KeNo's Housing and Economic Portal: Friday January 2 Housing and Economic stories

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Exclusive - U.S. airlines confront cheap oil's flip side: costly hedges - (www.reuters.com) Some major U.S. airlines including Delta and Southwest are rushing to finance losing bets on oil and revamp fuel hedges as tumbling crude prices leave them with billions of dollars in losses, according to people familiar with the hedging schemes. In theory, airlines are among the top beneficiaries of a six-month slump that halved crude prices to five-year lows. Oil is the biggest variable cost for airlines, often representing a third or more of their total operating expenses. But now, carriers such as Delta Air Lines and even Southwest Airlines, known for a successful hedging program that locked in cheap fuel prices before they rose a decade ago, see some of the benefits of cheap fuel eaten away by hedging costs.

Outlook Sours for Europe’s Oil Titans on Crude Slump: S&P - (www.bloomberg.com) The U.S. shale-oil industry has made another enemy: Europe’s largest crude explorers. Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch Shell Plc (RDSA), Total SA (FP) and BP Plc (BP/) as the oil-market rout driven by weakening demand and a flood of supply from American shale fields threatens cash flow into 2016. The credit-rating company also cast a dim eye on Houston-based ConocoPhillips, saying it’s facing similar cash flow pressure, and said it may cut the ratings on Eni SpA (ENI) and BG Group Plc’s BG Energy Holdings. S&P cited “the dramatic deterioration in the oil price outlook” and the 50 percent increase in debt loads for the biggest European oil producers since the end of 2008. BP, down 7.3 percent in the past month in London, pared losses today with a 0.5 percent gain to 415.65 pence by 8:55 a.m. local time. Shell, down 3.5 percent in the four weeks, edged 0.4 percent higher to 27.84 euros in Amsterdam. Total, down 11 percent for the month, rose 0.5 percent to 43.06 euros in Paris. Eni today slid 0.3 percent to 14.65 euros in Milan.

Russia Moves to Stave Off Panic Among Depositors After Rescuing Bank - (www.bloomberg.com) After arresting a decline in the ruble, Russia is now trying to avert a banking crisis. Lawmakers rushed legislation through the lower house of parliament today allowing the Deposit Insurance Agency to buy stakes in banks before they face bankruptcy proceedings to keep the system stable. While the ruble strengthened for a third day as the government told state-run exporters to sell foreign currency, it’s still down 30 percent in three months. Standard & Poor’s said today it may cut Russia’s credit rating to junk in part because of concern about the banking system. “Urgent measures are needed for the stabilization of the banking system to avoid a panic among the population and a run on banks,” Vitaly Isakov, a money manager at Otkritie Asset Management in Moscow, said by e-mail. “There are fears about certain banks’ ability to survive in the current situation.”

Ruble Swap Shows China Challenging IMF as Emergency Lender - (www.bloomberg.com) China is stepping up its role as the lender of last resort to some of the world’s most financially strapped countries. Chinese officials signaled on the weekend they are willing to expand a $24 billion currency swap program to help Russia weather the worst economic crisis since the 1998 default. China has provided $2.3 billion in funds to Argentina since October as part of a currency swap, and last month it lent $4 billion to Venezuela, whose reserves cover just two years of debt payments. By lending to nations shut out of overseas capital markets, Chinese President Xi Jinping is bolstering the country’s influence in the global economy and cutting into the International Monetary Fund’s status as the go-to financier for governments in financial distress. While the IMF tends to demand reforms aimed at stabilizing a country’s economy in exchange for loans, analysts speculate that China’s terms are more focused on securing its interests in the resource-rich countries.

US Government Admits $2.4 Billion Food-Stamps "Mis-Spent" – (www.zerohedge.com) According to the most recent report from the US Department of Agriculture's Office of Inspector General, government "mis-spent" $2.4 billion on food stamps. While $2.4bn may feel like small amount in the present day of trillion-dollar debts, as The Daily Signal's Alexandra Gourdikan notes, the fact itself should raise concerns adding that the food stamps program is in need of reform. First and foremost, policymakers should focus on promoting work. Americans are willing to help those in need, but they also believe that people must do what they can for themselves. As The Daily Signal reports, This year the U.S. Department of Agriculture misspent $2.4 billion on food stamps, according to a November report from the USDA Office of Inspector General. “Misspending” means the USDA gave a household either more or less food stamp benefits than it should have received. Historical data shows most misspending results in overpayments. Although $2.4 billion may be a relatively small portion of overall food stamp spending, that fact itself should raise concerns. Food stamps is a massive program costing roughly $80 billion in fiscal year 2013, up from approximately $40 billion in fiscal year 2008 and less than $20 billion in fiscal year 2000.

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