Thursday August 1 Housing and Economic stories

TOP STORIES:

Spanish prime minister rejects calls to step down over scandal - (www.reuters.com) Spanish Prime Minister Mariano Rajoy on Monday rejected calls to resign over a ruling party financing scandal and said he would not allow the matter to hold back his reform plans. The political pressure mounted on Rajoy as the former treasurer of his center-right People's Party gave new testimony before a judge looking into the affair, saying he had made 90,000 euros in cash payments to Rajoy and party secretary-general Maria Dolores Cospedal in 2009 and 2010. Rajoy had so far managed to limit the impact of the scandal, which involves alleged illegal donations by construction magnates that were supposedly distributed as cash payments to party leaders in return for juicy contracts.

Citigroup Sustains $2.4 Billion First-Half Currency Hit - (www.bloomberg.com) Citigroup Inc. (C), the U.S. lender that operates in more than 160 countries, posted a $2.41 billion first-half equity deduction from currency swings, approaching analyst Charles Peabody’s forecast for a year of foreign-exchange pain. Profit growth, including a 42 percent increase in second-quarter net income, still enabled the New York-based company to boost common equity during the period. Accounting rules require banks to subtract unrealized losses on some assets from shareholder equity instead of from profit. Peabody, who leads research at Portales Partners LLC, predicted last month that a drop in the value of emerging-market currencies would cost Citigroup $5 billion to $7 billion in regulatory capital this year. The bank said at the time that it hedges against foreign-exchange losses. The capital deduction increased to $1.7 billion in the second quarter from $711 million in the first, according to figures from the company today.

Economy skids dangerously close to contraction - (www.marketwatch.com)  U.S. economic growth has again slowed sharply, skidding dangerously close in the second quarter to an outright contraction in gross domestic product. Following the releases Monday of tepid reports on retail sales and inventory accumulation, forecasters marked down their GDP expectations from 1.4% to 1.1%. It’s probable that U.S. GDP rose less than 2% for the third quarter in a row, and it’s possible that growth was less than 1% for the second quarter in the last three. It’s not news that the global growth is sluggish, and that sluggishness is weighing on U.S. manufacturers’ export growth. And we know that the federal government is cutting back its spending.

Fed Puzzle: The Massive Collapse in Money Velocity - (www.businessinsider.com) But why is the Fed still so dovish? What are they worried about? Here's an interesting twist: Few people are talking about the complete collapse in money velocity, which is now at a five-decade low. Money velocity is one of those key metrics on the Fed dashboard. If the trillions in Fed stimulus were really working its way into the economy or "Main St." as was designed, you would see an increase in rate that money moves through the economic system with lending, monetary transactions, and economic activity -- the measure known as Money Velocity. When economic activity is high and at risk of overheating, such is in the late 1990s, the velocity of money is high, reflecting the fact that money is changing hands in transactions and banking activity. In fact, the opposite is now happening. As witnessed by chart above, money velocity, as measured by the M1 and M2 measures, has collapsed. This may reflect the economicc malaise that things are not as good as the financial markets appear to be telling us.

Egypt's Woes Are Economic - (www.atimes.com) It doesn't matter who sits in the Presidential Palace if the country runs out of bread. Tiny Qatar had already expended a third of its foreign exchange reserves during the past year in loans to Egypt, which may explain why the eccentric emir was replaced in late June by his son. Only Saudi Arabia with its $630 billion of cash reserves has the wherewithal to bridge Egypt's $20 billion a year cash gap. With the country's energy supplies nearly exhausted and just two months' supply of imported wheat on hand, the victor in Cairo will be the Saudi party.

