Friday March 4 2016 Housing and Economic stories

TOP STORIES:

U.S. banks to cut credit lines for energy firms -JP Morgan - (www.reuters.com) Cash-strapped energy firms are coming under increasing pressure from U.S. bank lenders and, on average, could see a 15 percent to 20 percent cut in their credit lines, the head of JP Morgan's commercial bank told investors on Tuesday. Until now, banks could be more lenient with their energy clients despite a prolonged slump in the price of oil, but Doug Petno, the head of JP Morgan's commercial bank, said that is changing. Moves, disclosed in securities filings, by oil and gas companies such as Linn Energy and SandRidge Energy to max out revolving credit lines - designed to cover short-term funding gaps - have prompted banks to take action.

It Starts: Subprime Auto Loans Implode (in Your Bond Fund) - (www.wolfstreet.com)  “What is happening in this space today reminds me of what happened in mortgage-backed securities in the run-up to the crisis,” U.S. Comptroller of the Currency Thomas Curry warned in October about the auto loan bubble. And his warning is now becoming reality. Subprime auto loans aren’t big enough to take down our megabanks, the way subprime mortgages had done. But they’re big enough to take down specialized auto lenders and cause a lot of tears among investors that bought the highly rated structured securities backed by subprime and deep-subprime auto loans that are now defaulting at a rate last seen during the days of the Financial Crisis. And they’re big enough to knock the auto industry, one of the few booming sectors in the otherwise lackadaisical economy, off its record perch. An auto-loan implosion would start at subprime and work its way up, just like mortgages had done.

ECB risks running out of bonds to buy unless rewrites rules - (www.reuters.com) The European Central Bank could run out of government bonds to buy within a year if it does not relax its own restrictions on purchases, dealing a blow to its mission to boost growth in the euro zone and lift inflation. The central bank may have to consider measures such as scrapping its ban on buying bonds yielding less than its deposit rate or even extending the scheme to include corporate debt, particularly if it increases the size of the 60 billion euros ($66 billion) a month program, as some analysts expect. Otherwise it risks running out of the bonds it can buy from some countries, including Germany - Europe's biggest economy and the euro zone's lowest-risk borrower.

Hedge funds are getting ready for Armageddon - (www.businessinsider.com)  Hedge fund investors are battening down the hatches. "Hedge fund positions bear all the imprints of significant risk aversion already," Societe Generale strategists said Wednesday in a note. "The volatile start of 2016 forced hedge funds to adopt a very cautious stance." As the chart below shows, hedge funds are long the Chicago Board Options Exchange Volatility Index, or VIX, which measures expected stock market volatility. They are also long 30-year US Treasury bonds and the Nikkei. They're short the Russell 2000, the S&P 500, and the Nasdaq.

Brazil Credit Ratings Cut to Junk by Moody’s - (www.bloomberg.com) Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade, as President Dilma Rousseff struggles to shore up fiscal accounts amid deepening political turmoil. The country’s benchmark stock gauge declined the most in two weeks and the currency weakened after the rating was reduced two steps to Ba2, putting Moody’s grade in line with Standard & Poor’s and one level below Fitch Ratings. The outlook is negative, meaning more downgrades may be coming, Moody’s said in a statement Wednesday.

OTHER STORIES:

U.S. Stocks Slip From 6-Week High as Recent Rally Leaders Falter - (www.bloomberg.com)
JPMorgan Trading Revenue Drops 20% This Year in Global Rout - (www.bloomberg.com)
Former JPMorgan trader says 'London Whale' debacle not his fault - (www.reuters.com)

Key Takeaways From a Brutal Year for Hedge Funds - (www.bloomberg.com)
China 'changing operational landscape' for East Asia dominance -US commander - (www.reuters.com)
U.S. Must Deploy Anti-Ship Missile Soon in Asia, Admiral Says - (www.bloomberg.com)