Mar 02

Will Trump build a wall protecting US banks from global rules?

The battle lines are now drawn, and McHenry’s letter shows the arguments that will be deployed in Congress by some Republicans close to the president. There has always been a strand of thinking in Washington that dislikes foreign entanglements, in this and other areas. While Yellen’s arguments are correct, the Fed’s entitlement to participate in international negotiations does not oblige it to do so, and a new appointee might argue that it should not.

Such a reversal would generate tensions within the Fed, and where it would leave the FSB, or indeed the Basel Committee, is unclear. In the early days of the Bank for International Settlements (where the Basel Committee’s secretariat is located) in the 1930s, the US government declined to take a board seat, and the US was represented by JP Morgan. It is a little hard to see that arrangement working well today.

These questions are of more than passing interest in Europe. European capital adequacy directives typically transpose Basel accords into EU law. If the Basel process stalls, transatlantic deals, which are the crucial underpinning of western capital markets, will be far harder to reach.

Mar 02

Greece’s Latest Drama Imperils Banks’ Baby Steps Toward Recovery

Now, fresh tensions over the country’s bailout are putting that progress at risk. About 1.3 percent of deposits were pulled from the banks in January, while bad loans crept higher, an increase Bank of Greece Governor Yannis Stournaras blamed on borrowers using the deadlock with creditors as an excuse to avoid making their payments.

That said, the [banking recovery] plan hinges on a robust economy, said Mantzarvas. Almost half the reductions in non-performing mortgages and bad business loans are slated to come in the second half of 2019. The structure is designed to provide enough time for a recovery to lift the country’s fortunes. That could be a gamble given the fundamental weaknesses in Greece’s economy, which has shrunk by a quarter since 2008.

Moreover, if European officials and the IMF can’t reach an agreement with Athens, Greece may not receive a vital payment from the rescue package. That would be a severe blow for a country that still can’t borrow from bond markets at affordable rates. And the clock is ticking: Greece must pay about 6 billion euros in sovereign bond principal by July.

Mar 02

BCBG Max Azria Files for Bankruptcy as Retail Glitz Fades

“Like many other apparel and retail companies, BCBG has fallen victim in recent years to adverse macro trends, including a general shift away from brick-and-mortar to online retail channels, a shift in consumer demographics away from branded apparel,” Etlin said.

The company either will sell itself at a court-supervised auction proposed for May. If no acceptable bids come in, management will try to negotiate a debt-for-equity swap with junior lenders owed $289.4 million.

Some lenders have agreed to loan the company $45 million to help it get through bankruptcy. That loan must be approved by the judge in the case. BCBG owes lenders about $459 million.

Guggenheim Partners got involved in 2006 when it arranged a $200 million loan for BCBG. In 2015, Guggenheim affiliates took equity in exchange for reducing debt. Today, Azria and his wife hold only about 20 percent of BCBG’s common shares.

The Vernon, California-based chain once operated more than 570 boutiques worldwide, including more than 175 in the U.S. 

Here’s your reason for the “44-year low unemployment claims,” right here!

Mar 02

U.S. jobless claims near 44-year-low as labor market tightens

“Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973, the Labor Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications received than previously reported.” — How is this possible as GDP growth weakens? A: because the unemployment statistics reflect a shrinking labor force more than they reflect a healthy labor force…

Mar 02

Suspend visa-free EU travel for U.S. citizens, lawmakers say

United States citizens should be denied visa-free access to the European Union before summer because Washington does not allow some EU nationals to enter there without visa, EU lawmakers said in a vote on Thursday.

The European Parliament vote is set to put pressure on the European Commission, the EU’s executive, to enforce a one-year suspension as a tit-for-tat measure for Washington’s denial of visa-free access to citizens of Poland, Croatia, Cyprus, Romania and Bulgaria, all members of the 28-country block.

