Baltic Dry Index. 1841 +15
LIR Gold Target by 2019: $3,000.
Most of the poverty and misery in the world is due to bad government, lack of democracy, weak states, internal strife, and so on.
George Soros.
We open today with China and the Wall Street Journal reporting on yet another attack on China’s “undervalued” currency. Someone has an agenda in play in taking on China, it seems, domestic US politics or a sign of something else. Eerily like 1987, when then US Treasury Secretary Baker took on Germany, and the result was the stock market crash of October 1987. Stay long precious metals. History doesn’t have to repeat, but this looks uncomfortably close.
IMF says yuan substantially undervalued
Published on Tue, Jul 27, 2010 at 08:35
The International Monetary Fund believes that the Chinese yuan is "substantially undervalued", the Wall Street Journal reported on Tuesday, citing two unidentified IMF officials.
The newspaper said the IMF's opinion, in a review of the world's third-largest economy, was backed by the United States, Germany, France and Britain among others.
A full analysis would likely be released in September unless China withholds its permission.
A US Treasury official also said on Monday that the yuan remained clearly undervalued and that the Treasury Department was closely monitoring it.
The yuan has risen 0.7% since the People's Bank of China announced its depegging from the dollar on June 19.
http://www.moneycontrol.com/news/rupee/imf-says-yuan-substantially-undervalued-_472571.html
JULY 26, 2010
China Fuels Trade Tension With Policies, Report Says
BEIJING—China's drive to support domestic technologies—which has already resulted in high-profile complaints by foreign businesses over government purchasing policies—is likely to continue to cause trade disputes and political tensions with the U.S., says a new report from the U.S. Chamber of Commerce.
"Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050," says the report, to be released this week. "What is worrisome for the business community is that these indigenous innovation industrial policies are headed toward triggering contentious trade disputes and inflamed political rhetoric on both sides."
The report, which was commissioned by the U.S. Chamber and written by James McGregor, a longtime journalist and executive in China who is now senior counselor for APCO Worldwide, says China is becoming increasingly aggressive in using its vast market to push foreign companies to transfer leading-edge technologies. That tactic, it says, is "forcing foreign technology companies to anguish over balancing today's profits with tomorrow's survival."
The report, from one of the world's biggest business groups, adds to the increasingly vocal concerns of foreign companies and governments about the business environment in China, including top executives from firms such as Siemens AG, General Electric Co., and Microsoft Corp.
Executives and officials have raised particular complaint about indigenous-innovation policies that they fear are designed to discriminate against foreign companies or to force them to transfer their intellectual property to China.
Beijing's handling of those concerns "has become a litmus test for many companies, particularly in the IT sector, for how China is currently treating investment and how it might treat investment in these sectors going forward," Myron Brilliant, the U.S. Chamber's senior vice president for international affairs, said in an interview.
Chinese officials have strongly defended the indigenous-innovation policies, saying they don't discriminate against foreign companies and noting that investment continues to pour into the country.
"Currently, there is an allegation that China's investment environment is worsening. I think it is untrue," Premier Wen Jiabao said this month in a meeting with German executives and officials.
China's leaders began emphasizing what they call "indigenous innovation" in 2006, but it emerged as a major issue for foreign businesses after the publication in November of rules for creating a national list of products containing indigenous innovation. Foreign companies feared that would shut them out of tens of billions of dollars in government procurement contracts.
We end on China with more on a growing problem we’ve touched on several times before. Much of China’s bubble rests on a foundation of sand. Below Bloomberg carries another red flag on the state of China’s bubble. It’s mid summer and all news is good news in our stock markets, complacently focused on anything other than the reality of our increasingly unstable world. Will 2010 end differently to 1987. Is High Frequency Trading the new portfolio insurance all set to trigger another spectacular crash?
Dagong Says China Ratings Miss Local Government Risks
July 27 (Bloomberg) -- Credit ratings assigned to yuan- denominated bonds issued on behalf of local governments in China are misleading and don’t reflect risks investors face, Dagong Global Credit Rating Co.’s chairman said.
Local government-backed borrowers shop around for the best rankings from Chinese ratings companies and “whoever gives them a better rating gets the business,” Guan Jianzhong, chairman of privately owned Dagong, one of China’s five official ratings agencies, said in a Bloomberg Television interview in Beijing yesterday. “This is very dangerous.”
Guan’s comments show growing concern at credit risks stemming from a record borrowing binge spurred by China’s efforts to revive economic growth during the global recession. Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) lent to finance local infrastructure projects, according to a person with knowledge of data collected by the China Banking Regulatory Commission.
“It reflects the lack of transparency in local-government finance,” Tom Orlik, a Beijing-based China economist at Stone & McCarthy Research Associates, said in a telephone interview. “It’s very difficult to get an accurate gauge of the repayment capacity either of the local government financing vehicles or of the local governments themselves.”
------ “In China most companies can’t issue junk bonds, they have to be at least AA to apply for debt issuance,” Guan said. Local governments set up financing vehicles to fund projects such as highways and airports with bonds and loans, due to limits on their ability to directly borrow money.
