Monday June 13 2016 Housing and Economic stories

TOP STORIES:

Trail of Defaults Leads to Dark Corner of Tax-Exempt Bond Market - (www.bloomberg.com) When Philip J. Kennedy needed financing to buy low-income housing in a wealthy Dallas suburb, he bypassed Texas agencies for a tax-exempt bond issuer 700 miles away in Gulf Breeze, Florida. Leaving the state allowed Kennedy’s non-profit American Opportunity Foundation Inc. to secure $35 million to buy Garden Gate Apartments in Plano, Texas, and a development in Fort Worth without answering questions from local authorities about AOF’s past difficulties repaying debt. Scores of non-profit organizations like AOF are required to use government-created agencies when selling bonds. In return, the agencies charge fees. At times, these conduits aren’t in the same state as the projects they’re financing, giving officials on the ground little incentive to scrutinize the deals.

EBT Card Outage? 8 Days Into June And Many Americans Are Still Waiting For Food Stamp Money - (www.zerohedge.com) Widespread reports continue to pour in from all over the nation of “glitches” with the food stamp system.  It is eight days into the month and large numbers of people still have not received their benefits, and in other instances it is being reported that EBT cards are simply not working correctly.  So what in the world is going on here?  On downdetector.com there are scores of reports of problems with the EBT system from people all over the nation.  Could this simply be another example of government incompetence, or is something else at work here? I had heard some rumblings about this over the past few days, but I had not really taken them seriously until I read an article from highly respected author Ray Gano… It interesting over the weekend I got several emails telling me about cell phones being down, internet being down, and get this, EBT cards not working and having no money associated to them. This is a concern because when the US Government has payment failures, then there is possibly something happening that the press is not telling you about.

Negative rates stir bank mutiny - (www.cnbc.com) An image of Euro banknotes being counted. The central bank policies have hit bank profitability in both regions and German banks have been vocal in criticizing Mario Draghi, ECB president,  accusing him of punishing savers and undermining their business models. Lenders in Europe and Japan are rebelling against their central banks' negative interest rate policies, with one big German group going so far as to weigh storing excess deposits in vaults. The move by Commerzbank to consider stashing cash in costly deposit boxes instead of keeping it with the European Central Bank came at the same time as Tokyo's biggest financial group warned it was poised to quit the 22-member club of primary dealers for Japanese sovereign debt. The ECB and the Bank of Japan have for months imposed negative rates for holding bank deposits in an attempt to push lenders to deploy their cash in the real economy through more aggressive lending to businesses. The policy in effect taxes banks for storing excess liquidity.

Thiel Says ‘Real Bubble’ Is in Government Bonds, Negative Rates - (www.bloomberg.com) Billionaire investor and Facebook Inc. board member Peter Thiel said government bond yields and negative interest rates are signs of an asset bubble that reflect the slowing of technological change. Thiel, speaking in German on a panel at the Finance Ministry in Berlin on Wednesday, said he doesn’t see a bubble in technology companies and startups. Negative-rate policies by central banks indicate a lack of attractive investment options and “show us that we don’t have ideas for a better future,” he said. “If there is a bubble today, then it’s a bubble in government bonds, in negative interest rates -- that’s the real bubble,” Thiel said. What’s needed is economic growth, in part because “politics only works when there’s growth,” he said.

Debt traders miss credit default swaps as losses loom - (www.ft.com) Investors looking for shelter from the next corporate bond storm have all but lost the ability to buy a type of financial umbrella called the single-name credit default swap. These derivative contracts provide a form of insurance. When the perceived creditworthiness of a company falls, single-name CDS prices rise, offsetting losses on a portfolio of bonds and loans. Single-name CDS became popular among banks a decade ago during a credit boom that preceded the crisis. But trading has dwindled in response to new regulation and capital requirements. Average weekly volume of $140bn in 2011 has fallen to $57bn in 2016, according to ISDA, the International Swaps and Derivatives Association.

OTHER STORIES:

Japan Stock Futures Drop Amid Yen Jump; Oil, Copper Extend Gains - (www.bloomberg.com)
Thiel Says ‘Real Bubble’ Is in Government Bonds, Negative Rates - (www.bloomberg.com)
The ECB's Corporate Bond-Buying Is Making Waves All the Way to the U.S. - (www.bloomberg.com)
Central banks in Catch-22 over currency reserves - (www.ft.com)

Soros Returns to Trading, Worried About World Economy, WSJ Says - (www.bloomberg.com)
A Bearish George Soros Is Trading Again - (www.wsj.com)
East China Sea Tensions Rise Over Chinese Ships, Plane Intercept - (www.bloomberg.com)

How's That Credit Hedge Working Out For You? - (www.bloomberg.com)
Japan protests after Chinese navy ship sails near disputed islands - (www.reuters.com)