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The Mortgage Bankers Association Lowers Expectations on New Home Sales

“The two-year-old U.S. housing recovery is faltering.

The Mortgage Bankers Association lowered its new and existing home sales forecast for 2014 to 5.28 million — a decrease of 4.1 percent that would be the first annual drop in four years. The industry group also cut its prediction on mortgage lending volume for purchases to $751 billion, an 8.7 percent decline and the first retreat in three years.

Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs.

The share of Americans who said they planned to buy a home in the next six months plunged to 4.9 percent last month from 7.4 percent at the end of 2013, the highest in records going back to 1964, according to the Conference Board, a research firm in New York.

“The big housing rally wiped itself out because prices increased too quickly for buyers to keep up,” said Richard Hastings, a consumer strategist at Global Hunter Securities LLC in Charlotte, North Carolina, who predicted the slowdown eight months ago. “The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said.

The best-qualified homebuyers jumped into the market last year to grab near-record low mortgage rates that averaged about 3.5 percent after delaying their moving plans during the housing slump, said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado.

Stagnant Wages

The median price of an existing home gained 11.5 percent last year, second only to 2005’s 12 percent increase, the highest on record, according to the National Association of Realtors. This year, price appreciation probably will slow to 5.6 percent, NAR said.

As prices climb, the ability of Americans with stagnant wages to buy homes wanes.

The median U.S. household income rose less than 1 percent in 2013, according to data from Sentier Research LLC in Annapolis, Maryland. In April, the median income was $52,959. When adjusted for inflation, that’s almost 6 percent lower than in June 2009, which marked the beginning of the economic recovery, said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics.

“Even though we’re technically in a recovery, household income is lower now than it was in the recession,” Green said. “It makes it a lot harder to buy a house.”

Changing Forecasts

Three major housing forecasters — MBA and government-run mortgage financiers Freddie Mac and Fannie Mae — began the year projecting an average home-sale gain of 10 percent in 2014.

In May, after monthly reductions in their estimates, Fannie Mae and MBA for the first time projected an annual decline, amounting to less than one percent.

Freddie Mac this week lowered its home sales 2014 forecast 1.8 percent to 5.4 million — which would be the first annual drop in four years. The company also cut its prediction on mortgage lending volume for purchases 1 percent to $751 billion, the first annual reduction in three years.

While home purchase applications have picked up recently…..”

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Study: Top Pay Equals Worst Performance

“Wave goodbye to the theory that top pay guarantees top performance. The highest-paid CEOs are also the worst performers, according to academic research cited by Forbes.

The study shows that CEOs who get paid huge amounts become overconfident and tend to think less critically about their decisions.

“They ignore dis-confirming information and just think that they’re right,” says one of the authors of the study, Michael Cooper of the University of Utah’s David Eccles School of Business.

Editor’s Note:
 5 Signs Stock Market Will Collapse in 2013

“The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance,” he tells Forbes.

Cooper and two professors, one at Purdue Universtity and the other at the University of Cambridge, studied data from 1,500 companies with the biggest market caps. They were surprised to find that the more CEOs got paid, the worse their companies did.

At the very top, the 5 percent of CEOs who were the highest paid turned in the worst company performance — 15 percent worse than the average. Broadening the view a bit, the top 10 percent of highest-paid CEOS turned in company performance’s that were 10 percent worse than the average.

The highest-paid CEOs apparently tend to think they can do no wrong, or they would not be entrusted with their position and their pay.

“That tends to result in over-investing — investing too much and investing in bad projects that don’t yield positive returns for investors,” Cooper explains.

The study finds that among the top-paid CEOs, 19 percent did mergers and those deals resulted in a negative performance of 1.38 percent during the following three years.

“The returns are almost three times lower for the high-paying firms than the low-paying firms,” Cooper argues. “This wasteful spending destroys shareholder value.”

The study also reveals….”

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The Military Industrial Complex Wins Again

“Recall a week ago we wrote “US Begins Delivering F-16s To Iraq This Week, A Decade After It Wiped Out Iraq’s Air Force” in which we said:

… the US will deliver the first of 36 F-16 fighter jets to Iraq in what Baghdad’s envoy to the United States called a “new chapter” in his country’s ability to defend its vast borders with Iran and other neighbors.

….the US earlier in March provided Iraq with some 100 Hellfire missiles as well as assault rifles and other ammunition. Then in April the US sent more arms, providing Iraq with 11 million rounds of ammunition and other supplies.

