Wednesday February 1 2017 Housing and Economic stories

TOP STORIES:

Condo Speculation Collapses in Miami-Dade’s Condo Glut - (www.wolfstreet.com) The lure: Buy a preconstruction condo from a developer in the early stages of development. The initial deposit is small, and in a booming market, the payoff big. Additional payments need to be made as the building progresses, but lenders are eager to lend as condo prices soar. Everyone is in nirvana. This bet has been hot in the condo construction boom around the country. But in Miami, the bet is now collapsing. And preconstruction condo flippers, the lucky ones that could sell their units at all, are bathing in a sea of red ink. First things first: The overall condo market in Miami-Dade has gotten tough, with the inventory of condos for sale ballooning and with sales plunging.

Martin Armstrong Warns EU Just Declared US Is The New Enemy – (www.zerohedge.com) The European Union’s chief BREXIT negotiator, Guy Verhofstadt, told Reuters that Donald Trump is part of a three-pronged attempt to undermine the European Union. The other two threats were from radicalized Islam and from Russian President Vladimir Putin, who Verhofstadt said was also working against the progress of the EU project. "We have a third front, for the moment, undermining the European Union, and it is Donald Trump," Verhofstadt said in a speech at the Chatham House think-tank.

"Trump spoke very favorably of the fact that also other countries will want to break away from the European Union, and that he hoped for a disintegration of the European Union."   Verhofstadt served for nine years as prime minister of Belgium, and has served in the European Parliament since 2009. He said that the European Union had severe problems, saying it was in a "poly-crisis", but nevertheless argued that the solution was for greater co-operation between states. "A disintegration of the Union would be a disaster ... not only for Europe but also I think for our allies and for the world."

Le Pen’s Main Rival Hit by Fresh Scandal in French Election - (www.bloomberg.com) Francois Fillon’s French presidential campaign plunged deeper into trouble on Tuesday after further revelations about his use of public funds to employ members of his family. The Republican candidate’s daughter and son allegedly earned 84,000 euros ($91,000) from 2005 to 2007 while working for him when he was a Senator, Le Canard Enchaine said. His wife, Penelope Fillon, earned more than 900,000 euros during over a decade as a parliamentary assistant and a contributor to a magazine, according to Le Canard. The newspaper’s initial report on Penelope’s job last week triggered a prosecutor to open a preliminary probe into the family’s affairs. The candidate says he’s innocent.

 IMF Warns Eurogroup Loan Measures Not Enough for Greek Debt - (www.bloomberg.com) Greece’s public debt and financing needs will prove “explosive” in decades to come unless Europe overhauls its bailout program to ease the load, the International Monetary Fund says in a draft report as the country seeks a fresh loan payout. In the IMF’s baseline scenario, Greece’s government debt will reach 275 percent of its gross domestic product by 2060, when its financing needs will represent 62 percent of GDP, the report obtained by Bloomberg says. The government estimates public debt around 180 percent of GDP at present. The European Union’s view of the evolution of Greek debt is “more benign” and based on “significantly more optimistic assumptions,” the IMF notes. The document also says some Greek debt proposals by euro-area finance ministers “are not specific enough to enable a full assessment” of how they would affect sustainability.

Fed Grapples With Massive Portfolio - (www.wsj.com) While Federal Reserve officials ponder when to raise short-term interest rates again, they are beginning to wrestle with another big policy decision—whether this is the year to start shrinking their immense portfolio of mortgage and Treasury securities. The Fed has boosted its portfolio of long-term bonds and other assets to $4.45 trillion from less than $1 trillion in 2007, just ahead of the financial crisis. Officials believe the large portfolio has helped to spur economic growth by holding down long-term interest rates. With the economy closer to healed from the financial crisis and recession, the central bank has already begun raising short-term rates. 

