KeNo's Housing and Economic Portal: Tuesday December 31 Housing and Economic stories

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Washington is abandoning the unemployed - (www.washingtonpost.com) There's one big thing left out of the Murray-Ryan budget deal: unemployment insurance. On December 28, federal jobless benefits expire for 1.3 million workers. These aren't normal unemployment benefits. These are the extended, emergency benefits meant to help the long-term unemployed. A little-known fact about the economy is that short-term unemployment — the percentage of the labor force unemployed for five weeks or less — is back down to where it was before the recession. It's long-term unemployment — which lasts more than 27 weeks — where the crisis lingers. No one has a very good answer for these workers. They're often stuck in areas of the country where jobs are scarce. They face a vicious cycle of employment discrimination in which employers don't want to hire them because they've been unemployed for so long, which in turn extends their unemployment and makes it even harder for them to find a job. And now we're just cutting them loose. "If there was ever time to err on the side of overextending jobless benefits, it would be now,"wrote Jim Pethokoukis at the conservative American Enterprise Institute.

Blackstone's Hilton raises $2.35 billion in record hotel IPO - (www.latimes.com) Hilton Worldwide Holdings Inc., the world's biggest hotel operator, raised $2.35 billion in a record initial public offering for a lodging company. The company and existing shareholders sold about 117.6 million shares for $20 each, according to a statement Wednesday. The McLean, Va., company had offered 112.8 million shares for $18 to $21 apiece. Blackstone Group is taking advantage of U.S. stocks near highs and a rebound in the hotel market to take Hilton public six years after acquiring it for $26 billion at the end of the buyout boom. Since the New York-based private equity firm purchased Hilton, the company has expanded its room count by a third, most of it outside the U.S. and in franchised and managed hotels, which require almost no capital investment.

Bond Mutual Funds Headed for Record Withdrawals This Year - (www.bloomberg.com) Bond mutual funds are headed for record redemptions in 2013 amid signals the U.S. Federal Reserve will reduce its stimulus. Investors have removed $70.7 billion so far this year from bond funds, TrimTabs Investment Research said today in an e-mailed statement. Unless the trend reverses, the redemptions would surpass a record $62.5 billion that investors removed from bond mutual funds in 1994, according to TrimTabs. Investors have been pulling money from bond funds since May, when Federal Reserve Chairman Ben S. Bernanke first hinted that the central bank might begin scaling back its unprecedented asset purchases. The yield on the 10-year Treasury note is 2.8 percent, up from 1.93 percent on May 21, the day before Bernanke spoke about the possibility of tapering its stimulus. “The ‘taper talk’ that started in May proved to be a huge inflection point for the credit markets,” David Santschi, chief executive officer of TrimTabs, said in today’s statement, which didn’t provide details of redemptions across various categories within fixed income.

IMF chief Lagarde warns euro crisis is not solved - (www.telegraph.co.uk) IMF's Lagarde says euro crisis not solved, demands pre-emptive action from ECB. The International Monetary Fund has poured cold water over claims that the eurozone is safely recovering, calling on the European Central Bank to take pre-emptive action to alleviate the credit crunch for small business and head off the risk of deflation. Christine Lagarde, the IMF's managing director, said it is "premature to declare victory", warning that EU governments may have to ditch austerity policies and switch to fiscal stimulus to kick-start growth and avert lasting damage to the underlying economy. "Looking past the headlines, there are clearly signs that not all is well," she told a forum in Brussels, highlighting the risk of a "vicious cycle" in which depressed demand and stagnant investment feed on each other. The warning came as fresh data showed Greece's recovery may be stalling again, with mounting risks of a relapse into recession over the winter. The Greek statistics office said industrial output had fallen 5.2pc in October, a sharp deterioration from minus 1.3pc in September.

Global economy's recovery is a sheep in wolf's clothing - (www.marketwatch.com) Officials promote government of the debt, by the debt, and for the debt. Many global stock markets are making new highs almost daily. Even the Nasdaq has risen to levels not seen since the 2000 tech bubble, as technology stocks are back in fashion with everybody looking for the new Google, Facebook or Twitter. Such is the bubble environment that a reader of the Financial Times commented that even an alien invasion would result in stock prices rising. Equity analysts would argue that companies could look forward to the prospect of gaining new non-human customers. Investors assume that the global financial crisis is now ancient history and normality has returned. But while financial markets are buoyant, the real economy remains moribund, stuck in a “secular stagnation” of low, volatile growth, high and rising debt, slow investment, overcapacity, high unemployment, low income growth and negative real interest rates. Yet despite talk of recoveries and reforms, little has actually changed. The global financial crisis (GFC) was the result of high debt levels, global imbalances, excessive financialization of economies and an entitlement society, based around borrowing-driven consumption and unfunded social entitlement programs in developed countries. These root causes remain substantially unaddressed. Since 2007, total debt levels in most economies have increased. Higher public borrowings have offset debt reductions by businesses and households. If unfunded entitlement obligations for pensions, health care and aged care are included, the level of indebtedness increases dramatically.

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