Friday July 29 2016 Housing and Economic stories

TOP STORIES:

Stocks Were Already Crashing the Last Two Times this Happened. So What Gives? - (www.wolfstreet.com) Over the last 20 years, margin debt – when investors buy stocks with borrowed money – went through three multi-year run-ups, each topped off with a spike, followed by a reversal and decline: during the final throes of the bubbles in 2000 and 2007, each followed by an epic stock market crash – and now. That pattern of jointly soaring and then declining margin debt and stocks even occurred during the run-up and near-20% swoon in 2011. The grand cycle began in February 2009, at the trough of the Financial Crisis, when margin debt had dropped to $200 billion. It was followed by a multi-year record-breaking run-up, topped off with a spike that culminated in an all-time peak of $507.2 billion in April 2015. Then margin debt reversed and began to decline. On cue, the stock market began to decline a month later. Margin debt zigzagged lower, and stocks did too. But in February this year, stocks suddenly bounced off sharply – without margin debt.

Twitter Plummets After Slashing Q3 Outlook – (www.zerohedge.com) Miraculously managing to beat user growth expectations (313mm MAUs vs 312mm MAUs exp) and EPS (+13c vs +9c exp), Twitter stock is plummeting after-hours after slashing Q3 revenue (and EBITDA) guidance drastically (from $681.4m to between $590 and $610mm). TWTR is trading down 11% after-hours... As Bloomberg reports, Twitter said third-quarter revenue will be less than analysts expected Tuesday, a sign it’s struggling to win more advertising dollars as user growth stagnates. The company forecast third-quarter revenue of $590 million to $610 million. Analysts were looking for $681.4 million. Monthly active users were 313 million in the second quarter, up from 310 million during the prior quarter. That beat the average analyst estimate for 312 million, according to data compiled by Bloomberg.

Active fund managers face more pain — Moody’s - (www.ft.com) The investor shift from active asset management to cheaper passive strategies will accelerate in the coming years and weigh on the earnings and credit ratings of investment groups unable to adapt to the new realities of the money management industry, according to Moody’s. The worsening ability of many fund managers to beat their benchmarks, coupled with their costs, has led to an investor exodus in favour of cheaper investment strategies such as exchange-traded funds, that seek to merely mimic the performance of a market at the cheapest possible cost. Ongoing for over a decade, the trend has accelerated and broadened recently, and badly rattled the traditional asset management industry that controls trillions of dollars’ worth of savings globally. As a result many have sought to build or buy their own passive investment operations, but those that fail to adjust will increasingly struggle, Moody’s warned in a report published on Monday.

It's Not a Search for Yield but a Scramble for Safety - (www.bloomberg.com) Some eight years after the financial crisis, investors are still petrified of risk assets. That statement might not ring true for anyone familiar with the 'reach for yield' that is said to have sent investors scurrying into riskier securities in recent times. But a new note from Bank of America Merrill Lynch turns that narrative on its head arguing that the "search for safety" has trumped the search for yield — at least, in terms of returns. At issue is the degree to which lower yields on benchmark government debt have actually pushed investors into riskier assets — a key goal of central bank bond-buying programs known as quantitative easing. Faced with lower yields, investors must shift into riskier, higher-yielding assets to generate their required returns, or so the thinking goes.

International Exposure to Turkey Is Showing Up in the Wrong Places - (www.bloomberg.com) Europe's credit markets are relatively insulated from the turmoil in Turkey. Unfortunately, according to analysts at JPMorgan Chase & Co., where exposure exists it's in all the wrong places. Start your day with what’s moving markets. Get our markets daily newsletter. Following an unsuccessful coup attempt earlier this month, Turkey's markets have been rocked by both political unrest and the threat of downgrade. From UniCredit SpA to Thomas Cook Group Plc, the risk is being shouldered by companies already battling problems at home. "In general, European credit does not carry much exposure to Turkey," the analysts led by Matthew Bailey said in the note to clients. Yet in almost all cases, the "names which are affected by the political situation were already facing other risks."

OTHER STORIES:

Dollar slips ahead of Fed, yen firms - (www.reuters.com)
Asia Stocks Fall With Global Shares Before Central Bank Meetings - (www.bloomberg.com)
U.S. Stocks Fall as Stronger Dollar Leads Commodities Lower - (www.bloomberg.com)

How Does This Hedge-Fund Manager Make So Much Money? - (www.bloomberg.com)
One Thing Both Parties Want: Break Up the Banks Again - (www.nytimes.com)
Xi’s China: The rise of party politics - (www.ft.com)