Friday April 14 2017 Housing and Economic stories

TOP STORIES:            

Startup Craziness Deflates, Hits Silicon Valley & San Francisco - (www.wolfstreet.com) Few areas in the US are as dependent economically on the startup ecosystem as Silicon Valley and San Francisco. And the crazy boom that peaked in 2014 and 2015 lifted all boats, but then the tide went out. It’s a larger US phenomenon, but San Francisco and Silicon Valley feel it particularly. Venture capital investments in the US “downshifted again” in the first quarter, according to the current report by the National Venture Capital Association and PitchBook Data. It was the sixth quarter in a row of declines, and the number of deals dropped to the lowest level since Q3 2010, The startup funding industry “is likely reverting to 2012-2013 levels of investment after peaking during the past few years,” the report says. 

These Eight Retailers Will File For Bankruptcy Next, According To Fitch - (www.zerohedge.com)  Sears Holdings Corp (roughly $2.5 billion); 99 Cents Only Stores LLC; Charming Charlie LLC; Gymboree Corp.; Nine West Holdings Inc.; NYDJ Apparel LLC; rue21, Inc.; and True Religion Apparel Inc. The situation is rapidly deteriorating for America's "bricks and mortar" retailers. As discussed earlier this week, some 9 retail outlets have already filed for bankruptcy protection in 1Q 2017 alone according to Alix Partners.  That volume of filings matches the total number of retail bankruptcies for all of 2016 and puts the industry on pace to exceed even the 'great recession' highs.

Federal Reserve wants to start unwinding the $4.5 trillion in bonds on its balance sheet this year - (www.cnbc.com) Federal Reserve officials said the shedding of the $4.5 trillion in bonds the central bank is holding on its balance sheet will begin this year. The revelation came Wednesday from a summary of the Federal Open Market Committee meeting held in March, during which the group approved a quarter-point hike in its benchmark interest rate target. Officials at the meeting noted that the Fed likely is on a faster pace with rate hikes ahead. Unwinding the balance sheet is significant both because of its sheer size and the impact it could have on markets, as Fed members including Chair Janet Yellen have indicated that the move itself would amount to a rate hike.

‘Shadow banks’ step into the spotlight - (www.ft.com) A range of finance institutions are challenging banks’ dominance of the lending market. One of the most enduring consequences of the 2008 financial crisis is its disruption of lending. Nonbank competitors — often referred to as “shadow banks” — have seized on the weaknesses of financial institutions, introducing new ways for businesses and households to borrow. The growing influence of alternative capital is most evident in the US — in April 2015, nonbank lenders accounted for more than half of new government-backed mortgages. Banks are still the biggest lenders in Europe, but rivals are emerging. Many of the new players are linked to the securitisation industry, where loans are packaged up and sold on as bonds to capital markets investors. The proliferation of securitisation — and its unravelling — compounded the financial crisis. Now, many of its proponents are developing initiatives to challenge traditional lenders.

Gary Cohn Backs Reinstating Glass-Steagal, Breaking Up Big Banks - (www.zerohedge.com) In an unexpected statement made by the former COO of Goldman Sachs and current director of Trump's National Economic Council, Gary Cohn told a private meeting with lawmakers on the Senate Banking Committee on Wednesday evening that he could support legislation breaking up the largest U.S. banks - a development that could provide support to congressional efforts to reinstate the Depression-era Glass-Steagall law - and impact if not so much his former employer, Goldman Sachs, whose depository business is relatively modest, then certainly the balance sheets of some of Goldman's biggest competitors including JPM and BofA. According to Bloomberg, Cohn said he generally favors banking going back to how it was "when firms like Goldman focused on trading and underwriting securities, and companies such as Citigroup Inc. primarily issued loans." What Cohn may not have mentioned is that with rates as low as they are, issuing loans - i.e., profiting from the Net Interest Margin spread - remains far less profitable than trading and underwriting securities in a world in which virtually every "developed world" central banker is either directly spawned from Goldman, or is advised by an ex-Goldman employee,

OTHER STORIES:

U.S. Stocks Fall With Dollar as Treasuries Rise: Markets Wrap - (www.bloomberg.com)
Traders Bet the Fed Will Slow Rate Hikes to Shrink Balance Sheet - (www.bloomberg.com)
Most Fed policymakers see change to balance sheet policy 'later this year': minutes - (www.reuters.com)

Inside the Fed’s March Meeting: The Annotated Minutes - (www.bloomberg.com)

Macron Slips Post Debate Making Him Tied With Le Pen, Poll Shows - (www.bloomberg.com)
Here's What Financial Markets Are Telling Us About the Economy - (www.bloomberg.com)