Friday, October 11, 2013

Today's Links

1---Abenomics Fail: Beer, near-beer shipments fall 2.8%, Japan Times

Beer and quasi-beer shipments fell 2.8 percent in August to their lowest level for the month since comparable data became available in 1992, figures from major brewers show.
The year-on-year drop to 40.96 million cases was led by slow shipments in the second half of the month...

 Asahi Breweries Ltd. and Kirin Brewery Co. logged declines, chiefly due to weak beer sales, while Suntory Liquors Ltd. and Sapporo Breweries Ltd. posted growth, thanks to high-end premium beers

2--Abenomics Fail; Ferrari Says Sales in Japan to Rise 30%, Bloomberg

3---Abenomics Fail: Machine Tool Orders Fall 6.3% On Year, Down 17th Straight Month, Nikkei

Orders received by machine tool makers in September fell 6.3% on the year to 100.63 billion yen, marking the 17th straight monthly decline, the Japan Machine Tool Builders' Association said Wednesday.
Despite a 35.9% jump in domestic orders to 42.12 billion yen, up for the third month in a row, overseas orders slid 23.4% to 58.51 billion yen, down for the 12th straight month.

4---Abenomics Fail: Japan Wages, trading economics

Wages in Japan decreased to 407.34 JPY THO in July of 2013 from 531.11 JPY THO in June of 2013. Wages in Japan is reported by the Ministry of Health, Labour and Welfare, Japan. Japan Wages averaged 317.62 JPY THO from 1970 until 2013, reaching an all time high of 883.79 JPY THO in December of 1997 and a record low of 52.91 JPY THO in February of 1970

5---The Four Totally Bad Bears: New Update, dshort

Click to View Click for a larger image
 
 



6---Wells .... said that its Q3 mortgage originations were a multi-year low $80 billion, or a 29% drop, zero hedge (Ouch) 

But the biggest pain was in the company's pure play primary line of business: mortgage origination. And as we have been pointing out all quarter, as a result of a 100 bps jump in rates since the taper talk in Q2, consumers' propensity to begin the mortgage pipeline, has plunged. Sure enough, Wells was kind enough to point that out moments ago, when it said that its Q3 mortgage originations were a multi-year low $80 billion, or a 29% drop sequentially, and a massive 42% Y/Y.


7---Americans' Satisfaction With U.S. Gov't Drops to New Low, Gallup
Democrats remain most likely to be satisfied, but much less so than in September


Eighteen percent of Americans are satisfied with the way the nation is being governed, down 14 percentage points from the 32% recorded last month before the partial government shutdown began. This is the lowest government satisfaction rating in Gallup's history of asking the question dating back to 1971.
Trend: Americans' Satisfaction With the Way the Nation Is Being Governed
The previous low of 19% was recorded in September 2011, just after Washington lawmakers reached a last-minute agreement that forestalled a government default. More broadly, less than half of Americans have been satisfied with the government since 2004.

8---In U.S., Perceived Need for Third Party Reaches New High, Gallup

Twenty-six percent believe Democratic and Republican parties do adequate job.

Amid the government shutdown, 60% of Americans say the Democratic and Republicans parties do such a poor job of representing the American people that a third major party is needed. That is the highest Gallup has measured in the 10-year history of this question. A new low of 26% believe the two major parties adequately represent Americans.
Trend: Perceived Need for a Third Major U.S. Political Party
9---JPMorgan Taps Taxpayer-Backed Banks for Basel Rules: Mortgages, Bloomberg

JPMorgan’s loans from the Cincinnati FHLB increased 64
percent to $42.7 billion in the first half of this year as its
total FHLB borrowing climbed to $61.8 billion from $42 billion.
    The bank stepped up its borrowing as it sought to use
longer-term funding to add to its cash and similar investments
to meet new liquidity rules called for by the international
Basel III agreement, according to a person familiar with the
company’s operations. The loans, which can cost less than
similar-maturity unsecured debt, are backed by mortgage
collateral, said the person, who asked not to be named because
the details are private.
    JPMorgan has issued $19.9 billion of senior dollar-
denominated bonds this year, according to data compiled by
Bloomberg.
...


At Cincinnati’s FHLB, demand for advances from members
other than JPMorgan has been limited. The “anemic economic
expansion” has depressed the amount of loans banks are making
while they have inflated deposit levels, according to its
disclosures.

While the FHLBs’ net lending would be shrinking without
JPMorgan, Bank of America and Citigroup, many other individual
members, particularly insurers, are also borrowing more,
according to e-mails and interviews with officials and spokesmen
from the New York, Cincinnati, Indianapolis, San Francisco and
Atlanta branches.

10--- U.S. Rethinks How to Release Sensitive Economic Data, WSJ
Potential Changes Driven From Unease Over High-Speed Trading Firms

11---Buried in Fine Print: $57B of FHA Loans Big Banks May Have to Eat, oc housing

...the main reason our economy has not recovered from the Great Recession is because we failed to force the banks to write down their bad loans and liquidate their assets. This would have lowered asset prices and freed up capital for more productive uses. It also would have caused investors in bank stocks and bonds to lose trillions of dollars and forced the nationalization of our banking system. That sounds scary mostly because the oligarchs that would have been impacted by this set out to scare the populace into agreeing to a massive bailout to preserve their wealth and power. The countries that recently nationalized their banks, Sweden in the 1990s and Iceland after the 2008 bust, both recovered quickly from nationalization and experienced robust economic growth. Countries that need nationalization, but don’t do it, experience years and decades of weak economic growth like we have.

