Monthly Archives: August 2015

Why it’s time to double down on Greek stocks

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“There are signs that some sectors have already reached competitiveness, with hotels enjoying a bumper season after slashing prices.  We’re also attracted by the bargain-basement nature of Greek stocks, which trade at a cyclically adjusted price/earnings ratio (Cape) of three, and at a hefty discount to the reported value of their net assets. Obviously, the banking sector is one downside risk. It’s possible that it could be taken over by the state, with shareholders getting little or nothing. However, banking stocks only account for around a fifth of the Greek stockmarket.  So we think it’s worth taking a punt on Greece.”

http://moneyweek.com/double-down-on-greek-stocks/

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J.P. Morgan makes it easier for rich to take out mortgages

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“J.P. Morgan Chase & Co. is loosening its underwriting criteria for big mortgages, as lenders ramp up competition to grab a bigger share of the high-end housing market.  The nation’s largest bank plans to announce as soon as Tuesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.  At the same time, some big banks are backing away from smaller loans where they see higher regulatory costs and litigation risks.  By dollar volume, jumbo mortgages given out by lenders last year accounted for about 20% of all first-lien mortgages. That is up from 5.5% in 2009. The last time jumbo mortgages accounted for a larger share was in 2005.”

http://www.marketwatch.com/story/jp-morgan-makes-it-easier-for-rich-to-take-out-mortgages-2015-08-04

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The Next Financial Disaster Starts Here

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“Because junk bond ETFs appear liquid, most investors don’t see the danger. They think they can sell their junk bonds ETFs just as easily as they could sell shares of Apple.  But if too many people decide to sell junk bonds at once, it could overwhelm the market and cause prices to crash.  None of this has been a problem yet because junk bonds have been in a bull market. According to Bank of America, junk bonds have gained 149% since 2009.  But all bull markets eventually end. And when this one ends, junk bonds could cause massive losses to investors who don’t know about these risks.”

https://www.caseyresearch.com/articles/the-next-financial-disaster-starts-here

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Hedge Funds Gear Up for Another Big Short: High-Yield Bonds

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“Wall Street is preparing for panic on Main Street.  Hedge funds are lining up to profit from potential trouble at some ‘alternative’ mutual funds and bond exchange-traded funds that have boomed in popularity among retirees and other individual investors.  Financial advisers have pushed ordinary investors into those funds in search of higher returns, a strategy that has come into favor as Federal Reserve benchmark interest rates remain near zero. But many on Wall Street worry that junk bonds, bank loans and esoteric investments held by some of those funds will be extremely hard to sell if the market turns, leaving prices pummeled in a rush for the exits.”

http://www.wsj.com/articles/hedge-funds-gear-up-for-another-big-short-1437504910

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Blackstone Selling 1,300 Atlanta Houses in Strategy Shift

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“Blackstone Group LP’s Invitation Homes, after spending more than $9 billion in a U.S. property-buying spree, is starting to sell some houses as it shifts focus from rapid expansion to fine-tuning its holdings.  Blackstone led private equity firms, hedge funds and other large investors in buying thousands of houses after the real estate crash, creating a new asset class of single-family rentals. Shares of publicly traded single-family landlords have trailed apartment companies as investors remain wary about the costs of running scattered-site rental properties. Landlords need thousands of homes in a market to achieve the scale needed for efficient management. That’s pushed smaller and mid-size owners to sell.”

http://www.bloomberg.com/news/articles/2015-07-13/blackstone-selling-1-300-atlanta-houses-in-strategy-shift

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Central Banks and Our Dysfunctional Gold Markets

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“First, it remains unclear whether or not much of the gold that is being sold as shares and in certificates actually exists. Second, paper gold can theoretically be printed into infinity just like regular currency — although private-sector paper-gold sellers have considerably less leeway in this regard than central banks. Third, new electronic gold pricing — replacing, as of this past February, the traditional five-bank phone-call of the London Gold Fix in place since 1919 — has not necessarily proved a more trustworthy model. Fourth, there looms the specter of the central bank, particularly in the form of volume trading discounts that commodity exchanges offer them.”

https://mises.org/library/central-banks-and-our-dysfunctional-gold-markets

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Lucky Lobsters Jam China Flights, Sending U.S. Prices to Record

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“Every Sunday for the past seven months, about 60,000 live North American lobsters packed in wet newspapers and Styrofoam coolers make the 18-hour flight to Asia in a Korean Air Lines Co. cargo plane.  The 7,500-mile (12,000-kilometer) trip from Halifax, Nova Scotia, to Shanghai via South Korea has become a weekly routine this year with a surge in demand from China, where lobsters caught in North Atlantic waters are at least one-third the cost of competing supplies. As a result, exports have skyrocketed from Canada and the U.S., the world’s top producers, and American prices are the highest ever.”

http://www.bloomberg.com/news/articles/2015-08-03/lucky-lobsters-jamming-china-flights-send-u-s-prices-to-record

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Miners Shed Thousands of Jobs as Commodities Prices Slide

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“The world’s biggest miners are hemorrhaging jobs as the price for almost everything they dig up–from gold to aluminum to copper–slides relentlessly downward.  Staff cuts are among the measures miners are taking to lower their costs amid a historic downturn in commodity prices driven by China’s abrupt economic slowdown. Anglo and other big miners such as Rio Tinto PLC have also moved to restructure organizations that had grown quickly when China was gobbling up commodities. The moves come as oil companies and their service contractors shed tens of thousands of jobs and are moving to reshape their operations for what could be a long period of lowered commodity prices.”

http://www.nasdaq.com/article/miners-shed-thousands-of-jobs-as-commodities-prices-slide-20150724-00296

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Big U.S. coal miner Alpha Natural files for bankruptcy

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“The move comes as President Barack Obama is expected to unveil tough new measures to cut greenhouse gas emissions from coal-fired power plants.  Alpha blamed its Chapter 11 bankruptcy on tougher regulatory standards and policies that favor renewable energy, as well tumbling prices for its coal.  Alpha is the world’s third-largest supplier of metallurgical coal used in making steel and has also been hit by a slowdown in China.  Walter Energy Inc and Patriot Coal Corp also filed for bankruptcy protection this year. Energy Future Holdings Corp, a power company that also has a large coal mining business, has been in bankruptcy since 2014.”

http://www.reuters.com/article/2015/08/03/alpha-ntrl-resc-bankruptcy-idUSL3N10E4JP20150803

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The Skinny on Breadth

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“Jason Goepfert at Sundial Capital points out that more than half of the stocks in the S&P 500 are already down by more than 10% from their 52-week highs. In essence, he says, the vaunted, long awaited, 10% decline has already been visited on a majority of stocks, but it just hasn’t been reflected in indexes. This is a remarkable number of stocks off 10% from their highs when you consider the S&P 500 itself was less than 3% from its 52-week high before it bottomed on Monday. To see how unusual this is, check out Goepfert’s chart above. It shows the number of stocks in the S&P 500 that are 10% or more below their 52-week high while the S&P 500 index itself was within 3% of its own high.”

http://www.moneyandmarkets.com/skinny-breadth-72613

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