Wednesday April 5 2017 Housing and Economic stories

TOP STORIES:            

Retail bankruptcies march toward post-recession high - (www.cnbc.com) The number of retailers filing for Chapter 11 bankruptcy protection is headed toward its highest annual tally since the Great Recession. Nine retailers have filed in just the first three months of 2017, according to data provided exclusively to CNBC from AlixPartners consulting firm. That equals the number for all of 2016. It also puts the industry on pace for the highest number of such filings since 2009, when 18 retailers resorted to that action. The rising number of retail bankruptcies comes as consumers are making more purchases online, and shifting their spending toward travel and other experiences. Meanwhile, the supply of physical stores continues to outweigh shopper demand, putting pressure on the industry's profits.

Here’s Why Italy’s Banking Crisis Has Gone Off the Radar - (www.wolfstreet.com) For a country that is on the brink of a gargantuan public bailout of its toxic-loan riddled banking sector, or failing that, a full-blown financial crisis that could bring down the European financial system, things are eerily quiet in Italy these days. It’s almost as if the more serious the crisis gets, the less we hear about it — otherwise, investors and voters might get spooked. And elections are coming up. But an article published in the financial section of Italian daily Il Sole lays out just how serious the situation has become. According to new research by Italian investment bank Mediobanca, 114 of the close to 500 banks in Italy have “Texas Ratios” of over 100%. The Texas Ratio, or TR, is calculated by dividing the total value of a bank’s non-performing loans by its tangible book value plus reserves — or as American money manager Steve Eisman put it, “all the bad stuff divided by the money you have to pay for all the bad stuff.”

Morgan Stanley: Used Car Prices May Crash 50% - (www.zerohedge.com) For all of you pension funds out there scooping up all of the AAA-rated slugs of the latest auto ABS deals for the 'juicy yield', now might be a good time to review what happened to the investment grade tranches of MBS structures back in 2009... For months we've been talking about the massive lending bubble propping up the U.S. auto market.  Now, noting many of the same concerns that we've highlighted repeatedly, Morgan Stanley's auto team, led by Adam Jonas, has just issued a report detailing why they think used car prices could crash by up to 50% over the next 4-5 years.  Here's the summary (flood of supply, poor lending standards and desperate OEMs who need to keep new car sales elevated at all costs):

• Off-lease supply: This has already more than doubled since 2012 and is set to rise another 25% over the next 2 years.
• Extended credit terms: Auto loans are at record lengths and lease assumptions (residuals, money factor) are at record levels of accommodation.
• Rising rates: Starting from record low levels in auto loans.
• Overdependency on auto ABS: The outstanding balance of auto securitizations has surpassed last cycle's peak.
• Record high deep subprime participation: 32% of subprime auto ABS deals were deep subprime (weighted average FICO < 550) in 2016 vs. 5% in 2010.

Political risk stalks booming Silicon Valley - (www.ft.com) For the past two decades Alex Karp, chief executive of Palantir, the data analytics “unicorn” start-up, has seen Silicon Valley bask in a seemingly unstoppable boom. These days, however, he feels uneasy. That is not because of the issue which alarms some investors: that technology valuations are so elevated they will eventually crash. Instead, Mr Karp frets about politics. “The Valley is marching off a political cliff,” he told me this week. “The [tech companies] have all these monopolies and economic capital, and assume that it translates into political capital — but that isn’t true.” Is he correct? Not if you listen to the public statements of other tech titans. The story Silicon Valley likes to tell is that it is a bastion of the American dream, producing innovative products that improve consumers’ lives. This should create plenty of political support, or so the argument goes. After all, surveys suggest that public trust in technology is sky high. I suspect, though, that Mr Karp is quite right and deserves great credit for speaking out. After all, a mere decade ago, Wall Street titans were also brimming with hubris and wealth, convinced that innovation was improving the world. However, the banking crisis then triggered a fierce political backlash against finance.

Packers DE Ricky Jean Francois Owns 25 Dunkin' Donuts Franchises - (www.bleacherreport.com) Green Bay Packers defensive end Ricky Jean Francois isn't a businessman. He's a business, man. Earlier this week, the 30-year-old big fella told Steve Gorman on Fox Sports Radio that he owns 25 Dunkin' Donuts franchises. Jean Francois told Gorman that "when the big money came in," he needed a retirement plan that would be useful the minute he retired. The former Washington Redskin, who recently signed a one-year, $2 million deal, added that he wants to be an example when the league talks to young players about handling money: “I won't be those guys you see on 30 for 30. I won't be those percentage of guys that goes broke. ... I want to be that guy on top. When the league talks about, "This is what you do with your money," they actually show a picture of me.”

OTHER STORIES:

Wall Street rises, aided by growth data; Nasdaq ends at record - (www.reuters.com)
Fed's Dudley Says Fiscal Stimulus Outlook Shifts Risks to Upside  - (www.bloomberg.com)
Mexico Raises Rate as Inflation Hits Highest Since Recession  - (www.bloomberg.com)

Draghi's German Problem May Fizzle as ECB Sticks to Its Plan - (www.bloomberg.com)
JPMorgan economist sees Fed shrinking balance sheet starting 2018 - (www.bloomberg.com)
Upbeat mood drives record emerging market sovereign debt sales - (www.ft.com)