KeNo's Housing and Economic Portal: Thursday November 17 20916 Housing and Economic stories

Wednesday, November 16, 2016

Thursday November 17 20916 Housing and Economic stories

Will the “Rout” in Government Bonds Turn into Carnage? - (www.wolfstreet.com) The Government “bond rout” didn’t start with Trump’s election victory. It started in July. And it didn’t just hit US Treasuries. It hit government bonds around the world. It’s predicated on the idea that inflation was raising its ugly head again. That idea has now become further entrenched. The threat of inflation puts holders of low-yielding or zero-yielding long-term bonds in a very foul mood because the purchasing power of their capital gets destroyed without compensation. It hit US Treasuries particularly hard. Central banks can push down long-term rates by buying bonds. The ECB and the Bank of Japan are doing that. But the Fed has been flip-flopping about raising rates. There is a good chance it will raise them another notch in December, from nearly nothing, by almost nothing, to next to nothing. So it isn’t going to revolutionize short-term rates. But it does point out that long-term rates in the US are on their own.

American Apparel topples into bankruptcy again – (www.usatoday.com) The company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated," American Apparel chief restructuring officer Mark Weinsten said in a court filing. "These market conditions were particularly detrimental to retailers." He said American Apparel's turnaround strategy "completely failed" as the company reported a 33% decline in year-over-year sales as of Sept. 30. The chain secured bankruptcy financing to keep its doors open for now, but Weinsten said the cash would run out by the end of the year. In the fiercely competitive teen fashion space, fast-fashion retailers H&M and Forever 21 have bulldozed their rivals in recent years. In 2016 alone, bankruptcies have included Aeropostale and Pacific Sunwear.

Europe's "Massively Over-Subscribed" Long-Dated Bond Bloodbath - (www.zerohedge.com) Remember all those super-long-duration bonds that every Tom, Dick, and Henri bought with both hands and feet earlier in the year? Headlines roared of "six time oversubscribed", or "four times oversubscribed" as Draghi and his entourage 'guaranteed' to keep everything profitable - whatever it takes. Well, things have gone a little disastrous in the last few days as Irish and Belgian 'century' bonds, Austria 70 year, Italian and Spanish 50 year bond prices are collapsing.

Henry Kaufman says Trump will help kill 30-year bond rally - (www.ft.com) The election of Donald Trump represents a “tectonic shift” for global economics and politics, and will help kill the three-decade bond market rally, according to Henry Kaufman, the original “Dr Doom”. The former Salomon Brothers chief economist gained his gloomy moniker by correctly calling the last bond bear market in the 1970s, and is now predicting another one, as Mr Trump will probably fire a massive slug of inflationary government spending and reshape the Federal Reserve in a hawkish way in the coming years. “We have already seen a burst higher in long-term interest rates … I would say the secular trend is going to be upwards now,” he told the FT. “Secular swings are hard to forecast, but the secular sweep downwards in interest rates is over, and we are about to have a gentle swing upwards.”

$200bn drained from equity funds since start of 2016 - (www.ft.com) Investors have pulled more than $200bn from equity funds since the start of 2016, with asset managers blaming the retreat on mounting concerns about political upheaval in developed economies and rocketing company valuations. This year’s outflows are the worst for equity managers since 2011, when investors pulled $148bn from funds exposed to global stock markets. Almost all types of equity mutual funds have been hit with redemptions this year, with $100bn being withdrawn in the latest quarter alone, according to figures exclusively compiled for FTfm by Morningstar, the data provider. The sell-off comes at a time of seismic political change. The unexpected victory of Donald Trump in the US election last week and the UK’s vote to leave the EU in June took markets by surprise.