According to China Lianhe Credit Rating Co., 43 urban construction companies affiliated with municipalities, provincial and prefecture-level cities, as well as counties, issued bonds totaling 59.2 billion yuan ($8.7 billion) in the first half of 2010. Of the 72 corporate bonds sold in the first half, 70 were rated AA or above, Lianhe said.
China has more than 1,000 county-level governments and hundreds of city and municipal councils that get revenue from local taxes, land sales and central-government transfers. Premier Wen Jiabao’s crackdown to prevent a real-estate bubble has left cities such as Tianjin, southeast of Beijing, reeling as revenues slump from land sales, which made up 41 percent of income in 2009.
http://noir.bloomberg.com/apps/news?pid=20601089&sid=aH_b4cOfNAUE
We end with this incredible news from America in today’s WSJ. Not content with a hidden mountain of unsold foreclosed homes hidden in the books of US banks, the FHA rescued US real estate industry is now ramping up to build even more homes. I doubt that this ends well for anyone, at some point a few months ahead.
JULY 27, 2010
Supply of Homes Set to Grow
Sales of new homes are near 47-year lows, yet the supply of new and existing homes is expected to grow in the months ahead as construction ramps up and a wave of foreclosed homes hits the market.
In June, new-home sales were running at a seasonally adjusted annual rate of 330,000 units, the Commerce Department said Monday. While that was up 23.6% from the all-time low of 267,000 in May, the June figures were the second lowest on record.
"What we're really seeing here is that new-home sales are at what I'd call rock bottom," said Steve Blitz, an economist at Majestic Research in New York. "The last time we were running these kinds of numbers was the 1982-1983 recession, when we had 100 million less people."
LPS Applied Analytics, a firm that tracks mortgage data, said Monday that there were 4.56 million loans in default or in some stage of foreclosure in June, down slightly from May. But the number of new foreclosures initiated on properties backed by Fannie Mae and Freddie Mac increased sharply, rising 21% in June from May.
The rise in foreclosures on Fannie and Freddie properties reflects the failure of many troubled borrowers to receive permanent loan modifications plans, analysts said. Having exhausted all options to rescue their homes, many troubled borrowers may now be giving up.
"Looking at the numbers you're seeing about this pickup in foreclosure starts, it's hard to see how it's not going to translate into elevated levels of [properties taken over by banks] down the road," said Herb Blecher, an analyst at LPS.
Home builders, which began buying up land lots late last year in anticipation of an economic and housing rebound, are stuck with thousands of acres that are prone to lose value as the market struggles. Many will build homes on the land, rather than write off its value and wait for the market to improve.
"Builders are willing to pay a premium to not have that risk on their hands. They're still facing a tremendous amount of stress," said Brad Hunter, chief economist at Metrostudy, a housing-market research firm based in Houston. "They're discounting the homes, they're making very small profit margins, but they're building homes. They're very interested in securing market share."
Several former bubble markets are seeing the biggest increase in home construction. According to Metrostudy, new-home starts in the second quarter show signs of rising 68.1% in South Florida, 83.7% in Naples/Ft. Myers, 65.1% in Las Vegas and 59.7% in Denver from the same period in 2009.
http://online.wsj.com/article/SB10001424052748704700404575391582687553008.html
Why Are Banks Withholding Highend Repossessions Over $300,000 From the Market?
Posted by Keith Jurow 07/20/10 8:00 AM EST
With the expiration of the first-time buyer tax credit on April 30, there are now two main props keeping the housing market afloat. One is the growing percentage of home sales financed by Federal Housing Administration (FHA) loan guarantees. The other is the refusal of banks to put on the market foreclosed homes over $300,000.
In this article, we will take a look at the second factor. A future report will examine the role of the FHA in keeping the market from collapsing
Let's begin with Chicago. Cook County is comprised of Chicago and its contiguous suburbs and has a population of roughly 5.3 million residents. It experienced a huge bubble during 2004-2006 and has suffered a substantial drop in both prices and home sales.
RealtyTrac.com has the most comprehensive database on foreclosures. It claims to have specifics on over 1.5 million defaulted, auction-ready, and bank-owned properties. The information is updated daily. You can organize listings of defaulted properties; those scheduled for auction, and repossessed homes (REO) by date as well as by amount. The website also provides a separate listing of those properties which have been put up for sale by the lender.
As of July 15, RealtyTrac listed 28,829 properties which had been foreclosed and repossessed by lenders. Some have been owned by the bank as long as 2½ years without having been placed on the market. Roughly half have been repossessed by the lender since late January 2010.
This year, banks in the Chicago area have foreclosed on a huge number of expensive homes. RealtyTrac lists 2,650 repossessed homes for more than $300,000 and 169 for more than $1 million.
Here is where it gets really interesting. Out of 28,829 repossessed properties, there were only 1,292 listed by lenders as "for sale." The vast majority of these available homes were inexpensive. A mere 29 homes over $300,000 were for sale. In other words, the banks have withheld from the market 2,621 properties listed at $300,000 or higher.
