Implode Explode

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Tracking the many faces of the global credit implosion.
Updated: 11 min 27 sec ago

Malls face more change with JCPenney closings

Sun, 02/26/2017 - 10:48
``... a focal point of the American shopping mall, but as brick-and-mortar retail has struggled and consumerism has evolved following the Great Recession, that's not the case anymore. Now, really, all they're doing is keeping these malls anchored in the past... stronger retailers don't necessarily want to bite at a desolate indoor property when consumers are more interested in shopping at mixed-use, lifestyle centers where they can live, work and play. ''

Toronto Housing Market May Need Vancouver-Style Cooling, RBC Says

Sat, 02/25/2017 - 08:47
Toronto may require measures to cool its red-hot housing market similar to moves taken in Vancouver if interest rates don't increase, said Royal Bank of Canada Chief Executive Officer David McKay.

The head of Canada's largest lender said Toronto housing is "running hot" and is fueled by a "concerning mix of drivers" that include lack of supply, continued low rates, rising foreign money and speculative activity. Similar circumstances in Vancouver prompted British Columbia's government last year to impose a 15 percent tax on foreign buyers.

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The comments from the bank CEO come as frustration grows over the unaffordability of properties in Canada's biggest city. The average home price in Toronto jumped 22 percent in January from the previous year, the fifth straight month of gains topping 20 percent. Listings have dropped off, down by half from last year, squeezing prices further.

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Since the tax was imposed in Vancouver, monthly transactions in the metro region fell on average by 36 percent compared to a year earlier, according to data from the Real Estate Board of Greater Vancouver. Prices for prized single-family detached homes had been rising in double digits last year. In the past six months, they've fallen 6.6 percent to an average C$1.47 million, according to board figures released earlier this month.

New home sales are up, but pace disappoints; Price slips

Fri, 02/24/2017 - 17:24
New residential single-family home sales increased 3.7% to an annually adjusted rate of 555,000 in January, the report stated. This is up from December's rate of 535,000 and 5.5% above January 2016's rate of 526,000. .. new sales have much room to grow," McLaughlin said. "In January, new home sales represented about 11.6% of all sales, which is less than half of the pre-recession average of 23.6%." Median sales prices of new homes sold slipped in January from December's $322,500 to $312,900 in January. The average sales price slipped from $384,000 to $360,900 in January.''

Spain: Former IMF Chief and Dozens of Former Bank Execs Just Got Sentenced to Jail

Fri, 02/24/2017 - 17:05
The unimaginable just happened in Spain: two former bank CEOs, Miguel Blesa (CEO of Caja Madrid) and Rodrigo Rato (CEO of Bankia) were just awarded prison sentences of six years and four-and-a-half years, respectively, for misappropriation of company funds. Rato was also Managing Director of the IMF from 2004 to 2007. He was succeeded by another luminary, Dominique Strauss Kahn.

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Dozens more former Caja Madrid senior executives, most of whom are closely connected to either, or both, of the country's two main political parties and/or unions also face three to six years in prison. They were found guilty by Spain's National High Court of misusing company credit cards. Those cards drained money directly from the scarce funds of Caja Madrid, which at the height of Spain's banking crisis was merged with six other failed savings banks into Bankia, which shortly thereafter collapsed and ended up receiving the biggest bail out in Spanish history, costing taxpayers over €20 billion, to date.

U.S. home sales hit 10-year high, prices soar on low inventory

Wed, 02/22/2017 - 18:21
U.S. home resales surged to a 10-year high in January as buyers shrugged off higher prices and mortgage rates, signaling rising confidence in the economy and bolstering expectations of a pickup in growth in the first quarter.

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Though the nation's housing inventory increased from December, it remained near a record low. As a result, the median house price vaulted 7.1 percent from a year ago to $228,900 in January. That was the biggest increase since January 2016.

Demand for housing is being underpinned by a strengthening labor market, which is improving employment opportunities for young adults and, in turn, boosting household formation... But a persistent shortage of properties available for sale, which is lifting house prices, remains an obstacle to a robust housing market. That is likely to put pressure on homebuilders to ramp up construction.

Last month, the number of homes on the market rose 2.4 percent to 1.69 million units, still remaining close to an all-time low of 1.65 million units in December. Housing inventory was down 7.1 percent from a year ago. It has declined for 20 straight months on a year-on-year basis.

Economists say homebuilders are struggling to plug the inventory gap because of difficulties securing funding as well as shortages of land and labor. The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to alleviate the chronic shortage.

