Thursday April 21 2016 Housing and Economic stories

TOP STORIES:

It's All Suddenly Going Wrong in China's $3 Trillion Bond Market - (www.bloomberg.com) The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel.  Spooked by a fresh wave of defaults at state-owned enterprises, investors in China’s yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003. While bond yields in China are still well below historical averages, a sustained increase in borrowing costs could threaten an economy that’s more reliant on cheap credit than ever before. The numbers suggest more pain ahead: Listed firms’ ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis.

As Olympics Looms, Governor Warns Rio Is "Close To Social Collapse" - (www.zerohedge.com) With feces-infested waterways, Zika-carrying mosquitoes, a collapsing economy, and political corruption that runs from top to bottom, Brazil is in trouble. All that excludes now impeached president Dilma Rousseff who refuses to step down, which has cast the country in political limbo. But just a few short weeks ahead of The Olympics, the people are revolting as Sao Paulo state governor Geraldo Alckmin warns "Rio de Janeiro is close to social collapse” after state payments to retirees have not been made. Of course, none of this matters as long as Ibovespa is soaring and Real is strengthening:

U.S. Regulators to Focus on Borrowing at Large Hedge Funds – (online.wsj.com)  Top U.S. regulators are set to focus on borrowing by the hedge-fund industry, particularly large funds, as they assess potential risks in the asset-management sector. The Financial Stability Oversight Council voted unanimously at a public meeting Monday to endorse a 27-page “update” of its more-than-two-year review of financial-stability risks tied to the asset-management industry. Treasury Secretary Jacob Lew said the oversight council, a group of senior regulators that he heads, has found that leverage in the hedge-fund industry appears to be concentrated at larger funds, though he cautioned that “greater leverage does not necessarily imply greater risk or systemic risk” and more factors need to be considered.

Wall Street banking revenue is in free fall, and here's why - (www.cnbc.com) Fixed income, currencies and commodities trading declines hit Wall Street hard in a volatile first quarter. Goldman Sachs reported first-quarter earnings Tuesday morning that while crossing a low bar also saw a 47 percent year-over-year drop in fixed income, currencies and commodities, or FICC, to $1.66 billion. It was part of a report that showed revenue growth tumbling 40 percent, from $10.62 billion from the year-ago period to $6.34 billion in the first three months of 2016. With growing uncertainty on the horizon in the second quarter, the FICC struggle could continue. In part thanks to more central banks embracing negative interest rates, S&P Global Markets Intelligence equity analyst Kenneth Leon said more FICC pain could continue on Wall Street in 2016.

This Also Happened the Last 2 Times before Stocks Crashed - (www.wolfstreet.com) Something that happened just before the prior two market crashes, and the recessions that accompanied them, including the Great Recession, is happening again: the boom in financial engineering is starting to backfire against the companies doing it. Their credit ratings are getting slashed, and their borrowing costs are therefore rising, even while they need newly borrowed money to buy back even more shares to keep the charade going. Until the music stops. Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research. The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.

OTHER STORIES:

Media Websites Battle Faltering Ad Revenue and Traffic - (www.nytimes.com)
Saudi Arabia turns oil weapon on Iran: Kemp - (www.reuters.com)

Crude's Losses Drag Ruble, Loonie Lower; Stocks Pare Their Drop - (www.bloomberg.com)

U.S. Stocks Advance as Investors Look Past Declines in Crude Oil - (www.bloomberg.com)
China March home prices rise at fastest rate in two years, top cities boom - (www.reuters.com)
China State Enterprises Likely to Suffer More Defaults, S&P Says - (www.bloomberg.com)