OTHER STORIES:

China Ships Pass Via Strait North of Japan as Tensions Run High - (www.bloomberg.com)

India Inflation Reaches Three-Month High as Rupee Fans Costs - (www.bloomberg.com)
China June Home Sales Rise 24% as Buyers Defy Property Curbs - (www.bloomberg.com)

China Growth Slows to 7.5% as 2013 Target Under Threat: Economy - (www.bloomberg.com)

China economic slowdown seen deepening as Beijing pushes reform - (www.reuters.com)

Four Glaxo China Executives Held in Criminal Investigation - (www.bloomberg.com)

JPMorgan and Wells Fargo Feel First Chill of Rising Interest Rates - (www.nytimes.com)

Analysis: Banks face profit lull as mortgage boom fizzles - (www.reuters.com)

Wednesday July 31 Housing and Economic stories

TOP STORIES:

Miami tops foreclosures, as banks selling into the boom - (www.bloomberg.com) Miami’s foreclosure rate ranked at the top of major U.S. metropolitan areas last month as auctions more than tripled, signaling lenders are preparing to sell a backlog of distressed properties amid rising home prices. One in 236 housing units in the area that includes Miami, Fort Lauderdale and Pompano Beach received a foreclosure filing in June, more than four times the national average, RealtyTrac Inc. said in a report today. The jump was led by notices of scheduled auctions -- the step before a bank-owned property sale -- which rose 283 percent from a year earlier to 5,172 homes, according to the real estate data company. The surge in auctions in states such as Florida, where courts oversee repossessions, reflects lenders pushing properties through foreclosure after years of judicial delays lengthened the process, said Daren Blomquist, vice president at Irvine, California-based RealtyTrac. That’s clearing the inventory of distressed homes at a time when surging demand from investors and international buyers is fueling price gains in the Miami area.

Indicted real estate broker gets permission for island vacation - (www.thesunchronicle.com) A former Mansfield real estate broker under indictment for multiple counts of real estate fraud was given permission by a federal judge to travel to the U.S. Virgin Islands while awaiting trial on a massive indictment charging mortgage fraud and money laundering. Michael David Scott, who earlier filed for Chapter 7 bankruptcy protection, asked for permission for himself, his wife and three children to travel to the island of St. John during school vacation. Scott asked permission to stay at the Westin Hotel which overlooks a lagoon and lists minimum room rates of more than $500 a night. Court records do not indicate whether Scott and his family actually traveled to the Virgin Islands. Scott, owner of Southeast Properties LLC, was indicted by a federal grand jury in 2010 on 62 counts of wire fraud, bank fraud and money laundering in connection with an alleged long-running real estate scam in Boston's Dorchester and Roxbury neighborhoods.

Renewed fear of global recession as companies rein in spending - (www.telegraph.co.uk)  Standard & Poor’s warned that the global cycle for capital investment has already rolled over, with early signs pointing to deepening contraction of 5.4pc in 2014. “The capex recovery appears to be ending before it has really begun,” said the agency’s Gareth Williams. Company spending plans are watched as an early warning gauge for the economy. The drastic falls in large parts of the world doom hopes for strong recovery later this year, and even point to a recession risk. The International Monetary Fund has cut its global forecast for this year to 3.1pc, sharply downgrading Russia, Brazil, South Africa, India and Mexico, as well as Italy and Germany. “Policymakers everywhere need to increase efforts to ensure robust growth,” it said. The unexpected pull-back in company spending is a serious blow. It had been assumed that firms must soon start to spend their huge cash piles, helping to kickstart recovery. “This is a pretty troubling snapshot of the global economy and it shows endemic lack of confidence. Companies are still worried, and there still is excess capacity in autos and other industries,” said Mr Williams.

Stretched car loans gain traction with buyers - (www.latimes.com) Scott Greenberg could have handled a bigger car payment. But with a baby on the way and the dealership offering a rock-bottom interest rate, Greenberg stretched the loan to 72 months — about as long as the average American keeps a new car. At 2.64% interest, the long term cut about $100 from his monthly payment on the Volkswagen Touareg SUV. "I will be putting that savings into her college fund," Greenberg said of the daughter he's expecting. The Santa Monica technology consultant is among a record number of car buyers taking out loans of six, eight or even 10 years. Loans of six years or longer account for 30% of all financing deals so far this year, including leases, according to research firm J.D. Power and Associates. That's up from 23% five years ago.