A Simple Subpoena For Trump's Tax Returns Could Sink Him

Wed, 02/22/2017 - 17:53
``So-called President Trump is becoming increasingly at odds with Senators John McCain (R-AZ) and Lindsay Graham (R-SC). They could be deciding votes as to whether to subpoena his tax records in conjunction with investigating Russian collusion with Trump. The so-called President has said both that he knows Putin well--to the point where Putin supposedly confided in him years ago his lack of respect for Obama--and that he had never met or spoken to him. His son, Don, Jr., claimed a lot of Russian money in Trump enterprises whereas Daddy just said the opposite.''

Deutsche Bank Says Next Big Short Is on CMBS as Malls Suffer

Wed, 02/22/2017 - 09:24
``Analysts at Deutsche Bank AG, one of the biggest underwriters of bonds tied to U.S. commercial mortgages, say now it's time to bet against the securities. The bonds are vulnerable because they are supported in part by leases from retailers, a lagging part of the economy, wrote Ed Reardon and Simon Mui in a note this week. A combination of bankruptcies and closures could lead to faster-than-expected mortgage defaults for stores and malls, as long-term pressure from internet competitors wears many companies down, the analysts wrote.''

Banks Retreat From Apartment Market

Wed, 02/22/2017 - 09:03
Swelling supplies of apartment units are prompting big banks to pull back from new projects, forcing developers to scramble for capital, in a sign that the U.S. apartment industry headed for a downturn.

The apartment sector, which contributes some $284 billion to the economy annually, has been a winning bet for investors since the housing crash, as the economy recovered and more renters sought out units. Since 2010, average U.S. apartment rents have increased by 26%, according to data tracker MPF Research, a division of RealPage.

But fresh supply is beginning to overwhelm demand. More than 378,000 new apartments are expected to be completed in 2017, a 30-year high, according to real estate researcher Axiometrics Inc. In the fourth quarter of last year, 88,000 units were completed but only 50,000 of those were rented by tenants, according to MPF.

"Our business has radically changed," said Toby Bozzuto, president and chief executive of the Bozzuto Group, which owns or manages 59,000 apartments in cities across the U.S. "I haven't seen anything this seismically different since 2008, when credit dried up."

Why Toronto (and Other Cities) Inflate Housing Bubbles to the Bitter End

Wed, 02/22/2017 - 08:56
``Home prices in Greater Toronto have become "dangerously detached" from economic fundamentals and are soaring simply on the belief that they will continue to soar, he wrote. "The market is far too hot for comfort."...

... Toronto is just an a example. There are many jurisdictions in the US that face similar budget problems, and the only thing that keeps them from falling deeper into a financial and fiscal sinkhole is the rich tax revenue that the local property bubble extracts from the economy. Homeowners and investors might grumble, but they usually put up with it, mollified by soaring property prices. So this system works until suddenly, it doesn't.

Home Depot is Flying High Again

Tue, 02/21/2017 - 09:16
The home improvement chain has benefited from a stronger economy and rising home values, which have encouraged shoppers to invest in their homes. Even as the company faced tough comparisons from the prior-year period, analysts expected it to perform better than the broader retail space due to this ongoing shift in consumer spending.

Indeed, the company's fourth-quarter comparable sales growth represented an acceleration from the prior quarter, even as it was up against a 7.1 percent increase from a year earlier. During fourth quarter 2015, the unseasonably warm weather allowed contractors and homeowners to continue working on outdoor projects through the winter.

Expert: Australia headed for ‘economic armageddon'

Sun, 02/19/2017 - 12:59
``"The data clearly demonstrates that there are significant structural economic imbalances in the Australian economy. Significant expansion of the broad money supply and record low interest rates by the Reserve Bank of Australia as well as generous tax incentives and welfare provisions by the Federal Government have led Australians to amass record levels of personal debt which have fuelled the creation of asset bubbles, particularly in housing.''

Jim Rickards: China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors

Sun, 02/19/2017 - 10:29
When you look at the Chinese banking system, private estimates are that the bad debts are 25% of total assets. Banks usually run with 5, maybe 7-8% capital. Even if you said 10% capital, well, if 25% of your assets are bad, that completely wipes out your capital, so the Chinese banking system is technically insolvent, even though they don't admit that. I mean, they cook the books, they take these bad loans.

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So, if you just say, "Well, I've got 900 billion in the kitty, it's going out the door at 50 to 100 billion a month," I'm going to be broke by the end of 2017. That's what I mean by going broke. You say, "Well, wait a second. Where did the 1.1 trillion, the first part we talked about that the reserve position went down, where did the money go? It didn't disappear." Well, no, it didn't disappear. What's happening is that everybody in China is getting their money out. They're scared to death that the yuan's going to devalue, so what are the Chinese doing? By hook or by crook, some of it's legitimate, some of it's corrupt, some of it involves bribery, some of it involves false invoicing.

