small investors that could be in the line of fire – through a fast-growing class of stock market-listed investment companies called mortgage Reits (real estate investment trusts).

OTHER STORIES:

Internet giants deny granting government 'direct access' to servers - (www.reuters.com)

Draghi Disappoints as Firepower Becomes Fig Leaf - (www.bloomberg.com)

China Lending Data May Be Overstated, Credit Suisse Says - (www.bloomberg.com)

Bundesbank Cuts Growth Forecasts For Germany - (www.bloomberg.com)

Debt Risk Heads for Third Weekly Rise as Yields Surge in Europe - (www.bloomberg.com)
Aso Says Japan Won’t Intervene in Market After Surge in Yen - (www.bloomberg.com)

Investors Pull Record $12.5 Billion From Bonds, Citigroup Says - (www.bloomberg.com)

Tuesday June 25 Housing and Economic stories

TOP STORIES:

Bank’s attitude toward struggling loanowners toughening as prices rise - (www.ochousingnews.com) In any negotiation the options of the parties determines the strength of their bargaining position. Ordinarily, when a lender and a borrower execute a promissory note and a mortgage agreement, the lender has most of the power, which is why they determine the terms of the agreement. The only option a borrower has is to shop for slightly better terms from another lender. If the borrower fails to pay according to the terms of the promissory note, the lender has the option of calling a public auction on the property to regain the outstanding balance on the loan. Lenders wisely force the borrower to put money down on the transaction to provide a cushion to protect the lender from loss if the foreclosure sale doesn’t obtain appraised value on the property. At least that’s how the system is supposed to work. When house prices crashed, borrowers found they had more options and lenders found they had less. The balance of power in the negotiation shifted. Because lenders foolishly loaned money at 100% of appraised value during the bubble, they had no cushion when prices fell. If they were to exercise their contractual right under the mortgage agreement to call a public auction, they stood to lose money – lots of it. This made banks hesitant to foreclose.

'Shadow' homes could burden U.S. housing agencies - (www.reuters.com) Well over a million U.S. homeowners are months behind on payments on government-backed mortgages, raising the risk federal housing agencies will end up facing the cost of managing a fresh flood of foreclosed homes, two government watchdogs said on Thursday. Some 1.7 million borrowers have missed several payments on mortgages backed by the U.S. government, the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development said in a joint report. These loan delinquencies represent a "shadow inventory" of homes that could hit the market if foreclosed on, which would need be managed by government-run Fannie Mae or Freddie Mac, or some other federal housing agency. Once seized, these so-called real estate owned properties, or REOs, present significant financial challenges to these government agencies, the report said.

Turkish Protesters Attacked in Erdogan’s Black Sea Hometown - (www.bloomberg.com) Turkish Prime Minister Recep Tayyip Erdogan accused protesters across the country of violating laws and damaging state property, and said he won’t permit a minority to dominate. “No right can be sought in violation of the law,” Erdogan said at a press conference in Tunis today, where he’s on the fourth day of a North Africa visit. He said people with “environmental sensitivities” who have protested against the redevelopment of a park in central Istanbul are being exploited by illegal groups, including terrorists. Demonstrations spread nationwide after police attacked a rally in the park, near Istanbul’s Taksim Square, with tear gas and water cannons on May 31. Many protesters have called for the resignation of the Islamist-rooted Erdogan, saying he’s become too autocratic, and cite grievances including alleged police brutality and curbs on alcohol sales.

Philippine, Thai Bourses Try to Calm Investors on Stock Rout - (www.bloomberg.com) Stock exchanges in the Philippines and Thailand have moved to soothe investors after speculation the U.S. Federal Reserve may scale back bond purchases prompted selloffs by overseas investors. Stock Exchange of Thailand President Charamporn Jotikasthira today urged investors not to panic, saying economic and corporate earnings growth in Southeast Asia’s second-biggest economy remains strong. The benchmark SET Index dropped to two-month low. Philippine Stock Exchange President Hans Sicat described the selloff as an “extreme overreaction.” The Philippines benchmark index has slumped 11 percent and the Thai gauge 8.4 percent since May 22, when Fed Chairman Ben S. Bernanke said policy makers could consider reducing the pace of monetary stimulus if the nation’s labor market improves. Overseas investors have sold a net $414 million of Thai stocks and $147 million of Philippine shares this month.

$1 Trillion Debt Crushes Business Dreams of U.S. Students - (www.bloomberg.com) Dr. Steve Sherick wants to build the emergency-care business he started two years ago that now employs seven doctors and two part-time administrators. The $300,000 in student loans he and his wife carry makes that prospect difficult, he said. Sherick, 36, who contracts with a local hospital in Trinidad, Colorado, about 200 miles south of Denver, graduated in 2009 with about $140,000 of debt. That’s not counting the student loans of his wife, a pediatric oncologist, and their mortgage. He would like to hire a full-time administrator and offer more competitive salaries to entice doctors to work in the rural community. “It deters an entrepreneurial spirit when you already start four steps behind the starting line,” said Sherick. “The student debt increases the risk for an entrepreneur like me and makes it harder to expand new business, get loans and thus hire new people.”

OTHER STORIES:

JPMorgan ‘Afraid’ of Emerging Market Selloff on Fed Tapering - (www.bloomberg.com)
Report: Entitlement changes to put seniors at financial risk - (www.washingtonpost.com)

Real-Linked Bond’s 13% Wipeout Hits Foreigners: Brazil Credit  - (www.bloomberg.com)

Dimon Sees ‘Scary’ World as Interest Rates Return to Normal - (www.bloomberg.com)
Companies in U.S. Added Fewer Workers Than Forecast in May - (www.bloomberg.com)

Turkey Urban Protesters Blame Erdogan for Narrowing Freedoms - (www.bloomberg.com)

France says tests prove Syria used nerve gas; U.S. sends Patriots to Jordan - (www.reuters.com)

ECB Keeps Rates on Hold as Confidence Returns to Euro Region - (www.bloomberg.com)
Central-bank-liquidity worries put Draghi in focus - (www.marketwatch.com)

Abe’s New Steps in Japan Draw Less Enthusiasm - (www.nytimes.com)