OTHER STORIES:

How Trump's immigration move could derail the market rally - (www.cnbc.com)
Citigroup, European Banks Stick With Mexico as Trade War Looms - (www.wsj.com)

Trump talks to world leaders amid alarm over Muslim immigrant policy - (www.yahoo.com/news)
Trump's Attack on Germany and the Global Economy - (www.spiegel.de)

China military official says war with US under Donald Trump 'becoming practical reality' - (www.independent.co.uk) 

Tuesday January 31 2017 Housing and Economic stories

TOP STORIES:

Uh-oh! Americans Are Flipping Houses Like It's 2006 – (www.wallstreetexaminer.com) Yes, Americans are “flipping” homes again, just like in 2006.  The steps involved in “flipping are: 1) buy a house, 2) apply a fresh coat of paint, 3) trim some bushes, and then 4) resell the home at a profit. According to Trulia, investors flipping homes account for the largest share of US housing sales since … 2006. What do these cities have in common? Look at the housing bubble peak of 2005-2006. It looks like a repeat of the housing bubble (except for Dallas).

ECB’s Insider Connections Under Scrutiny Again - (www.wolfstreet.com) Just months after chastising former European Commission President Jose Manuel Barroso for accepting an “advisory” role with Goldman Sachs, EU Ombudsman Emily O’Reilly has a new job on her hands: investigating the close ties ECB President Mario Draghi and aides have with private banks. The inquiry, launched after a complaint lodged by the NGO Corporate Europe Observatory (CEO), will delve into Draghi’s membership of the Group of Thirty, a secretive forum of influential finance executives, academics, and policy makers. “CEO research has exposed a severe lack of critical distance between the ECB’s decision-making bodies and corporate bankers in the G30,” the NGO said. “Our study shows that high-level employees of the ECB are far too close to the representatives of the banks they supervise and that the information they transmit at the G30 meetings is out of control,” asserted Kenneth Haar, a member of CEO.

Noah Ravenscroft, former Quicken Loans exec, charged with killing wife – (www.theoaklandpress.com) A Commerce Township man and former Quicken Loans executive is jailed without bond after being charged in his wife’s brutal slaying. Noah Ravenscroft, 36, was arraigned on a charge of first-degree premeditated murder via video after being entered into Oakland County Jail inmate records tied to the Monday, Jan. 23 stabbing death of his wife, Kristy. Bond was denied for Ravenscroft, who was charged while in the hospital. A probable cause hearing in his case is scheduled for 9:15 a.m. on Feb. 1, and a tentative exam date was set for 1:30 p.m. on Feb. 8.

New Homes Sales Fall 10.37% In December, Back To 1991 Levels – (www.wallstreetexaminer.com) Great success! US new home sales are now at 1991 levels! US home sales for December 2016 fell 10.37 from November to December while adding 536 thousand units SAAR. The midwest crashed by 40% while the northeast grew at 50%. Bear in mind that the base is small for new home sales in both the northeast and midwest. Both the south and the west fell around 9%. New home sales back to only 1991 levels. One reason that new home sales are so lame?  The under 620 credit crowd have essentially vanished from the housing market for new homes.

Sales of New U.S. Homes at 10-Month Low as Mortgage Rates Jump - (www.bloomberg.com) Purchases of new U.S. homes fell in December to a 10-month low, suggesting the post-election jump in mortgage rates pushed out potential buyers. Single-family house sales dropped 10.4 percent, the most in almost two years, to a 536,000 annualized pace, Commerce Department data showed Thursday. The median forecast in a Bloomberg survey was for 588,000. The figures indicate that the increase in mortgage rates curbed momentum in the housing market after steady job gains and historically low borrowing costs helped push full-year sales to the highest since 2007. Stricter lending standards also remain a hurdle for buyers this year.

OTHER STORIES:

U.S. Wage Disparity Took Another Turn for the Worse Last Year - (www.bloomberg.com)
Guess Which Way the Doomsday Clock Just Ticked - (www.bloomberg.com)
Trump Strategist Steve Bannon Says Media Should ‘Keep Its Mouth Shut’ - (www.nytimes.com)

Canceled Meeting Deepens U.S.-Mexico Rift - (www.wsj.com)
Jens Weidmann fuels debate on ending ECB monetary stimulus - (www.ft.com)
Europe’s Economy Takes Over From Trump in Driving Local Bond Yields - (www.wsj.com)

Wall Street Can’t Quit the Mexican Peso - (www.bloomberg.com)

Monday January 30 2017 Housing and Economic stories

TOP STORIES:

Americans Are Flipping Houses Like It’s 2006 - (www.bloomberg.com) Housing market investors have pushed the share of flips, or properties sold twice in 12 months, to its highest level in a decade. A tactic that helped define the height of home-buying madness in the U.S. in the years before the market collapsed is rearing its head again. Home flippers, who buy homes as a speculative bet on short-term price appreciation, accounted for 6.1 percent of U.S. home sales in 2016, according to Trulia, which defines a flip as a property sold twice in a 12-month period in arm’s-length transactions. That’s the highest share since 2006, when flips accounted for 7.3 percent of sales.