Realtor arrested for stealing clothes from home for sale - (www.myfoxdc.com) The homeowner says he and his wife had a feeling something strange was going on inside their home while real estate agents were alone inside. It turns out, they were right. A video taken last month at a home on N. 11th Street in the Ballston area shows real estate agent Stephen Brumme rifling through a closet and some drawers, taking women's clothing before a client came to tour the home. The homeowners had installed cameras because there were so many people coming through their home, and they had noticed some weird things, like a razor blade in the garbage disposal. They say they were "creeped out" when they watched the video and called police. Brumme, 60, from Silver Spring, Md., faces charges of burglary and possession of burglarious tools. His real estate license has been suspended.

OTHER STORIES:

Brazilian unions flex muscle in attempt to lead protest movement - (www.reuters.com)

Portugal's PM says committed to reaching cross-party deal - (www.reuters.com)

China June M2 Growth Trails Estimates, New Loans Top Forecasts - (www.bloomberg.com)

China Can Endure Growth Slowdown to 6.5%, Finance Chief Says - (www.bloomberg.com)

House GOP outlines plans for mortgage finance - (www.washingtonpost.com)

U.S.-based junk bond funds see $3.28 bln net outflow -Lipper - (www.reuters.com)

China exports slide raises doubts about currency policy - (www.reuters.com)

Tuesday July 30 Housing and Economic stories

TOP STORIES:

The wheels are coming off the whole of southern Europe - (www.telegraph.co.uk)  Europe’s debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure. None of Euroland’s key actors seems willing to admit that the current strategy is untenable. They hope to paper over the cracks until the German elections in September, as if that is going to make any difference. A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc. The Greek stabilisation is a mirage. Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.

As Detroit teeters on bankruptcy, creditors are left holding the bag  - (www.washingtonpost.com) After decades of sad and spectacular decline, it has come to this for Detroit: The city is $19 billion in debt and on the edge of becoming the nation’s largest municipal bankruptcy. An emergency manager says the city can make good on only a sliver of what it owes — in many cases just pennies on the dollar. A decision about whether to file for bankruptcy is widely expected this month. Detroit’s dire fiscal condition is sending ripples of concern through the normally placid capital markets that all state and local government rely on to raise cash for everything from road improvements and school roofs to libraries and parks. Holders of Detroit’s municipal bonds — always touted as among the safest investment vehicles — are being asked to take on staggering losses. It also has worried the city’s 9,500 employees and nearly 20,000 retirees, who have much to lose. Under the plan put forward by emergency manager Kevyn D. Orr, a former D.C. bankruptcy lawyer, retirees will have to absorb significant reductions in pension and health benefits. The choice before bondholders and retirees is stark, given that both groups would inevitably face steep cuts in a bankruptcy.

10 Boomer 'entitlements' today's youth won't have - (www.telegraph.co.uk) HSBC chief economist Stephen King claims rich Baby Boomers (those born between 1946 and 1964) are behaving like the nobility in the Peasants’ Revolt and risk an uprising by the younger generation. We look at 10 'entitlements' they have enjoyed:

• House price boom. Property has been a staggeringly good investment for Baby Boomers. They own 40pc of the £2.5trn tied up in property. Even the recession of the late 80s did little to halt the stellar rise in house prices. It meant Baby Boomers were able to raise mortgages easily on three times one salary and have seen the wealth in their homes soar. They were also able to borrow against the equity in their homes to spend on cars and holidays. One in five Boomers owns a second home.

• Final salary schemes. Many Baby Boomers had final salary schemes that paid such handsome pensions that retirement was billed as "the holiday of a lifetime". The expense of these schemes were so heavy for some businesses that they have increasingly been closed to new members. The retirement age was also lower.

