Wednesday, September 25, 2013

Today's Links

1--"Still in Recession": Bloomberg confirms widespread pessimism. 53 percent disapprove Obama job performance, Bloomberg

We’re still in a recession; I don’t know why they say it’s over,” says Chris Sams, 28, a disabled Navy veteran from Daingerfield, Texas. ...Fewer people anticipate improvement in the economy’s strength over the next year than in the last survey in June, with 27 percent saying the expansion will be more robust, down from 39 percent who expected improvement three months earlier

More than eight of 10 say they don’t plan to take on more debt or borrow money to make ends meet. And pluralities of 40 percent or more say they see no change in either their overall financial security, job security for members of their households, retirement savings, investments, or their ability to spend on vacations or entertainment.

Job Market

Poll respondents are less optimistic about the job market over the next year than they were in June. The percentage of those foreseeing stronger employment fell to 36 percent from 42 percent in the previous poll.

More than eight of 10 say they don’t plan to take on more debt or borrow money to make ends meet. And pluralities of 40 percent or more say they see no change in either their overall financial security, job security for members of their households, retirement savings, investments, or their ability to spend on vacations or entertainment...

Fewer Americans also forecast improvement in the housing market with 42 percent saying the situation will get better, down from 51 percent three months ago. ...

38 percent say they approve of the job Obama is doing to make people feel more economically secure while 53 percent disapprove. ...

Those making less than $50,000 a year are feeling especially strapped. Almost one-quarter say they expect to borrow money in the next year to make ends meet. That’s more than twice the percentage of those earning between $50,000 and $99,000 who plan on such borrowings.
“The economy’s going to get worse and worse,” says Renee Howard, 59, of Cincinnati. “You’re just stuck.”

2---Investors exit housing market, Testosterone Pit

We’re selling everything that’s not nailed down.” Since then, PE firms and hedge funds have sloughed off assets by any means possible, including IPOs.
The latest in the bunch: Oaktree Capital Group and its partner Carrington Mortgage Services are trying to dump a portfolio of 500 single-family homes that they’d bought out of foreclosure, Reuters reported. They’re trying to get the heck out of the hot buy-to-rent trade...

The evil combination of jumping prices, sky-high vacancy rates, and compressing rents has raised the distinct possibility that the business model of buy-to-rent might not work – and that vast amounts of capital will be destroyed as this is being sorted out. But whose capital?
The Wall-Street funded, Fed-instigated buying frenzy has turned single-family homes, the bedrock of American society, into another speculative Fed-driven asset class, where prices jump and crash erratically. And now, the smart money has decided to sell. They too see the numbers.

One of the timeliest gauges of home prices is Redfin’s Real-Time Price Tracker. It relies on sales contracts reported to the MLS data bases upon signing in the 19 metro areas where Redfin is active. Last week, it reported that in August the price per square foot – eliminates the issue of larger versus smaller homes –was up a bubbly 17.7% from last year on a 6.2% increase in volume. But on a monthly basis, prices had dropped 0.4%. The chart paints what could become the beautifully rounded top of a bubble.

3---Obamacare: It's Better Than You Think , Dean Baker

There is much real basis for criticism of the ACA. Private insurers are the sole providers of insurance. Not only are we not getting universal Medicare, we did not even get a public option, the right to purchase a Medicare-type plan that would compete with private insurers.
The drug companies and medical equipment suppliers both end up as winners under Obamacare. They will be able to secure even greater profits from their government-provided patent monopolies since the ACA does little to rein in costs.

As a result, we will still be paying close to twice as much for drugs and medical devices as people in other wealthy countries. This is a guaranteed recipe for bad health care since the enormous profits provided by these patent monopolies give drug companies an incentive to push their drugs even when they may be harmful.
And we will still be paying twice as much for our doctors as people in other wealthy countries. These failures on cost controls will add hundreds of billions of dollars to the cost of health care each year.