A Rising Tide of Used Cars Threatens Ford’s Profits - (www.bloomberg.com) All those years of rising U.S. auto sales are starting to work against carmakers. A glut of used vehicles has started to depress prices. That trend will intensify as Americans will return 3.36 million leased cars and trucks this year, another jump after a 33 percent surge in 2016, according to J.D. Power. The fallout has already begun, with Ford Motor Co. shaving $300 million from its financial-services arm’s profit forecast for this year. “Ford is the canary in the coal mine,” said Maryann Keller, a former Wall Street analyst who’s now an auto industry consultant in Stamford, Connecticut. This drag may be hitting the rest of the industry, too. A National Automobile Dealers Association index of used-vehicle prices declined each of the last six months of last year. When auto lenders lease out vehicles, they charge the customer a monthly payment and make an assumption of the car or truck’s value when it will be returned for resale. If vehicles are depreciating more than expected, losses can pile up.

Google Permanently Bans 200 "Fake News" Sites – (www.zerohedge.com)  From November to December 2016, we reviewed 550 sites that were suspected of misrepresenting content to users, including impersonating news organizations.  We took action against 340 of them for violating our policies, both misrepresentation and other offenses, and nearly 200 publishers were kicked out of our network permanently. In addition to all the above, we support industry efforts like the Coalition for Better Ads to protect people from bad experiences across the web. While we took down more bad ads in 2016 than ever before, the battle doesn’t end here. As we invest in better detection, the scammers invest in more elaborate attempts to trick our systems. Continuing to find and fight them is essential to protecting people online and ensuring you get the very best from the open web. Google has not disclosed the list of 200 sites it had permanently banned.

U.S. home sales drop as supply tumbles to 17-year low - (www.reuters.com) U.S. home resales fell more than expected in December as the supply of houses on the market dropped to levels last seen in 1999, but the housing market recovery remained intact against the backdrop of a tightening labor market. The National Association of Realtors said on Tuesday existing home sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million units. In addition to the lack of properties to purchase, rising home prices and mortgage rates also likely sidelined some buyers last month. The drop in sales followed three straight months of increases and probably does not signal impending housing weakness, with the labor market near full employment and the economy strengthening.

Federal Debt Projected to Grow by Nearly $10 Trillion Over Next Decade - (www.nytimes.com) After seven years of fitful declines, the federal budget deficit is projected to swell again, adding nearly $10 trillion to the federal debt over the next 10 years, according to projections from the nonpartisan Congressional Budget Office. The numbers reveal the strain that government debt could have on the economy as President Trump presses to slash taxes and ramp up spending. The deficit figures released Tuesday will be a major challenge to House Republicans, who were swept to power in 2010 on fears of a bloated deficit and who made controlling red ink a major part of their agenda under former President Barack Obama.

OTHER STORIES:

Pricier Oil Means China's Foreign Reserves Will Shrink Even Faster, Goldman Says - (www.bloomberg.com)
China says will protect South China Sea sovereignty - (www.reuters.com)
Trump Injects High Risk Into Relations With China - (www.nytimes.com)

For C.E.O.s, a New Concern: The Activist in Chief - (www.nytimes.com)
Mexico braces for confrontation with Trump team - (www.ft.com)
Turkey’s interest rate moves leave country in a mess - (www.ft.com)

Friday January 27 2017 Housing and Economic stories

TOP STORIES:

Financialization of Rents Gets Taxpayer Guarantees - (www.wolfstreet.com)  Invitation Homes, the 2012 buy-to-rent creature of private-equity firm Blackstone, and now owner of 48,431 single-family homes, thus the largest landlord of single-family homes in the US, accomplished another feat: it obtained government guarantees for $1 billion in rental-home mortgage backed securities. The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt. Some of this debt will be refinanced with the proceeds from the sale of the $1 billion of government-guaranteed rental-home mortgage backed securities.