Bonuses Given to Bank of America Employees for Home Foreclosures - (www.infowars.com) According to Salon, BOA employees in the mortgage servicing unit “systematically lied to homeowners, fraudulently denied loan modifications, and paid staff bonuses” for foreclosing on peoples’ homes. On June 1, 2012 Obama expanded the Home Affordable Modification Program (HAMP) to help struggling homeowners. HAMP was supposed to lower homeowners’ monthly payments so that they could afford their payments and sustain their home for the long-term. Instead of providing homeowners with the modifications to their loans, former employees say BOA used it as a tool, attempting to squeeze out as much money as possible from the struggling borrowers before eventually foreclosing on them. Under the program’s guidelines, borrowers were supposed  make “three trial payments before the loan modification became permanent.” Instead, the borrowers were left making trial payments for up to one year and were then rejected for “permanent modification.”  Homeowners were left owing the difference between the trial modification and the original payment.

Portugal political crisis deepens - (www.reuters.com) Portugal's president threw the bailed-out euro zone country into disarray on Thursday after rejecting a plan to heal a government rift, igniting what critics called a "time bomb" by calling for early elections next year. President Anibal Cavaco Silva proposed a cross-party agreement between the ruling coalition and opposition Socialists to guarantee wide support for austerity measures needed for Portugal to exit its bailout next year, followed by elections. The surprise move came just when conservative Prime Minister Paolo Passos Coelho thought he had overcome a cabinet crisis by reaching a deal to keep his center-right coalition together.

OTHER STORIES:

Fed's actions causing interest rates to rise - (www.nytimes.com)

Unemployment claims increase by 16,000 - (www.reuters.com)

Weak China trade data add to growth fears  - (www.telegraph.co.uk)

Central Bankers Hone Tools to Pop Bubbles - (finance.yahoo.com)

World economy stuck in neutral: IMF - (money.cnn.com)

BOJ says economy recovering, unfazed by China slowdown - (www.reuters.com)

Greek unemployment rate scales new high in April - (www.reuters.com)

Brazil Signals World’s Biggest Key Rate Increase Far From Over - (www.bloomberg.com)
More Chinese cities likely to curb auto sales: industry group - (www.reuters.com)

Monday July 29 Housing and Economic stories

TOP STORIES:

Closer to bankruptcy: Major insurer opposing Kevyn Orr's Detroit plan - (www.freep.com) An insurance company that backs more than $170 million in Detroit bonds said it opposes emergency manager Kevyn Orr’s attempt to restructure the city’s finances, a rejection appearing to place the city one step closer to the largest municipal bankruptcy in U.S history. Ambac Assurance said in a written statement Monday night that it does not agree with Orr’s plan to treat general obligation bondholders the same as unsecured creditors. The company didn’t say what it plans to do next. But it did announce the hiring of Harrison J. Goldin of Goldin Associates. Goldin is a former New York City comptroller who played a key role in New York’s financial restructuring in 1970s.

Detroit sues after insurer blocks city's access to casino revenues - (www.freep.com) Emergency manager Kevyn Orr said today that Detroit filed suit against one of the insurers of its debts that sought to stop payment of up to $11 million a month in casino revenues the city desperately needs to maintain public services while Orr restructures government operations. The lawsuit is complicated, but boils down to this: In 2009, Detroit — in a move to avoid defaulting on payments for debts it issued to shore up pension underfunding — pledged casino revenues as collateral. Under the deal, the city agreed to set up an account that Orr spokesman Bill Nowling called a “lockbox” that would be administered by U.S. Bank. That company would release casino revenues to Detroit once the city had paid its obligations under the deal. Syncora Guarantee insured the hedge agreements, often called swaps, as well as some of the the $1.4 billion in what are called certificates of participation that the city issued to make up for underfunding in Detroit’s two public employee pension funds.

