Monthly Archives: August 2015

John Paulson Is Starting to Cash In on His Big Land Grab

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“Hedge-fund manager John Paulson, who made billions wagering against subprime mortgages, has started to profit from a U.S. housing bet that took longer to ripen: owning land.  After acquiring about 35,000 lots since 2009, Paulson & Co. shifted toward selling last year and is accelerating its disposition pace. Paulson’s funds had invested $770 million, mostly in lots bought out of bankruptcies or other distressed sales, and acquired two dozen communities in Arizona, California, Colorado, Florida and Nevada.  He’s joining other large land buyers who are selling.  Builders replenishing land holdings are finding that prices for finished lots across the U.S. jumped 57 percent since the bottom in 2009.”

http://www.bloomberg.com/news/articles/2015-08-12/john-paulson-starts-selling-land-to-reap-gains-in-u-s-housing

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A Major Cause of the Financial Crisis Is Making a Comeback

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“Subprime lending is surging.  Subprime loans are made to people with bad credit. They’re riskier than traditional loans. Lenders charge higher interest rates on subprime loans to compensate for the higher risk.  Subprime lending exploded in the early-to-mid-2000s and fueled the housing bubble. When people couldn’t pay back these expensive loans, the housing market crashed.  It sparked the biggest financial crisis since the Great Depression…and almost took down the whole US financial system. Lenders aren’t giving people subprime loans to buy houses much anymore. Instead, they’re giving subprime loans to people to buy cars… and to buy stuff on their credit cards.”

http://www.caseyresearch.com/articles/a-major-cause-of-the-financial-crisis-is-making-a-comeback

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Ravaged by Oil’s Collapse, Venezuela Now Has a Big Gold Problem

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“The South American country, which is trying to stave off a bond default in the wake of oil’s swoon, had 68 percent of its international reserves in bullion as of August, according to the World Gold Council. That’s a big worry because the price of the precious metal has tumbled 15 percent from this year’s high in January as the global slump in commodities deepened.  The decline threatens to erode reserves the cash-strapped country relies on to pay its foreign debt.  Venezuela’s dollar-denominated bonds have lost 19.2 percent in the past three months, the most in emerging markets, as the collapse in oil exacerbates concern the nation will run out of money to pay debt.”

http://www.bloomberg.com/news/articles/2015-08-10/ravaged-by-oil-s-collapse-venezuela-now-has-a-big-gold-problem

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China Devaluation Is Blow to Cash-Strapped Argentina’s Reserves

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“China’s devaluation couldn’t come at a worse time for Argentina.  About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.  The move is eroding the cash Argentina uses to pay its debt and comes as the nation is effectively shut out of overseas bond markets and struggling to defend its slumping peso at home. The country’s yuan holdings have ballooned since it signed an $11 billion currency-swap agreement with the People’s Bank of China in July.  In the unregulated market Argentines use to sidestep the government’s currency controls, the peso has sunk 12 percent in the past two months.”

http://www.bloomberg.com/news/articles/2015-08-13/china-devaluation-is-blow-to-cash-strapped-argentina-s-reserves

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Yahoo Files for Alibaba Spinoff, Though Tax Issues Linger

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“In the filing with the Securities and Exchange Commission, the Internet company warned shareholders that it might cancel the spinoff if federal tax authorities failed to provide written assurance in advance that the transaction will be tax-free to shareholders.  Yahoo’s 384 million shares of Alibaba are currently worth about $32 billion. The spinoff, announced in January, is intended to transfer the value of that stock to Yahoo’s shareholders without incurring the capital gains tax of more than $10 billion that would be due if Yahoo simply sold the stock and returned the cash to its shareholders.  The company’s stock has fallen as Wall Street worried that the deal might not pass muster with the I.R.S.“

http://www.nytimes.com/2015/07/18/business/dealbook/yahoo-files-for-alibaba-spinoff-though-tax-issues-linger.html

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Alibaba Revenue Misses Expectations; $4 Billion Stock Buyback Planned

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“A year ago, executives of the Chinese e-commerce company Alibaba were preparing a roadshow that paved the way for one of the biggest initial public offerings of stock in history.  Since then, the company’s situation has changed drastically. Alibaba is now grappling with an economic slowdown in China, which has been made more volatile by the devaluation this week of the country’s currency.  Investors who bought into Alibaba’s growth promise during the roadshow are also more skeptical — and less forgiving of any stumbles, especially as turbulence in China’s stock market spreads to Chinese companies listed in the United States.”

http://www.nytimes.com/2015/08/13/business/international/alibaba-q1-earnings-stock-buyback.html?_r=0

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The Yuan Drop Just Added $14 Billion to Asia Inc.’s Debt Burden

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“The record devaluation of the yuan has dragged down almost every currency in Asia. As they drop, the foreign debt bills of the region’s companies are rising.  Almost $1.6 trillion of bonds and loans denominated in dollars and euros across Asia outside Japan and China has just become $14 billion more expensive for companies that service the debt in their home currency, Bloomberg-compiled data show.  The cost to insure Malaysian government debt against nonpayment touched 171.5 basis points Wednesday, the highest since October 2011. Protection costs in Thailand, Indonesia, India and Vietnam also tested altitudes not seen in over a year.”

http://www.bloomberg.com/news/articles/2015-08-13/the-yuan-drop-just-added-14-billion-to-asia-inc-s-debt-burden

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China stuns financial markets by devaluing yuan for second day running

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“With the bank having said on Tuesday that that day’s action was a ‘one-off depreciation’, the rapid two-day drop in the value of the currency of about 4% dealt a blow to investors. They fear a prolonged currency war that could damage world trade should the US and Japan retaliate and drive down the value of the dollar and yen.  The prices of key industrial and construction metals – nickel, copper and aluminium – hit six-year lows.  The International Monetary Fund said China’s move to make the yuan more responsive to market forces appeared to be a welcome step and that Beijing should aim to achieve an effectively floating exchange rate within two to three years.”

http://www.theguardian.com/business/2015/aug/12/china-yuan-slips-again-after-devaluation

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One of the biggest Wall Street dealmakers sounds the alarm on M&A

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“Total M&A activity is also at the highest level since 2007, with global volumes at $2.9 trillion for the year to date, according to the data provider Dealogic. That is up around 38% on the same period last year.  Effron has been one of the biggest beneficiaries. He advised Kraft on its $58 billion merger with Heinz, and he is advising General Electric of its disposal of $200 billion of assets, according to Centerview’s website.  He added that the high valuations in the M&A wave were being justified in the context of today’s environment of low interest rates. That isn’t likely to last forever.”

http://www.businessinsider.com/blair-effron-on-mergers-and-acquisitions-activity-2015-8

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Australia and China work together to deport officials suspected of corruption

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“This April, the Central Anti-Corruption Coordination Group of the Central Commission for Discipline Inspection (CCDI) launched a new initiative called ‘Skynet’ to hunt down officials suspected of corruption and those accused of economic crimes that have fled overseas. Unlike the ‘Fox Hunt’ operation launched last year, which targeted fugitives hiding in Asia or Africa, the Skynet list directly targets people in Western countries. The US, Canada and New Zealand have 40, 26 and 11 fugitives respectively and Australia was the 4th popular hideout with 10 people.  Most of the officials and economic criminals on the run in Australia chose to live in big cities, like Sydney or Melbourne.”

http://www.globaltimes.cn/content/936535.shtml

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