Trump tells manufacturers he will cut regulations, taxes - (www.reuters.com) U.S. President Donald Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies, as China's influence in the region rises. Fulfilling a campaign pledge to end American involvement in the 2015 pact, Trump signed an executive order in the Oval Office pulling the United States out of the 12-nation TPP. Trump, who wants to boost U.S. manufacturing, said he would seek one-on-one trade deals with countries that would allow the United States to quickly terminate them in 30 days "if somebody misbehaves." "We're going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country," the Republican president said as he met with union leaders in the White House's Roosevelt Room.

Judge Reveals Shady Side of Crushed Aetna-Humana Merger, Banks to Lick their Wounds, Aetna to Get Pummeled - (www.wolfstreet.com) On Monday, a federal judge blocked Aetna’s $34-billion acquisition of Humana. Combined they would have formed the second largest health insurer, behind the also under-attack Anthem-Cigna merger. The court cited antitrust grounds related to Medicare Advantage insurance plans, where their combined pricing power would ultimately raise the costs that consumers pay for coverage. But Wall Street loved the deal that had been announced with such great hoopla in 2015. It was the year of the mega-mergers. The bigger the better. Money was growing on trees. And investment banks would have made a bundle. How big would the combined entity have been? In January this year, Aetna had a Medicare Advantage enrollment market share of 7.2%, and Humana of 16.9%. 

White House temporarily freezes EPA grants, contracts - (www.reuters.com) U.S. President Donald Trump's administration has asked the Environmental Protection Agency to temporarily halt all contracts, grants and interagency agreements pending a review, according to sources. The White House sent a letter to the EPA's Office of Administration and Resources Management ordering the freeze on Monday, an EPA staffer told Reuters. "Basically no money moving anywhere until they can take a look," the staffer said, asking not to be named. The EPA awards billions of dollars worth of grants and contracts every year to support programs around environmental testing, cleanups and research. It was unclear if the freeze would impact existing contracts, grants and agreements or just future ones. Myron Ebell, who headed Trump's EPA transition team until his inauguration last week, said he believed the move was related to Trump's executive order on Monday temporarily halting all government hiring outside the military.

You're Buying, They're Selling: Big Bank Execs Dump $100 Million In Stock As Market Soared - (www.zerohedge.com) Shortly after the melt-up in US bank stocks began following Trump's election victory, we noted heavy insider-selling (and options expiration) among Goldman Sachs executives. Well the selling never stopped, as WSJ reports executives at the biggest Wall Street banks have sold nearly $100 million worth of stock since the presidential election, more than in that same period in any year over the past decade. As we detailed in mid-November, while the mainstream media proclaims the surge in bank stocks as heralding a new dawn in everything-is-awesome-ness for America, we note that insiders at Goldman Sachs sold $205 million of stock since Nov. 8, company filings show. That’s three times more than the group has sold in any month for at least five years, data compiled by Bloomberg show.

OTHER STORIES:

Big Shrink to “Hire” 25,000 in the US, as Layoffs Pile Up - (www.wolfstreet.com)

Fed's Lacker favors faster rate hike path to curb inflation - (www.reuters.com)
Hedge Funds Risk Treasuries Wipeout After Bearish Bets Soar  - (www.bloomberg.com)
Le Pen Risk Flashes in Tightest Yield Spread to Spain Since 2010 - (www.bloomberg.com)
A Rising Tide of Used Cars Threatens Ford’s Profits - (www.bloomberg.com)

Hedge fund assets top $3 trillion for the first time after boost from the Trump post-election rally - (www.cnbc.com)
President Trump Focuses on Trade With Promise of ‘Very Major’ Border Tax - (www.wsj.com)
China: We can lead world beyond 'crisis' of Western democracy and capitalism - (www.cnbc.com)
U.S. says will prevent China taking over territory in international waters - (www.reuters.com)

Thursday January 26 2017 Housing and Economic stories

TOP STORIES:

These are the Countries with the Biggest Debt Slaves, and Americans Are Only in 10th place - (www.wolfstreet.com) Americans have been on a borrowing binge. To buy their favorite cars and trucks, they’ve loaded up on $1.14 trillion in auto loans. Young and not so young Americans are mortgaging their future with student loans that now amount to $1.28 trillion. Credit card and other debts are at $1.12 trillion. And mortgage debt stands at $8.82 trillion. So, total household debt was $12.35 trillion, according to the New York Fed’s Household Debt and Credit Report for the third quarter 2016. That’s a massive amount of debt. Many consumers are struggling with it. Student loans are seeing enormous default rates, and repayment rates are far worse than previously disclosed. And “debt slaves” has become a term in the financial vernacular.