There are probably two important reasons why banks have pursued this strategy. First, they are concerned that placing these more expensive homes on the market will severely weaken an already thin upper tier market.
Even more crucial is that selling substantial numbers of expensive homes at discounts of 50% or more would compel the lenders to take substantial losses which have been avoided by keeping them off the market.
To give you an example, one repossessed home in the upper income suburb of Glencoe was purchased in January 2004 for $850,000. Though not listed for sale yet, its opening bid price is $2,819,000. This suggests that the foreclosed owner had refinanced the property to the tune of $2.8 million. If the holder of the first lien put a home like this on the market, it could be forced to swallow a loss approaching $2 million or perhaps even more.
One big problem with this strategy is that the banks have also ramped up their placing of seriously delinquent borrowers into default - the first step in the foreclosure process. RealtyTrac listed 39,963 defaulted properties in Cook County as of July 15. All of them have been placed into default since August 2009 and half of them since early February of this year. That is nearly 4,000 per month for the past five months and nearly 10,000 in the last two months alone. Of these defaulted properties, there are 7,550 listed over $300,000. Sooner or later, these homes are coming on to the market either as foreclosures or short sales.
What does the market for non-foreclosed properties in Cook County look like now? As of July 15, trulia.com posted 38,877 properties for sale of which 14,866 were listed for $300,000 or more.
Sales of all new and existing homes and condos totaled only 9,057 in the first quarter of 2010 according to DataQuick. That is an average of slightly more than 3,000 per month for a county with over one million owner-occupied units. Since the peak in early 2006, home sales in the Chicago area have plunged by nearly 75%. Median sale prices for Cook County slid to only $175,000 in the first quarter, down 10% from a year earlier according to DataQuick.
With so many homes listed for more than $300,000 now languishing on the Cook County market, it is somewhat understandable that the banks would be reluctant to add their foreclosed homes in this price range to a weak market. When you add in the 7,550 defaulted properties in this price range which have not yet been repossessed by the banks, you can get a sense of the soaring number of homes that is ready to inundate an already glutted market. When these homes come onto the market, as they eventually must, prices will inevitably plunge.
Current home sellers may have been taken in by all those reports lately which have been claiming that the housing market is "stabilizing." Only 35% of all the homes listed for more than $300,000 have had their asking price reduced since posting on Trulia. So these homes just sit ... and sit.
More.
“This asymmetry in the treatment of lenders and borrowers is a major source of instability in the global capitalist system and it needs to be corrected,”
George Soros.
At the Comex silver depositories Monday, final figures were: Registered 52.58 Moz, Eligible 57.77 Moz, Total 110.35 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, more on one of Wall Street’s finest, the infamous Bernie Madoff late of New York’s “lipstick building” now the star attraction at the Federal prison in Butner North Carolina. The top Ponzi specialist of the world’s capitalist system, he pales into insignificance compared to Uncle Sam’s Ponzi specialists slaving away in the cause of international crime in the depths of the Fed and US Treasury. Uncle Sam’s gargantuan debts will one day be “restructured” away. For now though, they are advancing at an official rate of about 1.5 trillion a year. The 300 million Americans, most of them legal, must wonder what’s in store for themselves as our brave new century unfolds. As with the swindler Bernie, nothing good is the answer I suspect. Below, even those who thought they’d won are about to find out just how costly winning was.
'The situations that men define as true, become true for them.'
William Thomas.
Madoff Trustee Plans More Lawsuits: Report
By REUTERS Published: July 26, 2010
BANGALORE (Reuters) - Irving Picard, the court-appointed trustee overseeing the liquidation of Bernard Madoff's investment firm, is preparing to file new lawsuits to recover funds from investors who were also duped by the Ponzi scheme, the Wall Street Journal said.
Picard told the Journal in an interview that he could end up suing about half the estimated 2,000 individual investors he has called "net winners" from their dealings with Madoff.
Investors categorized as "net winners" withdrew more money from Madoff's firm than the amount of principal they invested, the Journal said.
"The people who made money, who got more, have made money at the expense of the people who did not," Picard told the newspaper.
On July 21, Picard demanded more than $3.6 billion in damages in an expanded lawsuit against a hedge fund firm and individuals whom he said had helped Madoff run a massive Ponzi scheme.
Picard, a partner at law firm Baker & Hostetler LLP, has said that through March 31 he had recovered more than $1.5 billion of assets for Madoff victims.
Madoff was arrested on December 11, 2008, and pleaded guilty three months later to orchestrating the $65 billion Ponzi scheme.
http://www.nytimes.com/reuters/2010/07/26/news/news-us-madoff-lawsuit.html?hp
“We have come to realize that a large hedge fund like Quantum Fund is no longer the best way to manage money, ... Markets have become extremely unstable and historical measures of value at risk no longer apply.”
George Soros.
The monthly Coppock Indicators finished June:
DJIA: +269 Down. NASDAQ: +460 Down. SP500: +290 Down.
The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators.
No comments:
Post a Comment