Monthly Archives: January 2016

‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

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“Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.”

http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html

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Zimbabwe adopts Chinese yuan as legal tender

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“As China slowly began to enter African markets, it sought out countries overlooked or shunned by Western investors: Zimbabwe fit the bill perfectly. Beijing sought to court Zimbabwe with the deep pockets of state run companies, and shadowy investors such as Sam Pa (a man with seven known names and ties to the Chinese intelligence service.)  China is now Zimbabwe’s largest trading partner, purchasing 27.8% of the country’s exports. Moreover, bilateral trade has grown from $500 million in 2010 to $1.24 billion in 2014, with Beijing having provided Zimbabwe with $1 billion in low-interest loans since 2010.”

http://globalriskinsights.com/2016/01/zimbabwe-adopts-yuan-as-legal-tender/

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China halts stock market again after CSI 300 plunges more than 7%

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“China’s stocks were suspended from all trade on Thursday after the CSI300 tumbled more than 7 percent in early trade, triggering the market’s circuit breaker for a second time this week.  That drop-kicked stock markets across Asia, which were already wallowing after a weaker open amid concerns over China’s swooning currency and economic slowdown as well as falling oil prices.  China’s securities regulator also issued new rules to restrict the percentage of shares major shareholders in listed companies can sell every three months, in an attempt to stabilize markets. Shareholders are not allowed to sell more than 1 percent of a company’s share in that period.”

http://www.cnbc.com/2016/01/06/china-slowdown-low-oil-prices-and-north-korea-h-bomb-weigh-on-asian-stock-markets.html

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Is ‘Peak Auto’ the Latest Threat to the Markets?

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“More than 19% of today’s loans are going to subprime or ‘deep subprime’ borrowers — and total volume for lower credit score borrowers is just shy of its 2005 record.  Indeed, lenders are basically giving loans to anyone with a pulse. The New York Fed recently found that application rejection rates have dropped to 3.3% from more than 10% a few years ago. The average loan now stretches out to a record 67 months, while 27% of U.S. loans sport terms of six to seven years. That’s because buyers can’t afford their monthly payments any other way. Bottom line: If you own auto stocks or stocks leveraged to the auto industry, sell them.”

http://www.moneyandmarkets.com/peak-auto-latest-threat-markets-75131

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US auto loans hit $1 trillion for first time

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“The loan balances have been driven up by a combination of three factors — strong car sales, rising car prices and low interest rates.  Interest rates are low. Borrowers with top credit scores can get loans for less than 3%.  But the amount owed is up 11%, a sign of the increase in the size of car loans due to rising prices.  The average amount borrowed is about $21,700, and buyers owe nearly $18,000 on average. The average new car purchase price now stands at $32,529, according to sales tracker TrueCar. The average car loan balance is rising faster than it is for mortgage loans, according to TransUnion.  The average payment now stands at just under $400 a month.”

http://money.cnn.com/2015/11/16/autos/car-loans-trillion-dollars/

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Luxury home prices finally getting too high?

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“The tables have turned in the real estate industry as luxury listing prices fell for the first time since 2012, according to a Redfin report. The brokerage firm suggests that the drop in prices stems from wealthy buyers and foreign investors refusing to buy at the top of the market.  Prices for luxury homes fell by 2.2 percent in the third quarter, compared to a year ago, according to the report.  While many market watchers feared that the Fed raising interest rates may increase mortgage prices further, White said: ‘A lot of our transactions are all cash, and even the slight short-term interest increase really doesn’t affect the mortgage rates in a significant way.'”

http://www.cnbc.com/2015/12/29/luxury-home-prices-finally-getting-too-high.html

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Where Rich Chinese Stash Their Cash: America’s Hotels and Strip Malls

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“While wealthy Chinese home buyers have pulled back on U.S. purchases in recent months amid the market turmoil at home, investors looking for commercial property have kept buying aggressively, brokers said. Many have centered on unlikely investments such as small office buildings, chain hotels and other nondescript properties in and around big U.S. cities, seizing an opportunity to place greater sums of money outside their government’s reach.  China’s middle-class families, meanwhile, have received attention for their purchases of individual homes and condo units in U.S. cities. Those transactions could be cooling, too, as Beijing tries to keep money from exiting the country.”

http://www.wsj.com/articles/where-rich-chinese-are-stashing-their-cash-americas-hotels-and-strip-malls-1449556200

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HK property developers push HK$1.3 billion in home loans to buyers

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“Facing fierce competition amid a tightening of mortgage policies, a growing number of developers have been skirting bank regulations by providing home loans of up to 95 per cent of the purchase price through wholly owned financial institutions to lure buyers. They began offering mortgage loans after the maximum loan-to-value (LTV) ratio for bank mortgages for self-use residential properties with a value below HK$7 million was lowered from 70 per cent to 60 per cent in February last year. That meant home buyers needed to make a 40 per cent initial down payment, up from 30 per cent, when purchasing an apartment.”

http://www.scmp.com/property/hong-kong-china/article/1897925/developers-saddled-hk13-billion-mortgage-receivables

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Once China’s richest person, Hanergy’s Li Hejun sells shares at 95pc discount

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“Beleaguered Hanergy Thin Film Power chairman Li Hejun has agreed to sell HK$537 million worth of the firm’s shares at a 94.5 per cent discount as the firm struggles amid a regulatory probe.  The company’s shares are traded on the stock exchange in Hong Kong dollars. They last traded at HK$3.91 on May 21, when trading was abruptly halted on the firm’s request after they plunged 47 per cent in about an hour.  The SFC in June demanded from Hanergy audited financial statements of its parent Hanergy Holding for the past four years and detailed terms of outstanding loans taken out by Li.  But Hanergy said it could not meet the SFC’s request for financial statements.”

http://www.scmp.com/business/companies/article/1895893/once-chinas-richest-person-now-troubled-hanergy-chairman-li-hejun

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China slaps cap on overseas UnionPay cash withdrawals

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“The gatekeeper of China’s foreign exchange has moved to plug a loophole in the capital account by capping the value of overseas withdrawals on bank cards, amid rising concerns over capital outflows and illicit money transfers.  The State Administration of Foreign Exchange has slapped an annual cap on overseas cash withdrawals for UnionPay cardholders at 100,000 yuan or its equivalent per card.  SAFE requires banks to add accounts that exceed the cap to a watch-list and forbid further cash withdrawals outside of China.  Still, the withdrawal cap did not address another obvious escape route, the number of cards for which an individual can apply.”

http://www.scmp.com/business/banking-finance/article/1862570/chinas-safe-slaps-cap-overseas-unionpay-cash-withdrawal

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