KeNo's Housing and Economic Portal: Friday October 17 Housing and Economic stories

TOP STORIES:

How A Company That's Worth $1.5 Billion On A Friday Could Go Bankrupt On A Monday - (www.businessinsider.com) GT Advanced Technologies, which makes sapphire glass components for smartphones, filed for bankruptcy on Monday. Sapphire glass is an ultra-strong material, which Apple uses on both the camera lens and fingerprint scanner on the new iPhone. However, Apple doesn't, contrary to some expectations, use the material for the iPhone's main display. The move caught the market flat-footed, shares of the company were down 90% after the announcement. The drop in shares of GT on Monday has taken the company's market cap from roughly $1.5 billion Friday to about $175 million. At least one analyst Business Insider heard from after the announcement sees one possible reason for the sudden change from GT Advanced: Apple pulled the plug. Jeffrey Osborne, an analyst with Cowen & Co., wrote that Apple, which lent GT $578 million as part of a supply agreement last November, "had the ability to call the interest free loan back and it appears they have done that."

Tumbling Oil Prices Punish Hedge Funds Betting on Gains - (www.bloomberg.com) Hedge funds increased bets on rising oil prices just before crude futures tumbled to a 17-month low on signs that global supply is outstripping demand. Prices capped the biggest weekly decline in two months after money managers boosted net-long positions in West Texas Intermediate by 4.1 percent in the seven days ended Sept. 30. Long positions climbed 2.7 percent, U.S. Commodity Futures Trading Commission data show. WTI sank below $90 on Oct. 2 after Saudi Arabia, the world’s largest oil exporter, cut its prices to Asia. U.S. production is the highest since 1986, while OPEC output expanded to the most in a year. The International Energy Agency last month reduced its projections for demand growth this year and in 2015, citing a weakening economic outlook. “Oil isn’t looking like a good bet anymore,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Oct. 3. “Production continues to rise, flooding the market, while on a good day the demand picture looks anemic.”

Catalan Standoff to Hit Spain Economy, Whoever Wins - (www.bloomberg.com) Spanish Prime Minister Mariano Rajoy is battling to keep his country together, facing down Catalan separatists. Even if he wins, the standoff risks weakening the economy that the two sides are fighting over. Catalan President Artur Mas, backed by about two-thirds of the region’s lawmakers, is defying orders from Spain’s highest court and pressing ahead with a vote on independence on Nov. 9. The wrangling last week pushed the gap between Spanish and German bond yields to the widest since Scotland voted to remain in the U.K., while support for Rajoy’s People’s Party is tumbling, according to a poll published by El Pais yesterday. “Investors are pricing the risk of political instability in Catalonia,” said Francesco Marani, a fixed-income trader at Auriga Global Investors SA in Madrid, who trades government and regional debt. “The independence issue has already been hurting the Spanish economy, and it’s not over.” Spain’s economy is losing momentum amid a slowdown for its European trading partners. Uncertainty over the future of Catalonia, whose contribution to the Spanish economy is twice that of Scotland’s to the U.K., risks undermining investment as well as pushing up borrowing costs and distracting politicians from tackling the 24 percent jobless rate.

Paulson Says AIG Harsh Loan Terms Meant to Send Message - (www.bloomberg.com) American International Group Inc. (AIG) received harsher terms than other institutions in the 2008 financial crisis because regulators wanted to send a message to markets that government help would cost them, Henry Paulson, the former treasury secretary, testified. “It was important that terms be harsh because I take moral hazard seriously,” Paulson said, referring to the economic term for consequence-free risks. His appearance on the witness stand came in the Washington federal trial of Maurice “Hank” Greenberg’s Starr International Co.’s claim that the government illegally took equity in the insurer. Starr, AIG’s largest shareholder at the time of the bailout, claims the government punished the insurer by demanding equity and imposing an effective interest rate of 14 percent on a rescue loan -- far higher than interest other bailout recipients, such as banks, had to pay. Starr is seeking at least $25 billion in damages for shareholders.

[Bloomberg] Greek Budget Said to Leave Creditors Unconvinced on Exit - (www.bloomberg.com) Greece’s creditors insist the country should retain access to bailout funds next year even as the government seeks an almost-balanced budget for the first time in decades, two officials with knowledge of the matter said. The country’s budget deficit will shrink to 338 million euros ($424 million) next year, or 0.2 percent of gross domestic product, from 1.41 billion euros, or 0.8 percent of GDP, this year, according to the 2015 draft budget, which was submitted to parliament today. The primary surplus, which is the budget before interest payments, will rise to 5.42 billion euros in 2015, or 2.9 percent of GDP, from of 3.6 billion euros this year, the plan shows.

OTHER STORIES:

World Bank trims China, East Asia 2014-2016 growth forecasts - (www.reuters.com)