Monday June 6 2016 Housing and Economic stories

TOP STORIES:

Puerto Rico’s U.S. Rescue Won’t Come Soon Enough to Halt Default - (www.bloomberg.com)  Even if U.S. lawmakers return next week and push through their Puerto Rico rescue with unusual speed, it may not come fast enough to save the island from its biggest default yet. The legislation would put Puerto Rico’s budget and, potentially, a restructuring of its debt in the hands of a federal oversight board appointed by congressional Republicans and President Barack Obama -- a body that’s virtually impossible to set up before $2 billion of debt payments come due on July 1. And the bill doesn’t provide any additional federal money to the U.S. territory, whose government says it’s simply too broke to pay. “I don’t think we would expect that Congress would enact anything that’s quick enough to solve the July 1 debt service problem,” said Phil Fischer, head of municipal research at Bank of America in New York. “There’s a lot of uncertainty about what will be paid and how.”

The Big Short Is Back in Chinese Stocks - (www.bloomberg.com)  Chinese equities are once again in the cross hairs of short sellers. Short interest in one of the largest Hong Kong exchange-traded funds tracking domestic Chinese stocks has surged fivefold this month to its highest level in a year, according to data compiled by Markit and Bloomberg. The last time bearish bets were so elevated, such pessimism proved well-founded as China’s bull market turned into a $5 trillion rout. While trading in the Shanghai Composite Index became subdued this month amid suspected state intervention, pessimists are betting that equities face renewed selling amid a slumping yuan. The Chinese currency is heading for its biggest monthly loss since last year’s devaluation as the nation’s economic outlook worsens and the Federal Reserve prepares to raise borrowing costs, driving a rally in the dollar.

China's Slowdown Hits Nearby Economies Hardest - (www.bloomberg.com) Those nearest to China are among the hardest hit as growth in the world's second-largest economy grinds to the slowest pace in a quarter century. Hong Kong, Macau, and Taiwan all saw their economies shrink in the first quarter, while Mongolia's commodities-fueled boom has faltered. And the bad news doesn't stop there. "The ripples are likely to spread further out," said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. "As China's economy continues to cool, it will provide an ongoing drag on global output, curtailing inflation pressures in the process and anchoring interest rates in the process. The economic malaise currently experienced by China's immediate neighbors, therefore, is only a portend of a milder version to afflict economies elsewhere as China comes off the boil." 

Payday Loans’ Debt Spiral to Be Curtailed - (www.nytimes.com) The payday loan industry, which is vilified for charging exorbitant interest rates on short-term loans that many Americans depend on, could soon be gutted by a set of rules that federal regulators plan to unveil on Thursday. People who borrow money against their paychecks are generally supposed to pay it back within two weeks, with substantial fees piled on: A customer who borrows $500 would typically owe around $575, at an annual percentage rate of 391 percent. But most borrowers routinely roll the loan over into a new one, becoming less likely to ever emerge from the debt. Mainstream banks are generally barred from this kind of lending. More than a dozen states have set their own rate caps and other rules that essentially prohibit payday loans, but the market is flourishing in at least 30 states. Some 16,000 lenders run online and storefront operations that thrive on the hefty profits.

Pension Funds Pile on Risk Just to Get a Reasonable Return -  (www.wsj.com) What it means to be a successful investor in 2016 can be summed up in four words: bigger gambles, lower returns. Thanks to rock-bottom interest rates in the U.S., negative rates in other parts of the world, and lackluster growth, investors are becoming increasingly creative—and embracing increasing risk—to bolster their performances. To even come close these days to what is considered a reasonably strong return of 7.5%, pension funds and other large endowments are reaching ever further into riskier investments: adding big dollops of global stocks, real estate and private-equity investments to the once-standard investment of high-grade bonds. Two decades ago, it was possible to make that kind of return just by buying and holding investment-grade bonds, according to new research.

OTHER STORIES:

Bonds Fall With Emerging Markets as Dollar Gets Lift From Yellen - (www.bloomberg.com)
Emerging Markets Pounded by Yellen as Run of Monthly Gains Stall - (www.bloomberg.com)
Draghi’s First Good News in a Year Has $267 Billion Cost - (www.bloomberg.com)
Fed's Bullard says global markets seem well-prepared for summer rate hike - (www.reuters.com)

Hong Kong Home Prices Have Much Further to Fall Before Controls Are Eased - (www.bloomberg.com)
Defaults Threaten China's Wealth Management Market - (www.bloomberg.com)
A new monetary order will only emerge from the next crisis - (www.ft.com)
China Lashes Out at US Defense Secretary Criticisms - (www.ap.com)