4---The rats flee the ship. Reuters

Oaktree Capital Group is leading an effort to put up for sale roughly 500 fully-leased homes, an indication some early investors are looking to cash-out on the recovery in U.S. housing prices, according to sources familiar with the market.
Oaktree, which manages about $76 billion, and its partner Carrington Mortgage Services are entertaining bids for the portfolio of fully-leased homes as they seek to exit from the buy-to-rent trade that has become popular the past two years with hedge funds and private equity firms.
The homes, mainly located in several western U.S. states, is being shopped to other large investors in foreclosed homes, said three sources, who asked for anonymity because they were not authorized to discuss the matter.

Oaktree, which specializes in distressed investing, and Carrington had initially planned on converting their portfolio into a real estate investment trust. But investors have now decided to simply exit the trade. Their asking price for the portfolio could not be learned.
Earlier this year, Reuters first reported that Oaktree, after partnering with Carrington in early 2012, was souring on the buy-to-rent trade after seeing returns on rents from single-family homes begin to compress. Oaktree, which had agreed to spend up to $450 million on building a portfolio, told Carrington this spring that it did not want to continue buying additional foreclosed homes.{nL2N0DN0X7}
A year ago, hedge fund Och Ziff Capital Management put its book of 300 homes in Northern California up for sale, a process it has just about completed.

5----Greece: The rape continues, naked capitalsim


One of the troika’s major demands concerns a moratorium on foreclosures. The international community wants to be able to throw Greeks out of their homes, and makes it a condition for further bailouts. All in the name of making Greek banks profitable. Which is of course just a veiled way of saying international banks want to be able to squeeze more money out of their bad and failed Greek investments.
The idea is summarized perfectly in this comment about the Greek banks: “… anything that helps them return to profitability is good…”. They mean that word for word. If it means throwing grandma out onto the street, so what? She’s not your yaya, is she (yaya is Greek for grandma)? Bloomberg:

Greeks Needing Credit Ethos Weigh Home Repossessions
Panagiota Kalapotharakou says she’s never seen such distress in her 25 years as a lawyer at the consumer-advocacy organization she helped to set up in Athens.
“If you look outside, the people are in despair,” Kalapotharakou said of the line of visitors outside her office in the rundown neighborhood of Exarchia, where most of her time is spent helping people with debts they can’t pay from Greece’s boom years. “They can’t survive. What they can pay is much smaller than what the banks are asking for.”....
 
The troika of Greece’s creditors on Monday exercised strong pressure on the state privatization fund (TAIPED) to speed up the country’s sell-off projects.
During a meeting at TAIPED’s headquarters, the mission chiefs of the European Central Bank, the European Commission and the International Monetary Fund called for more action so that this year’s revenue shortfall, amounting to €1 billion, can be covered in 2014.
At the troika’s focus were the privatizations of ports, water and sewage companies, and Hellenic Post. According to plans drawn up in January, these sell-off projects should have started in the second quarter of the year, while the aim now is for them to get started in the last quarter, given that the third will be over in a week’s time

6---What do CLO managers and retail investors have in common? sober look (Bernanke's low rates push investors into risky trades)
 
The answer is, they both love senior leveraged loans...

The amount of US leveraged senior secured debt outstanding has risen sharply this year. According to LCD this market is now some $630bn in size.

Source: LCD
(the fluctuations include new loans/refinancings as well as partial or full prepayments)
Yet that doesn't seem to be enough. While the M&A activity has picked up this year (Heinz, Dell - see story), the volumes are not nearly sufficient to feed retail investors and CLO managers.
Reuters: - Retail money keeps flooding into loan funds, marking 66 straight weeks of heavy inflows, according to Lipper data. Loan funds pulled in $1.3 billion in the week ended September 18, during which the Fed surprised the markets with its plan to keep on buying $85 billion of bonds weekly to keep rates low and boost economic growth.

Loan fund inflows accelerated over the summer on expectations that the U.S. central bank was about to reduce those bond purchases this month, keeping interest rates rising. Issuance of collateralized loan obligations (CLO), another key source of demand for leveraged loans, at $57 billion so far this year already topped last year's issuance.
This demand continues to keep loan valuations elevated. In spite of the recent selloff across fixed income markets, the leveraged loan index has been pushed to new highs.
 