It is unknown how many of these have fallen into Al Qaeda/ISIS hands (we do know that at least one Iraqi Black Hawk chopper was captured during the rush for Mosul). What is known is that as PBS Frontline reported two weeks ago, while the administration has denied arming Syrian “rebels”, i.e. the same ISIS militants that have crossed the border and are now fighting in Iraq…

… the reality is that it has. From: “Obama Says Not Arming Syrian Rebels, Syrian Rebels Say He Is

… the Syrian rebels themselves say they are already armed and trained by US in the use of sophisticated weapons and fighting techniques, including, one rebel said, “how to finish off soldiers still alive after an ambush.” The interviews are the latest evidence that after more than three years of warfare, the United States has stepped up the provision of lethal aid to the rebels, as PBS notes “it appears the Obama administration is allowing select groups of rebels to receive US-made anti-tank missiles.”

The commander of the unit also told Ali that their American contacts had asked him to bring 80 to 90 members of his unit to Ankara for training.

One of the fighters said they received three weeks of training in how to conduct ambushes, conduct raids and use their weapons. They also said they received new uniforms and boots.

“They trained us to ambush regime or enemy vehicles and cut off the road,” said the fighter, who is identified only as “Hussein.” “They also trained us on how to attack a vehicle, raid it, retrieve information or weapons and munitions, and how to finish off soldiers still alive after an ambush.”

To summarize: the US was arming and training the same Al Qaeda/ISIS groups of Jihadists, that it concurrently gave Iraq weapons to fight…..”

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With Money Being So Cheap and Easy We Find $29.1Trillion in Market Investments, Held By….

“Another conspiracy “theory” becomes conspiracy “fact” as The FT reports a cluster of central banking investors has become major players on world equity markets.” The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which “could potentially contribute to overheated asset prices.” China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world’s banks try to diversify themselves and “counters the monopoly power of the dollar.” Which leaves us wondering where are the central bank 13Fs?

While most have assumed that this is likely, the recent exuberance in stocks….”

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Asset Forfeiture Coming to a Bank Near You

“Do you have a bank account that you don’t actively use or a safe deposit box that you have not checked on for a while?  If so, you might want to see if the government has grabbed your money.  This sounds absolutely crazy, but it is true.  All over the world, governments are shortening the time periods required before they can seize “dormant bank accounts” and “unclaimed property”.

For example, as you will read about below, just last year the government of Australia seized a whopping 360 million dollars from dormant bank accounts.  And this kind of thing is going on all over America as well.

In fact, all 50 states actually pay private contractors to locate bank accounts and unclaimed property that can be seized.  In some states, no effort will be made to contact you when your property is confiscated.  And in most states, the seized property permanently become the property of the state government after a certain waiting period has elapsed.  So please don’t put money or property into a bank somewhere and just let it sit there.  If you do, the government may come along and grab it right out from under your nose.

In this day and age, broke governments all over the globe are searching for “creative ways” to raise revenues…..”

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RealtyTrac: U.S. Forclosures Hit an 8 Year Low

“Foreclosure activity across the United States dropped toan eight-year low in May as banks reclaimed fewer homes and foreclosure startssaw their lowest levels in years, RealtyTrac said in a report on Tuesday.

RealtyTrac, which tracks and maintains housing market data, said 109,824 properties across the country were at some stage of the foreclosure process in May. That marked a 5 percent decline from April and left foreclosure activity—foreclosure notices, scheduled auctions and bank repossessions—26 percent below the year-ago level.

May was the 44th consecutive month foreclosure activity was down on an annual basis, a sign of the housing market’s steady progress toward recovery.

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“This is showing that foreclosures are fading further into the rear-view mirror …”

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Your Tax Dollars at Work

“In South Florida, one of the nation’s top privately-run Medicare insurance plans faces a federal investigation into allegations that it overbilled the government by exaggerating how sick some of its patients were.

In the Las Vegas area, private health care plans for seniors ran up more than $100 million in added Medicare charges after asserting patients they signed up also were much sicker than normal — a claim many experts have challenged.

In Rochester, New York, a Medicare plan was paid $41 million to treat people with serious diseases — even though the plan couldn’t prove the patients in fact had those diseases.

These health plans and hundreds of others are part of Medicare Advantage, a program created by Congress in 2003 to help stabilize health care spending on the elderly. But the plans have sharply driven up costs in many parts of the United States — larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are, an investigation by the Center for Public Integrity has found.