''

Freddie Mac's Tough Spot: Turn Down a Loan to Trump's In-Laws?

Fri, 02/17/2017 - 09:48
Kushner Cos. has apartment buildings from New Jersey to Maryland with more than $500 million in government-backed mortgages financed by Fannie Mae and Freddie Mac. That could put officials at those agencies in an awkward spot: If Kushner Cos. applies for a new loan, or wants to refinance, would Freddie turn them down? If Kushner Cos. fails to comply with the terms of a loan, will Fannie seek to foreclose on a property owned by the president's in-laws?

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The FHFA is run by Mel Watt, appointed by former President Barack Obama. Watt's term ends in 2019, at which point Trump will pick a successor, though it's possible the president could try to remove Watt from office before then. FHFA spokesman Peter Garuccio declined to comment on potential conflicts, as did spokesmen for Fannie and Freddie.

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Before loans are issued for large or unusual deals, representatives of Fannie set interest rates and review borrowers' applications that are submitted to the lenders. They don't do that for smaller, routine loans.

Freddie, however, examines all applications submitted to the lender, including scrutinizing the appraisal and applicant's history of payments on other loans. Depending on the review, Freddie representatives could adjust the interest rate quoted by the lender.

If Kushner Cos. fails to make Fannie-backed loan payments on time or violate other terms, Fannie employees would determine whether to foreclose. Fannie backs about $142.3 million of the outstanding loans.

Deutsche Bank Comes Under Pressure on Trump-Russian Connection Search

Thu, 02/16/2017 - 12:46
The international banking giant that Donald Trump and some of his family use is coming under pressure to appoint an independent auditor to examine its books for any suspicious links between Trump's accounts and Russia, according to a report in The Guardian.

Deutsche Bank has already conducted a "close internal examination" of President Trump's personal account and found no evidence of suspicious dealing, according to the London-based liberal-leaning publication. That investigation was a routine piece of compliance after Trump became what banks' internal money-laundering police call a "politically exposed person," or PEP, by announcing his run for the presidency. Banks typically subject PEPs to stricter compliance scrutiny. The bank "double-checked" its records after Trump's election victory in November, according to the paper's source.

That would normally be an end of the matter, but not everyone is inclined to take Deutsche's compliance department at its word after a string of governance scandals in recent years that culminated in a $630 million settlement for failing to police money-laundering by its Moscow office last month. As part of that settlement, the New York Department for Financial Services ordered it to hire an independent monitor to review its compliance operations.

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Deutsche's relationship with Trump goes back a long way. The German bank stepped in when Wall Street lenders stopped lending to him after his fourth bankruptcy filing. However, Deutsche's private bank now manages the relationship, after the commercial banking division also had a bust-up with him in 2009. According to Bloomberg, it has granted four loans, worth around $300 million in total, secured against Trump properties in Washington, Chicago and Miami. Trump's daughter Ivanka and son-in-law Jared Kushner are also clients, as is Kushner's mother Seryl Stadtmauer (according to The Guardian's sources).

Trump's family has made no secret in the past that they had received significant funding from individuals in Russia and the former Soviet Union to develop their projects. That strategy has sometimes attracted controversy, most notably in the case of the ill-fated Trump SoHo development, where the project's developers have faced allegations of financing it in part with laundered money. The developers, rather than Trump, were responsible for due diligence in that case, according to Trump Organization general counsel Alan Garten.

Made For Each Other - KUNSTLER

Tue, 02/14/2017 - 10:32
``I look for the financial fireworks to start around March -- April, as the irresolvable debt ceiling debate in congress grinds into a bitter stalemate, and it becomes obvious that there will be no voucher for the great infrastructure spending orgy that Trump's MAGA is based on. Elections in France and the Netherlands have the potential to shake apart the European Union, and with that the footing of European banks. Pretty soon, everybody in all parties and factions will be asking: "Where did the glittering promises of Modernity go...?" As we slip-side into the first stages of a world made by hand.''

Senate expected to confirm Mnuchin for Treasury secretary -- then he'll have a lot of work to do

Mon, 02/13/2017 - 15:26
Once confirmed, he would face a packed agenda. A wealthy hedge fund manager and Hollywood movie producer, Mnuchin would be a key administration player on boosting economic growth. He would take office with some key looming deadlines, including a need to increase the debt limit next month and to decide by April 15 whether to label China a currency manipulator and possibly trigger a trade war.

