Monday September 28 Housing and Economic stories

TOP STORIES:

“There’s Just No Cash”: Oil Bust in Canada Hits Creditors – (www.wolfstreet.com) “There’s just no cash.” That’s the Coles Notes from a senior banker describing the book of oil service loans he manages for one of Alberta’s leading lenders. There’s simply not enough cash flow to support current levels of debt. Bankers and borrowers have kicked the can down the road about as far as they can as more oilfield service (OFS) and exploration and production (E&P) companies default on their loans and seek more relief on lending covenants. While a significant oil price increase to lift all the sinking boats will surely come, it won’t happen soon enough. More of the same won’t work. Oil industry debt is everyday news. But the discussion is about the symptoms, not the ailment. Companies cannot borrow their way out of debt. Equity capital is only available at distressed valuations. Specialized OFS assets will fetch only a fraction of replacement cost—if somebody actually wants them. Although oil and gas reserve valuations are down by half, borrowers are being forced to sell them anyway to repair balance sheets. The last four months of 2015 will be very difficult for any company with meaningful amounts of debt. Same for their lenders, the other signatories to the loan agreement.

No Escape for China Hedge Funds Overwhelmed by Stocks Collapse - (www.bloomberg.com) It’s about to get even uglier for China’s hedge funds. The newfangled industry, short on expertise and ways to protect itself from market declines, has seen almost 1,300 funds liquidate amid China’s $5 trillion stocks selloff, and a similar number may be at risk, according to Howbuy Investment Management Co. Now, a government crackdown on short selling and other hedging strategies have made prospering in a bear market difficult. It’s an inglorious turn for China’s on-again, off-again love affair with stocks, which saw the number of hedge-fund-like vehicles explode in past years as the government made it easier to register funds and introduced new financial instruments. The market rout -- and the regulatory response to it -- has revealed cracks in the industry that suggest it may need years to recover. In the most devastating blow to domestic hedge funds, China has imposed new restrictions on trading in stock-index futures, a key investment strategy to dampen volatility and avoid big losses.

Puerto Rico Water Agency Pays Premium to Refinance Bank Loan - (www.bloomberg.com) Puerto Rico’s main water utility paid a significant premium while selling $75 million of short-term notes that extend a bank loan through November and said it remains optimistic that the agency can issue $750 million in bonds in the next few weeks. The Puerto Rico Aqueduct and Sewer Authority revenue note sale transfers most of a $90 million loan with Banco Popular to Bank of America Merrill Lynch, the lead underwriter of the deal, according to Norma Munoz, a spokeswoman in San Juan for the utility. The notes, which mature Nov. 30, were privately placed with an 8.75 percent coupon priced at par. Top-rated three-month tax-exempt securities yield about 0.09 percent, according to data compiled by Bloomberg. The utility, called Prasa, plans to sell the revenue bonds after delaying the deal last month. The agency is reviewing and updating its bond documents and “should be back in the market in the next few weeks,” Munoz said. Bank of America is also the underwriter for the proposed bond offering.

ACKMAN: The US government is perpetrating 'the most illegal act of scale' with Fannie and Freddie - (www.businessinsider.com)  Hedge fund titan Bill Ackman, the founder of $19 billion Pershing Square Capital Management, slammed the US government on Tuesday night for keeping all of the profits from mortgage guarantors Fannie Mae and Freddie Mac. Ackman called it "the most illegal act of scale" he has ever seen the US government do. Ackman spoke on Tuesday evening during a panel at Columbia University for the launch of Bethany McLean's new book "Shaky Ground." McLean and former Fannie Mae CEO Frank Raines were also panelists. Ackman, however, did most of the talking. During the financial crisis, Fannie and Freddie needed massive bailouts and were taken over by the government. It's been seven years since the financial crisis and the companies are still in a state of conservatorship. Today, the government-sponsored enterprises (GSEs) make billions in profits, all of which goes directly to the Treasury.

Record 46.7 Million Americans Live In Poverty; Household Income Back To 1989 Levels - (www.zerohedge.com) That said, here are some things Obama will not discuss. According to the just released Census Bureau annual report on Income and Poverty, in 2014 the official poverty rate was 14.8% as a result of a record 46.7 million Americans living in poverty. This is the fifth consecutive year since the end of the recession that the number of impoverished Americans has barely not budged. What recovery? Worse, while there was no material change for the percentage of Americans in poverty, there was a statistical increase in the number of people in poverty who had at least a bachelor’s degree (rising from 3 million to 3.4 million in one year) and married-couple families. Because through higher education and debt, to poverty. The people living in extreme poverty, i.e. below 50% of the poverty minimum, also rose to an all-time high of 20.8 million.

OTHER STORIES:

Manufacturing in U.S. Declines by Most Since January 2014 - (www.bloomberg.com)
Brazil Stocks, Real Slump as Goldman Sachs Doubts Political Will - (www.bloomberg.com)
Why Everyone Is Suddenly Talking About Financial Conditions - (www.bloomberg.com)
China Stocks Post Biggest Two-Day Loss in Three Weeks on Economy - (www.bloomberg.com)

China Brokers Shut Out of Own Futures Market Try Singapore - (www.bloomberg.com)

Yellen's Former Aide Says a Rate Hike Would Be a Serious Error - (www.bloomberg.com)
U.S. 2-Year Yields Reach Highest Since 2011 as Fed Meeting Looms - (www.bloomberg.com)