Dominated by private insurers, Medicare Advantage now covers nearly 16 million Americans at a cost expected to top $150 billion this year. Many seniors choose the managed-care Medicare Advantage option instead of the traditional government-run Medicare program because it fills gaps in coverage, can cost less in out-of-pocket expenses and offers extra benefits, such as dental and eye care.

But billions of tax dollars are misspent every year through billing errors linked to a payment tool called a “risk score,” which is supposed to pay Medicare Advantage plans higher rates for sicker patients and less for those in good health.

Government officials have struggled for years to halt health plans from running up patient risk scores and, in many cases, wresting higher Medicare payments than they deserve, records show.

The Center’s findings are based on an analysis of Medicare Advantage enrollment data from 2007 through 2011, as well as thousands of pages of government audits, research papers and other documents.

Federal officials who run the Medicare program repeatedly refused to be interviewed or answer written questions.

Among the findings….”

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US Corporations Dump Dollar for Chinese Renmindi to Buy Imports

“The U.S. dollar is being increasingly dropped as the currency for settling international trade. But perhaps the latest trend provides the most startling evidence yet that the dollar is doomed as the world reserve currency.

The Financial Times reported today that U.S. corporations are using the Chinese renmindi to buy imports over three times more than they had the previous year:

China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.

The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago (see chart) as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm.

First, US importers can slash the cost of imports from China by agreeing to trade in renminbi rather than US dollars, Lodge said. Second, a recent surge in the popularity of a host of renminbi-denominated financial market instruments are making it easier for US corporates both to hedge currency risk and to earn an investment return from the renminbi they hold.


U.S. corporations are just following the global trend where the largest economies in the world are jumping from the dollar Titanic. Last April, the world’s 12th-ranked economy joined a growing list of nations that have agreed to bypass the dollar in bilateral trade with China. China, ranked 2nd behind the U.S., also has similar agreements with Japan (3rd), Brazil (6th), India (9th), and Russia (10th).

Further, the BRICS nations appear ready to shake up the ‘world order’ with the deployment of their own development bank as reported today by Al Jazeera:

After more than six decades of dictating development policy in much of the emerging world, the Western-led International Monetary Fund and World Bank may soon have some competition.

The BRICS nations — Brazil, Russia, India, China and South Africa — are reportedly close to finalizing their long-awaited development bank and currency reserve, each valued at $100 billion, in what has been billed as a historic challenge by the world’s emerging economies to a global financial architecture that has been dominated by the U.S. and Western Europe since its post–World War II inception.

The IMF and World Bank also appear to be pushing for a global economic “reset”. “We need to push the reset button. The world is still much too much caught in a crisis-management mode,” said Klaus Schwab founder of the World Economic Forum earlier this year.

A sentiment echoed by IMF head Christine LeGarde during the same event….”

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Euro Inflation Slows Tripping Up Chances of Bazooka Style Liquidity

Euro-area inflation slowed more than economists forecast in May, cranking up pressure on the European Central Bankto deploy measures as soon as this week to kindle prices and drive growth.

The rate fell to 0.5 percent from 0.7 percent in April, the European Union’s statistics office in Luxembourg said today. Themedian forecast in a Bloomberg News survey of 38 economists was for a decline to 0.6 percent. The rate has been less than half the ECB’s target for eight months.

With ECB President Mario Draghiwarning about the risk of a negative price spiral, the Governing Council is considering measures from negative interest rates to conditional liquidity for banks. The central bank is also contending with high unemployment, which unexpectedly decreased in April while remaining near a record, a separate Eurostat report showed.

“It’s a surprise, but not enough of a surprise to change materially the global economic outlook that the ECB will release on Thursday,” said Michel Martinez, an economist at Societe Generale SA in Paris. “What seems highly likely is that the ECB will cut key rates and probably also inject further liquidity.”

The euro erased losses against the dollar after today’s date were released, trading at $1.3610 at 12:14 p.m. in Brussels, up 0.1 percent on the day.

Of 50 economists surveyed by Bloomberg News, 44 expect the Frankfurt-based ECB to become the first major central bank to take interest rates into negative territory by cutting its deposit rate. All but 2 of 60 respondents said the benchmark rate would also be reduced.

‘Ready to Act’

The ECB has prepared investors for the prospect of stimulus ….”

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Study: Half of All US Adults Hacked in the Last 12 Months

“Online computer hackers have infiltrated and exposed the personal information of 110 million Americans – nearly half of the US adult population – over the last year alone, according to an alarming new report.

The study – formulated by researchers at the Ponemon Institute, which measures data collection and information security in the public and private sectors – also determined that the number of hacked accounts belonging to those individuals numbered at or near 432 million.