"Under any objective standard, Mr. Mnuchin has ample experience, credentials and qualifications for this important position," Sen. Orrin Hatch (R-Utah) said Monday, decrying what he called "continual and pointless delays" of his confirmation by Democrats.

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By March 17, Mnuchin would need to persuade Congress to increase the nation's debt limit. If he can't, he would have to start using a series of so-called extraordinary measures to extend the deadline for several weeks to avoid a U.S. default on its debt.

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On the same day, he'd be scheduled to begin two days of meetings in Germany with finance ministers of the world's advanced economies at a G20 summit, amid a rocky start for Trump on international relations.

By April 15, Mnuchin would face a statutory deadline to inform Congress if the Treasury Department will label China a currency manipulator.

Trump promised during his campaign to direct his Treasury secretary to take that step, which would trigger negotiations to resolve the matter. If those talks fail, the U.S. could levy sanctions that might lead to a trade war.

Keeping currency exchange rates artificially low makes a country's products cheaper to buy abroad, boosting exports. China has faced allegations of manipulations in the past, but since 2014, financial markets have been pushing down the value of its currency and China has been trying to intervene to keep the value up.

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And by the first week of June, Mnuchin would have to report to the White House about changes needed to financial regulations under an executive order Trump signed Feb. 3. The order directed the Treasury secretary to consult with regulators and review the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Trump has pledged to dismantle.

Bank For International Settlements Warns Of Looming Debt Bubble

Mon, 02/13/2017 - 11:38
``Global debt-to-GDP is now at a comfortable record high and the Bank for International Settlements, aka the central bank of central banks, noted on Friday that over the last 16 years, debts of governments, households and corporations has gone up...everywhere.... "The next financial crisis is likely to revolve around how this debt burden is managed," warns Neil MacKinnon, an economist with VTB Capital in London.''

NYC rents dip as concessions become the new normal

Thu, 02/09/2017 - 17:14
The use of concessions has been on the rise, particularly in Manhattan, where Douglas Elliman found that it hit an all-time high for the fourth consecutive month--now, more than 30 percent of leases include a concession. In short, it's a good time to sniff out reduced rent.

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In Manhattan, the median rent--including the cost of concessions--has been on the decline for six consecutive months, year over year, landing it at $3,259 for the month of January. (Without concessions, the median rent in Manhattan comes in at $3,369.)

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Like in Manhattan, the demand for two- and three-bedroom apartments in Brooklyn remained softer than studios and one-bedrooms, with rents falling nearly four percent from this time last year for two-bedrooms, and almost eight percent for three-plus-bedrooms. On the flip side, the median rent for studios has remained relatively stagnant from this time last year, clocking in at $2,300--way down from December's $2,409. The median rent for one-bedrooms has increased about four percent since last January, bringing it to $2,700.

Ruh-roh. And from this WSJ article:

The concessions and flattening of rents have been attributed to a surge of new rental buildings coming to market, as well as a slowdown in growth of higher-paid jobs in New York City.

Mr. Gavzie said the weakness was most pronounced in more expensive apartments. Tenants typically had less room to negotiate in lower-rent starter apartments, he said.

Gary Malin, president of brokerage Citi Habitats, said the rental market is now value-driven, with tenants willing to try new neighborhoods to get a better deal.

Surveying the NYC toxic sites owned by the Trump family

Thu, 02/09/2017 - 11:00
Ironically, several of the most toxic properties in New York City are currently under the control of Trump family members who stand to benefit from their remediation and development. In Brooklyn, two enormous brownfields in Dumbo and Gowanus were purchased by Jared Kushner, Trump's son-in-law and a senior advisor at the White House, and are now in the beginning phases of their New York State Department of Environmental Conservation (DEC) cleanups.

In the Bronx, the Trump Organization is raking in millions of dollars from a special rent-free arrangement to operate Trump Ferry Point, a city golf course built on top of a noxious garbage dump. As the current president continues in his quest to weaken environmental regulations, it is unclear what the future will be for these polluted sites, and for the many other brownfields, Superfund sites, and contaminated wastelands in New York City.

Is America in a Bubble & Will America Ever Return to "Normal"?

Mon, 02/06/2017 - 20:34
... if the [household net worth, or HHNW] and GDP ratio are to come back to their 50 year norm (before they were warped by long periods of near Zero Interest Rate Policy and actual ZIRP)...there are two basic options: Either, GDP rapidly rises $7 trillion (a 38% increase)...Or, the other option is a 28% decline in HHNW, or a contraction of $25 trillion.  A $25 trillion decline in HHNW would equate to an average $200,000 decline in net worth for every household in America...''