Mar 02

Trump’s Russia headache gets worse, as Sessions struggles to spin undisclosed meetings

“A handful of top Democrats, including Nancy Pelosi and Claire McCaskill, called for his resignation overnight. Others are expected to follow in the coming hours. Many more are clamoring for a special prosecutor, both to explore whether Sessions should be charged with perjury for making apparently false statements to Congress and more broadly to explore links between Trump campaign officials and Russia during the election. There is consensus among Democrats in both chambers that Sessions must, at the very least, immediately recuse himself from all Russia-related investigations to preserve the integrity of the Justice Department and the ongoing FBI investigation, something he has repeatedly resisted.” — Even having the appearance of perjury is bad for an AG. Sessions needs to go.

Mar 01

Peak Rent? Bubble Deflates in Costliest Cities, Soars Mid-Tier

Real estate is local — as demonstrated by this phenomenon of plunging rents in some markets and soaring rents in others. But the gap between a 15% annual jump in rent for a one-bedroom in New Orleans and the 11% plunge in New York [and 20%+ factoring in incentives] gets averaged away in the national numbers.

On a national level in February, the median asking rent for a one bedroom apartment declined 0.1% from January, but rose 2.1% year-over-year to $1,142, according to Zumper. The median two-bedroom rent declined 0.4% from January but rose 1.4% year-over-year to $1,353. These increases are down from the 3% to 5% range of increases common over the past few years.

So where will this go? In August last year, on my list of the top 12 markets, there were four cities with year-over-year declines in two-bedroom rents. Now there are nine. Given current trends, it is likely that Seattle and Southern California will see year-over-year rent declines later this year. It will turn the whole table red. And it will spread to other cities.

Mar 01

Euro Breakup Prospects Rattle Investors Once Again

With hotly contested general elections coming up in France, Germany, and Holland — where yet another upset could be on the cards — 2017 was always going to be a nail-biter for the Eurozone… And investors’ nerves are fraying. The spread between the 10-year yields of French government debt and German government debt has already widened from 0.28% in October to 0.81% today in anticipation of French elections, to be held in April.

five years [from Draghi’s pledge to “do whatever it takes”, most of the Eurozone’s existential problems remain unresolved, despite the ECB having frittered €3.7 trillion (or roughly 36% of Eurozone GDP) on keeping the leaking ship — and the region’s biggest banks — afloat.

Mark Blyth, a professor of political economy in the U.S. who was one of very few academics who correctly guessed three of the biggest political shocks of 2017, Brexit, Trumpism and the no-vote in Italy’s constitutional referendum, has warned that 2017 could even be the year that the euro ceases to exist…

Mar 01

So What Are We Going to Do with the Retail Malls?

In some cases, these locations can be redeveloped. Uber bought the art-deco Sears Building in Oakland and is remodeling it for its new headquarters. The buyer of Macy’s men’s store in San Francisco will redevelop it into something else. No problem. But closing thousands of stores at already struggling malls around the country, in an industry — brick-and-mortar retail — that will remain on a sharp downward curve, cannot be so easily dealt with. And it will dog investors in that space for years to come.

Moody’s yesterday warned that retailers have replaced oil & gas as the most distressed sector. Of the retailers it rates, 14% are rated Caa/Ca, which is in deep junk. At the worst point during the Financial Crisis, 16% were rated that low, and many buckled under their debts. It expects current retailers to beat that sad record over the next few years.

Deportation fusion centers, perhaps?

Mar 01

Did Gold Really Fall Over Trump’s Speech? – The Wall Street Examiner

The conventional wisdom contaminating the FT’s gold-Trump story is such that we’re compelled to respond and shoot it down…. we can foresee higher gold prices under both strong [i.e., Chinese devaluation and crash] and weak dollar [i.e., inflationary] scenarios. The result is the same — although the paths are different based on initial conditions… How about that? Gold’s already recovered most of those losses from yesterday that got the Financial Times all hot and bothered.”