KeNo's Housing and Economic Portal: Monday August 26 Housing and Economic stories

TOP STORIES:

CFTC subpoenas metals warehousing firm as inquiry heats up - (www.reuters.com) The U.S. commodities market regulator has subpoenaed a metals warehousing firm, seeking all of its documents and communications related to the London Metal Exchange since January 2010, as an inquiry into complaints about inflated metals prices gathers steam. The U.S. Commodity Futures Trading Commission (CFTC) sent the subpoena last week, a source with direct knowledge of the matter said, after a letter from the regulator last month ordered the warehouse firm to preserve emails, documents and instant messages from the past three years. The subpoena is the latest sign that the CFTC is stepping up its inquiry as it looks into allegations by users of metals, such as Coca-Cola Co, that warehousing firms have made it more expensive for them to buy metal by restricting the flow of metal out of warehouses.

French Egg Producers Smash 300,000 Eggs and Demand Government Action to Raise Prices - (globaleconomicanalysis.blogspot.com) Farmers in France are on an egg-smashing rampage in protest of low prices. Farmers in northwest France have vowed to escalate an egg-smashing rampage they began this week in protest at low prices and rising production across the EU. The protesters say a 2012 European directive, which obliges egg producers to improve the wellbeing of hens by increasing the size of their cages, has forced them to invest millions of euros to cover the upgrade. On Tuesday night masked members of the informal collective vented their frustration by dumping 100,000 eggs – about 5 per cent of their output – from the backs of vehicles in the small Brittany town of Ploumagoar. A day later, they descended on Carhaix. On Thursday, it was the turn of Morlaix, where they left 100,000 smashed eggs outside the tax office. Residents were quick to complain about the smell. The producers have called on the government to help co-ordinate a 5 per cent reduction in the country’s production, and to designate a special site where eggs can be destroyed.

Has Obama Forgotten the Danger of Loose Mortgage Lending? - (www.bloomberg.com) Politicians have been promising more than they can deliver since the dawn of democracy. So it’s no surprise that President Barack Obama wants to make housing more affordable, ensure that home prices keep going up, reduce taxpayer support for the mortgage-finance system and prevent future crises -- simultaneously. But some of the items on his wish list, as outlined in a speech Tuesday in Phoenix, are contradictory. Many of the president’s goals are smart steps along the path of reform. Private lenders should have to deal with the consequences of their own bad decisions without dumping them on taxpayers. It should be easier for borrowers who are current on their loans to refinance at today’s relatively low mortgage rates. And government policy shouldn’t favor homeownership over renting, now that it’s clear renting is the better option for millions of households. Some of Obama’s other ideas are worrisome. It’s all well and good to say that the government should “cut red tape” and “simplify overlapping regulations” so that “responsible families” have an easier time buying homes. But what does this mean in practice? Should income and down-payment requirements be eased? Lest we forget, lowering lending standards was precisely what got us into the housing mess in the previous decade.

Bond Hubris Overwhelms Fed in Riskiest Sectors of Credit Markets - (www.bloomberg.com) Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis. The amount of loans made this year that lack standard protections for lenders exceed the all-time high set in 2007, and only one other time have investors pumped more money into funds that buy lower-rated loans than they did last week. Bonds rated in the lowest category of junk accounted for the greatest percentage of speculative-grade offerings last month since 2011. While Fed policy makers say employment and inflation will be the primary determinants of when and by how much they reduce the $85 billion a month being pushed into the economy every month through bond purchases, signs of excessive risk-taking are likely to also play a part. Chairman Ben S. Bernanke and Fed Governor Jeremy Stein have cited the potential for continued so-called quantitative easing, or QE, to disrupt financial markets.

What the 25% Collapse in Homebuilder Stock Prices Tells Us - (www.testosteronepit.com) Homebuilder stocks are heading into dangerous territory and investors need to take note—even if they don’t own these stocks—because the move to the downside for this barometer of activity in the U.S. housing market is significant. The most important factor that sets the fate of the homebuilder stocks is the housing market. If the housing market has growth potential ahead, then you can bet on homebuilder stocks to provide a stunning performance to the upside. If it’s the opposite scenario, with the housing market looking shaky, then homebuilder stocks usually tank. In other words, homebuilder stocks are very fickle, but they are also a great indicator of future activity in the housing market. Right now, the U.S. housing market is being threatened by the mixed messages the Federal Reserve is sending to the marketplace. Our central bank has “helped” lower the interest rates by buying bonds and keeping interest on overnight lending artificially low. As a result of this, the conventional mortgage rates in the U.S. declined to record lows—this created an opportunity for those who were sitting on the sidelines to get involved in the housing market. This is what has happened over the past four years.

OTHER STORIES:

Family Offices Chasing Wealthy’s $46 Trillion in Assets - (www.bloomberg.com)