WSJ: Government Student Loan Program a 'Scam' - (www.moneynews.com) A new report from the Congressional Budget Office (CBO) shows that the federal government's student-loan program is a "scam," a Wall Street Journal editorial states. "If you think the federal student-loan program looks like a bad deal for taxpayers, imagine how it would look with honest accounting," Journal editors write. "And now you don't need to imagine thanks to a new [CBO] report that's receiving far too little attention. Turns out that the official 'savings' for taxpayers of $184 billion over the next decade really add up to $95 billion in losses." The "scam" is that Congress has enabled a huge subsidy for universities while claiming that student loans create huge tax savings, the editorial says. It can make that claim because a 1990 law "requires a deliberate under-counting of the cost of defaults," the editorial says.  "To its credit, the Congressional Budget Office has noted on various occasions that while the law forces it to use this Beltway math, CBO knows it's not accurate under fair-value accounting."

Massachusetts regulator subpoenas Wall St firms over sales to seniors - (www.reuters.com) Massachusetts' chief securities regulator has hit top Wall Street firms with a blanket of subpoenas, saying he fears elderly people are being targeted for high-risk, alternative investment products. Massachusetts Secretary of the Commonwealth William F. Galvin said on Wednesday subpoenas have gone out to a group of firms including Morgan Stanley, UBS AG, Fidelity Investments, Bank of America Corp's Merrill Lynch, Wells Fargo & Co, TD Ameritrade and Charles Schwab Corp. Galvin said a recent investigation into real estate investment trusts heightened his concern that elderly investors were being targeted with products too complex for them to understand the underlying risks. "While these products are not unsuitable in and of themselves, they are accidents waiting to happen when they are sold to inexperienced investors by untrained agents who push the products to score the large commissions associated with alternative investments," Galvin said in a press release.

Las Vegas: a wretched hive of realtor scum and villainy - (www.ochousingnews.com)  To buy a large number of homes, renovate them, and either flip them or hold them, I needed to form business relationships in Las Vegas. Jacki, My Lieutenant out there, has known my wife for over 20 years, and despite the occasional mishap, she has been reliable and trustworthy. We’ve had contractors come and go, but we’ve used one title company for four years, and most of the professionals we’ve needed to rely on have been adequate to the task. Unfortunately, I haven’t had the same success with the realtors out there. If it was just one bad apple, I could ignore the problem as bad luck. But when three different realtors go to outrageous lengths to cheat and steal, it makes me jaded on the whole profession. Perhaps I am predisposed to judge realtors harshly. Everyone knows I think their association is horrendous, but when working with agents, its the character of the individual that matters. I have worked with Shevy for over four years now. I’ve consistently found him to be honest, moral, and deeply conscientious about ethics. I’ve met many other agents whom I admire and respect. The three you’re about to read about are not among them.

OTHER STORIES:

Lenders sound alarm over lack of action in Athens - report - (www.reuters.com)

REITs Deepening Bond Losses as Leverage Forces Sales - (www.bloomberg.com)

US loan vehicles pump up with leverage - (www.ft.com)

Stock 'fear gauge' flawed, Citi equity trading chief says - (www.reuters.com)

Ruble to Real Roiled as No Brick in BRICs $13.9 Billion Lost - (www.bloomberg.com)

U.S. Banks May Face Two Ratios as FDIC Sets Capital Vote - (www.bloomberg.com)

Alcoa Earnings Exceed Estimates as Aircraft Orders Gain - (www.bloomberg.com)

[ Henry Kaufman] The Fed must change itself as well as its policies - (www.ft.com)
Dozens Killed in Egypt as Islamists Fight Army - (www.bloomberg.com)

Friday July 26 Housing and Economic stories

TOP STORIES:

Watchdogs warn 1.7 million homeowners risk foreclosing, feds unprepared - (www.washingtonguardian.com) The government is already struggling to manage the more than 195,000 foreclosed homes it now possesses and is ill-prepared as a new wave of foreclosures looms on the horizon, according to federal watchdogs who paint a less rosy picture of the housing market than politicians. In fact, the inspectors general at the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) warn that a stunning 1.7 million mortgages are 90 days or more delinquent, putting them in danger of foreclosure. Such homes are considered "shadow inventory" in danger of being assumed by the government if the loans default. "Even a fraction of the shadow inventory falling into foreclosure could considerably swell" taxpayers' liability by increasing the number of foreclosed homes that HUD and the federally-run Fannie Mae and Freddie Mac mortgage giants must maintain, market and sell, the new report warns.