7---Obama at the UN: A defense of unilateral aggression, wsws
 
The United States of America is prepared to use all elements of our power, including military force, to secure our core interests in the region,” he said. First and foremost among these interests was “the free flow of energy from the region.” He also listed terrorism and weapons of mass destruction—the phony pretexts for the US invasion of Iraq—adding that “wherever possible” Washington would “respect the sovereignty of nations,” and wherever not, “we will take direct action.”
 
That Washington’s militarist policy is stated so nakedly before the United Nations is one more indication of the uncontrolled eruption of American imperialism and the growing danger that US threats against Syria and Iran could turn into a regional war and even a global conflagration. .....
 
Now, America’s “exceptionalism” is invoked not to praise American wealth and democratic institutions, but to justify American militarism—the means by which US imperialism increasingly seeks to offset its relative economic decline. This testifies to the depth of its political crisis, and the revolutionary implications of the sweeping changes in social relations during the past 35 years, which have turned the US into one of the most socially unequal nations on the planet......
 
The US president’s emergence as “assassin-in-chief,” ordering remote-control murders, is the starkest manifestation of US imperialism’s global criminality......He boasted that his administration had “limited the use of drones so they target only those who pose a continuing imminent threat” and to where “there’s a near-certainty of no civilian casualties.” This is nonsense. In Pakistan alone, it is estimated that more than 2,500 people have been killed in drone strikes, most of them civilians and the vast majority under Obama.....
 
Today, jobs are being created, global financial systems have stabilized and people are once again being lifted out of poverty,” he proclaimed.In fact, the current “recovery” is a success largely for the top 1 percent, which according to a recent report accounted for 95 percent of all increases in income between 2009 and 2012. At the same time, the latest Census survey shows average household incomes falling to the lowest level in a quarter of a century. Fully one-third of the American population fell into poverty at some point during the same period.

8---Toronto's condo crash, greater fool

there’s a shocking number of new, unoccupied or unsold units languishing on the market. In Toronto alone this equals 7,247 low-rise homes and 21,028 condos. At current absorption rates, that’s a whopping 3-year supply of high-rise units – with more new condos churned out daily.
The laws of economics tell you supply has already overwhelmed demand, which means prices have only one direction in which to travel – notwithstanding realtor Ryan’s desperate attempts to pitch these empty boxes as investment vehicles. Which they decidedly are not.
Speaking of demand, it’s collapsed. Look at this chart (which I ripped off from that irritating Canadian Watchdog guy, and sexed-up a bit):
New condo sales GTA
Buyers for new condos are evaporating in the country’s largest market. So far this year sales have crashed 50% from 2011 levels, and are down 25% from last year, Overall, new housing deals last month were 18% fewer than the previous August and currently sit at the lowest point in 10 years. Meanwhile the gap between condo and low-rise prices has yawned to historic proportions as land prices, government levies and construction costs spiral out of sight

9---Americans Turn on Washington, 68% Say Wrong Track in Poll, Bloomberg

Obama’s 45 percent job-approval rating is the lowest since September 2011, a month after a partisan showdown over lifting the debt ceiling brought the U.S. to the brink of default.
Americans also are pessimistic about the course of the country, with 68 percent saying it’s headed in the wrong direction, the most in two years, according to the poll of 1,000 adults conducted Sept. 20-23...

Obama’s handling of the situation in Syria is overwhelmingly unpopular, with Americans disapproving by 53 percent versus 31 percent approving. While foreign affairs has been a strength of his presidency, Americans disapprove of his management of the U.S. reputation in the world, 51 percent to 43 percent.
The slip in Obama’s job approval crosses a spectrum of issues. Approval of his handling of the economy at 38 percent is the lowest level since September 2011. Support for Obama’s handling of the budget has dropped to a new low of 29 percent
 
 

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