French Socialist Primary Winner Proposes Tax On Robots, Universal Income, Right Of Foreigners To Vote - (www.zerohedge.com) France24 reports Benoît Hamon and Manuel Valls take top spots in first round of left-wing primary in a field of seven candidates. Hamon's platform reads like it came from The Onion... Benoît Hamon is a 49-year-old former education minister. Here is his platform.

·         Universal basic income.

·         Tax on robots.

·         Progressive taxation of wealth.

·         Reduction of tax loopholes.

·         32-hour working week.

·         Legalization of marijuana.

·         National conference on “environmental democracy”.

USPS's Brief Postage "Deflation" Ends After a Mere 8 Months as Price of Forever Stamp Increases – (www.wate.com) Beginning Sunday, Jan. 22, the price of forever stamps will go up to 49-cents which is an increase from the current price of 47-cents... stamps only cost 47-cents for less than a year after a price drop in April 2016... USPS cites several reasons behind the price increase, including adjustments for gas in mail trucks, wages, maintenance costs for its buildings and other factors.'' Despite the change in price for forever stamps, the price of postcards, international letters and additional weight will all remain the same in 2017. A postcard costs 34-cents. An international letter cost $1.15 and additional weight cost 21-cents per ounce.

French far-right leader Le Pen calls on Europeans to 'wake up' - (www.reuters.com) French far-right leader Marine Le Pen urged European voters to follow the example of Americans and the British and "wake up" in 2017, at a meeting of right-wing leaders aiming to oust established parties in elections this year. Le Pen told several hundred supporters in the German city of Koblenz that Britons' vote last year to leave the European Union would set in train a "domino effect". A day after U.S. President Donald Trump took office, Le Pen said his inauguration speech included "accents in common" with the message on reclaiming national sovereignty proclaimed by the far-right leaders meeting in Koblenz.

U.K. Lawmakers Mull Steps to Halt Hard Brexit, Observer Reports - (www.bloomberg.com) A cross-party group of U.K. parliament members is seeking to stop Prime Minister Theresa May from carrying out a so-called hard Brexit on fears businesses will end up paying high tariffs on goods sold in the European Union, the Observer reported, without citing anyone. Lawmakers from the Labour, Liberal Democrats and Green parties, and even some in May’s own party, are in talks ahead of a Supreme Court verdict on Tuesday on whether parliament needs to vote to trigger Brexit, the newspaper said. If the court rules a vote is required, the MPs will seek legislation to block May’s proposed strategy for Brexit, the newspaper said.

OTHER STORIES:

EU Populists See Trump Victory as Beginning of End for Old Order - (www.bloomberg.com)
Asian media decry isolationist Trump, fear economic, diplomatic turmoil - (www.reuters.com)
Chinese media warns of 'dramatic changes' and 'fires being lit' as President takes office - (www.independent.co.uk)

Donald Trump and the New World Order - (www.spiegel.de)
Presidents Have Less Power Over the Economy Than You Might Think - (www.nytimes.com)
President Trump Issues Directives on Regulatory Freeze, Affordable Care Act - (www.wsj.com)
Europe’s nationalist leaders kick off year of election hopes - (www.washingtonpost.com)

Wednesday January 25 2017 Housing and Economic stories

TOP STORIES:

The Man Who Called The Last Bond Bear Market 40 Years Ago Says "Buy Bonds" – (www.zerohedge.com) 74-year-old bond guru Lacy Hunt is among a rare breed in finance today: people who actually traded during a period when bonds continuously lost value. As a young bond manager coming of age during the Great Inflation and Richard Nixon’s wage and price controls, Bloomberg reports that Hunt saw the bear market in bonds coming in the late 1970s, and made a fortune for his clients. Today, as hints of inflation start to bubble and calling the next bear market becomes the industry’s favorite pastime, Hunt says no, "I’m still long bonds, especially the long-end." Hoisington Investment Management’s Hunt shrugs it off and says “it’s just more of the same.”

Using an out of fashion metric known as the velocity of money, the Austin, Texas-based economist says he’s convinced the rout since the election of Donald Trump is just a bump in the road for an extended rally.