Greek outlook bleaker than lenders think, local think tank calculates - (www.reuters.com) Greece's economy could shrink by as much as 5 percent this year, the Athens-based IOBE think tank said on Tuesday, revising down its previous projection and offering a more pessimistic forecast than the country's foreign lenders. Athens, which has been limping along on bailout funds since 2010, secured its latest lifeline from its European Union and International Monetary Fund lenders on Monday but was told it must keep its promises on cutting public sector jobs and on selling state assets to get all the cash.

Alcoa Facing ‘Hard Decisions’ on Aluminum Plants - (www.bloomberg.com) The scale of the challenge in the aluminum market facing producers such as Alcoa can be seen in the size of stockpiles of the lightweight metal. Inventories total about 12 million tons, excluding China, Oleg Mukhamedshin, a director at Russian smelter United Co., said in an interview July 1. That’s equal to about 27 percent of 2012 global consumption, according to data compiled by Bloomberg. While producers worldwide have announced capacity cuts of about 1.3 million tons in 2013, others are set to add 5.4 million tons of capacity this year, led by new plants in China, Morgan Stanley said in a June 25 report. In comparison, Alcoa produced 3.74 million tons of aluminum in 2012. Alcoa has confirmed the shutdown of 149,000 tons of capacity so far in 2013, adding to the 531,000 tons temporarily and permanently closed last year. The company is doing more than most to help balance supply and demand, Davenport’s O’Carroll said.

Fed Says a Few Dealers Report Deterioration in MBS Market  - (www.bloomberg.com) The Federal Reserve said a few Wall Street dealers have seen a deterioration in the functioning of the market for residential mortgage-backed securities where the Fed each month is buying $40 billion in bonds. “A few dealers indicated that the liquidity and functioning of the underlying market for agency RMBS had deteriorated,” the central bank said today in a quarterly survey of senior credit officers. “For other collateral types covered in the survey, the liquidity and functioning of the underlying markets were generally characterized as little changed.” Twenty percent of dealers who responded to the question said the market in MBS had deteriorated “somewhat” or “considerably.” Ten percent said the market improved somewhat, while the remaining 70 percent saw the market “basically unchanged.”

[Bloomberg] China Central Bank Tightens Rules on Interbank Bond Trading - (www.bloomberg.com) China’s central bank is tightening rules on interbank bond market trading by ordering all transactions to be conducted through the National Interbank Funding Center as it seeks to boost transparency. Transactions including forward deals and repurchases can’t be reversed or changed once agreed between the two parties, the People’s Bank of China said in a statement posted on its website today. Clearing agencies should not engage in settling trades outside the interbank market, according to the statement. Alterations to bond ownership, such as inheritance that are not related to trading, must be supported by legal documents explaining the nature of the transaction, it said. Chinese authorities are seeking to clean up the $3.8 trillion market and encourage companies to raise funds through bonds rather than relying on bank lending. 

OTHER STORIES:

U.S. Banks May Face Two Ratios as FDIC Sets Capital Vote - (www.bloomberg.com)

Alcoa Earnings Exceed Estimates as Aircraft Orders Gain - (www.bloomberg.com)

[ Henry Kaufman] The Fed must change itself as well as its policies - (www.ft.com)
Dozens Killed in Egypt as Islamists Fight Army - (www.bloomberg.com)

Spanish corruption row seen shaking but not felling PM - (www.reuters.com)

Japan Says China Using Force to Try to Change Status Quo - (www.bloomberg.com)

China inflation picks up, limits room for policy easing - (www.reuters.com)

India to Inject $2.3 Billion Into State-Run Banks Over 3 Months - (www.bloomberg.com)