KeNo's Housing and Economic Portal: Wednesday August 24 2016 Housing and Economic stories

Tuesday, August 23, 2016

Wednesday August 24 2016 Housing and Economic stories

Withdrawals Plague Once-Mighty Hedge-Fund Firms Brevan Howard and Tudor - (www.wsj.com) Brevan Howard fund suffers first-half outflow of more than $3 billion; Tudor’s head count falls by 15%.A growing exodus from hedge funds extended to two of the biggest names in the industry Tuesday, Tudor Investment Corp. and Brevan Howard, as disenchanted investors increasingly shun what was once the hottest place to put money. The funds’ problem is clear: They just aren’t performing. Hedge funds and actively managed mutual funds have been underperforming since financial markets began their rebound in early 2009. The average hedge fund is up 3% this year through the end of July, according to researcher HFR Inc., less than half the S&P 500’s rise, including dividends. Funds in the $2.9 trillion hedge-fund sector have now experienced three consecutive quarters of withdrawals for the first time since 2009, according to HFR. Brevan Howard’s master fund was one of the star performers during the credit crisis, but is now on pace for its third straight calendar year of losses. Investors withdrew more than $3 billion from its flagship fund in the first half of this year, according to letters sent to investors and calculations by The Wall Street Journal based on the fund’s asset levels and performance.

Macy’s Pullback Imperils $30 Billion of Debt, Morningstar Says - (www.bloomberg.com) Store closures by Macy’s Inc. could hurt more than the mall rats, according to Morningstar Credit Ratings. Almost $30 billion of bonds backed by commercial mortgages are exposed to the retailer, which last week announced plans to shutter 100 outlets, the rating company wrote in a note on Wednesday. More than $3.6 billion in loans would be affected by the closing of 28 stores that Morningstar identifies as most at risk, several of which support multiple asset-backed securities, the company said. Start your day with what’s moving markets. Get our markets daily newsletter. Macy’s is struggling to reinvent itself for the 21st century as an increasing number of consumers opt to shop online, rather than in physical stores. To this end, the U.S.’s largest department-store company announced plans on Aug. 11 to close some of its less-profitable stores. But for bondholders, Macy’s problems signal further defaults could be ahead for notes backed by malls around the country.

Easy money is a dangerous cure for a debt hangover - (www.ft.com) Sweden’s Handelsbanken is an exemplar of prudence, barely touched by the 2008 financial crisis. It operates globally like a small community bank, to the point that it has just fired the chief executive, reportedly for attempting to centralise power. Branches lend as they see fit but are required to scrutinise creditworthiness and shun dodgy borrowers. The target loan loss ratio is zero; low loan losses, in turn, allow the bank to offer competitively priced loans and personalised service to creditworthy customers. Since it is better placed than lenders that rely on rule books or statistical models to assess the creditworthiness of entrepreneurs, Handelsbanken is also well positioned to satisfy the credit needs of small businesses. What is good for Handelsbanken is therefore good for long-term economic growth as well as for financial stability.

Irrational exuberance begins to surface in US stock market - (www.ft.com) Markets are extravagantly confident that brokers are too bearish, and that their profit forecasts for US companies are too low. The multiple of 18 times next year’s projected earnings at which the S&P 500 currently trades, according to Bloomberg data, allows little other interpretation. It is at its highest since 2002, outstripping any level it reached during the credit bubble, or when the Federal Reserve was pumping up asset prices with QE bond purchases. There are other signs that optimism on earnings is taking hold. For a while, the S&P has been dominated by high dividend-yielding stocks. This is a sensible strategy when you do not have faith in corporate profitability or growth. In the past few weeks, however, the S&P 500 Dividend Aristocrats index has started to lag behind the market. Classic income-producing sectors, such as utilities and real estate investment trusts, have also ceded leadership.

Carl Icahn Turns Apocalyptic: "I Am More Hedged Than Ever, A Day Of Reckoning Is Coming" - (www.zerohedge.com) We profiled Carl Icahn's notorious bearishness most recently two weeks ago when we showed that for the second quarter in a row, the billionaire's hedge fund, Icahn Enterprises had kept on its record short bias, manifesting in a net -149% market exposure. "I have hedges on, I'm more hedged than I ever was. [The market] is way overvalued at 20 times the S&P and I'll tell you why: a lot of it is a result of zero interest rates. That's going to be hurt. There's going to be a day of reckoning here. I've seen it many times in my life. When things look good, they look great. You go into the sky. But that's when you have to really pull down and really stop buying."

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