Sear’s Bankruptcy, Who Gets the Real Estate, and How the Pension Fund Got Hung Out to Dry (at Taxpayer Expense) Invade Mnuchin’s Senate Confirmation Hearing - (www.wolfstreet.com) That Sears Holdings will file for bankruptcy appeared to be taken for granted in the confirmation hearings before the US Senate on Thursday. And when it does file, it’s going to get very complicated for Steven Mnuchin, the Trump administration’s appointment for Treasury Secretary. But the most fascinating part, for us as a non-political finance and economics site, is the dissection of the whole Sears deal. Senator Bob Menendez (D-NJ), as he proceeds with his questioning, lays out how Sears Holding’s CEO “Eddie” Lampert, his hedge fund ESL, and some other entities have worked hard to get their hands on the real estate, while the pension fund, when Sears Holdings goes through bankruptcy, will be left behind as a sinkhole that taxpayers might be shanghaied into filling. I postulated at the end of December that Sears Holdings will try to stay out of bankruptcy at least through July to avoid running afoul of fraudulent conveyance provisions in the bankruptcy code. But after that, all bets are off. So this  might transpire pretty soon.

USGov Has Been Massively Under-Reporting Student Loan Delinquencies Due To "Glitch" - (www.zerohedge.com)  The latest unfabricated data [suggests] that loan delinquencies are rapidly rising toward 50% across most of America's colleges... the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

In lawmakers' first hearing on state budget, Gov. Jerry Brown's staff gets grilled on a $1.5-billion mistake - (www.latimes.com) Gov. Jerry Brown's budget team offered a seemingly simple explanation on Tuesday for an almost $1.5-billion accounting error in California's healthcare program for the poor. "The math was wrong," said Amy Costa, the chief deputy director of Brown's state Department of Finance, in a Senate committee hearing. The mistake drew sharp criticism from some state senators, who suggested it should be viewed it in the context of Brown's projected $1.6-billion deficit and the $3.2 billion in spending cuts he has proposed to help balance the books.

In Davos, Financiers Bewildered by Global Uncertainty - (www.nytimes.com) For the investors and market-movers at the annual World Economic Forum here, a threat lurks. At cocktail parties where the Champagne flows, financiers have expressed bewilderment over the rise of populist groups that are feeding a backlash against globalization. In the halls of the Davos Congress Center, where many of the meetings this week are taking place, investors have tried to make sense of the political upheaval. The world order has been upended. As the United States retreats from the promise of free trade, China is taking up the mantle. The stark shift leaves investors trying to assess the new risk and opportunities in the global economy. “This is the first time there is absolutely no consensus,” said William F. Browder, a co-founder of Hermitage Capital Management who has been coming to Davos for 21 years. “Everyone is looking into the abyss.”

OTHER STORIES:

Mnuchin Says He’ll Tag China an FX-Manipulator If Warranted - (www.bloomberg.com)
Schaeuble Says He’d Balk at New Greek Bailout Without the IMF - (www.bloomberg.com)
China is working hard to support its currency — it sold US government bonds for six straight months - (www.cnbc.com)

Mnuchin Hearing Does Little to Clear Trump Fog of Uncertainty - (www.wsj.com)
New Wall Street Conflict: Analysts Say ‘Buy’ to Win Special Access for Their Clients - (www.wsj.com)
Currency traders see tug of war over the dollar - (www.ft.com)

Tuesday January 24 2017 Housing and Economic stories

TOP STORIES:

The Mortgage Market’s $1 Trillion Pocket of Worry - (www.wsj.com) Bonds backed by certain risky single-family mortgages topped $1 trillion for the first time in November, crossing that threshold amid rising warnings for one corner of the housing market. These mortgages are insured by the Federal Housing Administration and typically go to borrowers with small down payments and lower credit scores. Banks have pulled back from issuing those loans and from packaging them into bonds sold to investors. The result: In the first three quarters of 2016, banks accounted for 9% of mortgage dollars originated by the FHA’s top 50 lenders, versus 62% for all of 2010, according to Inside Mortgage Finance. Nonbank lenders accounted for 80% of mortgage bonds backed by single-family FHA loans in July 2016, versus 9% the same month in 2010.