Most people understand that we have too-big-to-fail banks, but most don’t realize the extent to which we have gone to stop these institutions from going under. Many don’t understand why bank regulators allowed mark-to-fantasy accounting and why we continue to operate under this emergency measure four and a half years later. The reality is scary. Banks are holding billions in worthless assets on their books as if these loans have real value. The scale of this deception leaks out occasionally, and people who understand it are rightfully scared and angered by the special favors these too-big-to-fail institutions ...

The nation’s four largest banks are holding $57 billion of seriously delinquent loans that they’ve been slow to move into foreclosure over concerns that the Federal Housing Administration, the government mortgage insurer, will refuse to cover the losses and hit them with damages, according to industry sources.

The banks — Bank of America (BAC), Citigroup (NYSE:C), JPMorgan Chase (JPM), and Wells Fargo (WFC) — have assured investors in the footnotes of quarterly filings that the loans are government-insured and therefore pose no threat to their bottom lines, even if they end up in foreclosure. What’s more, the banks have used these supposedly iron-clad government guarantees as a pretext for continuing to classify the loans as performing and for holding no reserves against them.
No reserves? If these loans were not performing, and if the the banks truly had no worries about being reimbursed by the FHA, why are they still holding these on their books at all? ...

FHA’s guarantee does not apply if lenders are found to have violated underwriting or servicing standards, or to have engaged in misconduct. Banks can also be held liable for treble damages under the False Claims Act if they are found to have “falsely certified” that mortgages met all FHA requirements.
As a result, the banks face hefty losses if the loans go into foreclosure because there is no guarantee that the FHA will cover them, asserts Rebel Cole, a former Federal Reserve Board economist who is now a professor of finance and real estate at DePaul University in Chicago.....
The banks say they are certain of repayment on these distressed assets, but that’s simply not true,” says Cole....

The FHA has more than $32 billion in reserves, but it faces an estimated $70 billion in future payouts on loans originated just from 2007 through 2009, according to the 2012t from the Government Accountability Office. In all, the FHA has roughly 686,000 seriously delinquent loans, representing $106 billion in total principal balances for all lenders. These distressed assets continue to be a major drag on the housing market, distorting the supply of homes for sale because so many remain stuck in the foreclosure process.
All the stories in the mainstream media discuss how the housing market is on the mend and shadow inventory is no longer a problem. Market analysts like Keith Jurow are right to point out that these so-called  legacy loans are a major problem that isn’t going away by waiving a magic wand. These loans have yet to be dealt with, and when they are, they will be distressed sales that would not otherwise be on the market. It’s the price lenders and homeowners must pay for the depleted inventory rally they enjoy today

12---Consumer sentiment falls, cal risk

13---Syria extremists financed by private Gulf donors carried out mass killings – HRW, RT

14--Investors retreat from "frothy" market, CNBC

A potential stall in home price gains and a large drop in the number of distressed properties have some big investors pulling out of the single-family rental market.
They are getting out at the same time that billions of investor dollars continue to pour in.
"I think the investor market is largely past us," Doug Lebda, chief executive of Lending Tree told CNBC. "People were buying investment properties three, four, five years ago. What I hear is that's slowing now."

Recent reports that Oaktree Capital Group is selling about 500 of its homes added fuel to other reports that Och-Ziff Capital management is selling its homes as well. Both declined to comment on the reports. Carrington Mortgage Services stopped buying distressed homes late last year, claiming the market was "a bit too frothy."

Home prices are up over 12 percent from a year ago, according to CoreLogic, but still down 18 percent from their peak in 2006. Investors certainly played a role in putting a floor on home prices and then pushing them higher than many predicted.
Now, faced with higher mortgage rates and weak wage and employment growth, even usually bullish brokers predict home prices will stay flat through 2014.

15---Baby boomers are likely to ride their golden handcuffs into their graves, Dr Housing Bubble

Real estate prices soaring but very little new building
California home prices are up a stunning 28 percent from last year.  Did incomes boom up?  Nope.  Did we have a boom in high paying jobs?  Not really.  The flood of investor demand has been the big push.  If this was a longer term trend we would have seen a big pickup in building which never materialized....
 
California building permits are down a whopping 78 percent from the peak in 2005.  Yet prices are soaring.  But prices are soaring because the market is controlled similar to a U.S.S.R. project.  The entire mortgage market is government backed.  The Fed is injecting cheap rates into their member banks and this has trickled into real estate via investing.  Many on Wall Street see the devaluation of the dollar and massive QE events and the rush has been to tangible real assets.  Banks rewrote accounting standards to freeze mark-to-market to their favor.  Average Joe’s and Jane’s are basically competing with the big boys and as usual, mistake luck with investing acumen......
 
In October of 2007 the LA area had something like 53,000 properties.  We did hit a low in March of this year of 15,000 but today it is up to 18,000.  A good jump from the spring lows but a giant distance from the highs of 2007.  Many of the points given in the above comment highlight why investor demand in California has been nothing short of insane....
 
This is no free market.  It is a game changer however.  The Fed has unlimited digital printing power and they are now the backbone of over 90 percent of all mortgages.  They are willing to keep rates as low as possible until the entire government loses credibility (which sadly, seems to get more and more real every year).  It is clear that this has been a gift to banks, not the middle class in this country.  Baby boomers are likely to ride their golden handcuffs into their graves.  One thing you learn in real estate as an investor is equity is “dreamer’s cash” until you actually sell it and get your cashier’s check minus commissions and other fees once escrow closes.  Then and only then have you cashed in all those golden handcuffs.
 

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