Obama Slashes Mortgage Insurance Premiums For Subprime Borrowers With Just 10 Days Left In Office - (www.zerohedge.com) What do you do when a quick rise in mortgage rates suddenly threatens to tame home buying demand from subprime borrowers who, despite the lessons from the past, are still purchasing homes, en masse, with only 3.5% down payments and just enough monthly cash flow to cover mortgage payments?  Well, if you're the Obama administration then you simply socialize the problem and force those higher mortgage costs on taxpayers.  Anything less would just be a hateful attempt to deny minority and low-income citizens their "right" to home ownership. And while the Obama administration isn't directly passing out tax dollars to subprime borrowers to make their monthly mortgage payments, its recent decision to lower the FHA's annual mortgage insurance premiums by 0.25% is essentially the same thing since tax payers are still on the hook for the same risk but receiving lower premiums in return.  Per Bloomberg: The FHA doesn’t make mortgages. It sells insurance, paid by borrowers, on loans protecting investors in case of default. The program allows borrowers to get a mortgage with a down payment of as little as 3.5 percent and a credit score of as low as 580, on a scale of 300 to 850. That makes it one of the most forgiving mortgage programs and popular among first-time home buyers.

China’s Holdings of US Treasuries Plunge at Historic Pace - (www.wolfstreet.com) China’s holdings of US Treasury securities plunged by a stunning $66.4 billion in November 2016, after having already plunged $41 billion in October, the US Treasury Department reported today in its Treasury International Capital data release. After shedding Treasuries for months, China’s holdings, now the second largest behind Japan, are down to $1.049 trillion. At this pace, it won’t take long before China’s pile of Treasuries falls below the $1 trillion mark. It was China’s sixth month in a row of declines. Over the 12-month period, China slashed its holdings by $215.2 billion, or by 17%! Japan’s holdings of US Treasuries dropped by $23 billion in November. Over the 12-month period, its holdings are down by $36.3 billion.

US Government Caught Massively Fabricating Student Loan Default Data - (www.zerohedge.com) US Government and our broken Dept of Education propagating fake news?   How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department of Education had inflated the Student Loan repayment rates for 99.8% of all colleges/schools in the country. i.e., virtually every single # was made to appear better than it actually was. At more than 1,000 colleges/schools (1/4 of all schools), at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone is stating publicly. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

How Deutsche Bank Made −$462 Million Disappear - (www.bloomberg.com) On Dec. 1, 2008, most of the world’s banks were still panicking through the financial crisis. Lehman Brothers had collapsed. Merrill Lynch had been sold. Citigroup and others had required multibillion-dollar bailouts to survive. But not every institution appeared to be in free fall. That afternoon, at the London outpost of Deutsche Bank, the stolid-seeming, €2 trillion German powerhouse, a group of financiers met to consider a proposal from a team led by a trim, 40-year-old banker named Michele Faissola.

The scion of an Italian banking family, Faissola was the head of Deutsche’s global rates unit, a division that created and sold financial instruments tied to interest rates. He’d been studying the problems of one of Deutsche’s clients, Italy’s Banca Monte dei Paschi di Siena, which, as the crisis raged, was down €367 million ($462 million at the time) on a single investment. Losing that much money was bad; having to include it in the bank’s yearend report to the public, as required by Italian law, was arguably much worse. Monte dei Paschi was the world’s oldest bank. It had been operating since 1472, not long after the invention of the printing press, when the Black Death was still a living memory. If investors were to find out the extent of its losses in the 2008 credit crisis, the consequences would be unpredictable and grave: a run on the bank, a government takeover, or worse. At the Deutsche meeting, Faissola’s team said it had come up with a miraculous solution: a new trade that would make Paschi’s loss disappear.

OTHER STORIES:

China’s Holdings of U.S. Treasuries Drop by Most Since 2011 - (www.bloomberg.com)

Commerce Pick Ross Calls China ‘Most Protectionist’ Major Nation - (www.bloomberg.com)
Trump's trade policies could make things much worse for debt-ridden China - (www.cnbc.com)

Donald Trump and Janet Yellen Look to Be on a Collision Course - (www.nytimes.com)
Wall Street's Year in Charts: Trading Gains, Job Cuts and More - (www.bloomberg.com)
Ross escalates Trump trade criticism against Beijing - (www.ft.com)
Fed officials prepare ground to cut bank’s $4.5tn balance sheet - (www.ft.com)