Many of the people victimized may have inadvertently made available to hackers their names, debit or credit card information, email addresses, phone numbers, birth dates, passwords, security questions, and possibly their physical home addresses, according to CNN Money, which commissioned the study.

The news that so many people have been hacked comes on the heels of a series of vast security flubs at popular companies like Target and eBay. Target was the victim of a malware attack that compromised no less than 40 million credit card numbers (along with 70 million addresses, phone numbers, and other identifying materials) through the height of the holiday shopping season.

Snapchat admitted that five million user accounts were hacked, and 33 million Adobe users’ credentials were also taken …..”

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Barclays Fined for Manipulating the Price of Au for Over a Decade

“It was almost inevitable: a week after we wrote “From Rothschild To Koch Industries: Meet The People Who “Fix” The Price Of Gold” and days after “Barclays’ Head Of Gold Trading, And Gold “Fixer”, Is Leaving The Bank“, earlier today the UK Financial Conduct Authority finally formalized what most in the “tin-foil” hat community had known for years, when it announced that it fined Barclays £26 million for manipulating “the setting of the price of gold in order to avoid paying out on a client order.” Furthermore, the FCA confirmed that those inexplicable gold raids which come as if out of nowhere, and slam gold with a vicious force so strong sometime they halt the entire market, had a very specific source: Barclays, whose trader “Daniel James Plunkett, sent out a burst of orders aimed at moving the price of the yellow metal.”

This took place for a decade. As the FT reports:…”

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Intense Fighting Flares in Eastern Ukraine

“Pro-Russian separatist fighters in eastern Ukraine mounted four simultaneous attacks against government forces Wednesday night and early Thursday morning, officials in Kiev said. The violence comes just days before presidential elections that separatists have vowed to block.

The attacks resulted in some of the highest number of casualties since the conflict began, officials said. The overall death toll in the latest fighting wasn’t immediately available but Ukraine’s Defense Ministry said eight servicemen were killed in one of the battles.

“Today a major operation was prepared on all fronts and it was repulsed,” Andriy Parubiy, secretary of Ukraine’s National Security and Defense Council, told a briefing in Kiev, according to the Interfax news agency. He said the separatists are expected to increase their attacks in the days ahead of Sunday’s presidential elections.

In a separate briefing, Prime Minister Arseniy Yatsenyuk said Kiev is calling for an emergency meeting of the United Nations Security Council to address what he said were efforts by Russia to “escalate the conflict” and sabotage the elections. A Russian Foreign Ministry spokesman dismissed the allegations as “groundless.”

Previous such sessions have had little effect because Russia holds a veto in the Security Council.

Russia, however, has taken a softer tone as the election approaches, saying this weekthat it was pulling its troops back from the border. The White House and the North Atlantic Treaty Organization have been skeptical of the claim, but the military alliance’s civilian head said Thursday there were signs Russian forces were preparing to withdraw.

In remarks to the press in Montenegro that were released by NATO, Anders Fogh Rasmussen said: “It is too early to say what this means, but I hope this is the start of a full and genuine withdrawal.”

Separatists confirmed fighting on several fronts. In the breakaway Luhansk People’s Republic, one of the two regions where separatists have declared independence, the self-styled “people’s governor” declared martial law starting Thursday morning as a result of heavy fighting around the city of Lisichansk. It wasn’t clear what the declaration meant in practice, however.

Separatists near Luhansk blew up a bridge over the Siverskiy Donets river near Novodruzhesk in several hours of fighting, Interfax reported Thursday, citing local witnesses.

In the eastern part of Donetsk, the other of the two regions where separatists have declared independence from Ukraine, there were reports of another battle near the border with the Luhansk region.

Ukraine’s Defense Ministry said eight servicemen were killed near Volnovakha, on the road from the regional capital, Donetsk, to Mariupol, where there hadn’t been heavy separatist fighting before….”

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Jobless Claims Spike Above 300k

“The number of Americans filing new claims for unemployment benefits rose last week but stayed close to a seven-year low and pointed to ongoing healing in the labor market.

Initial claims for state unemployment benefits rose 28,000 to 326,000 for the week ended May 17, the Labor Department said on Thursday.

The prior week saw the lowest reading since May 2007 and brought claims back to a level last seen before the deep 2007-09 recession. Economists say the cumulative reduction in new claims could point to stronger hiring, although one metric in Thursday’s report cast a shadow over the upcoming monthly employment report for May.

Thursday’s data falls within the survey week for the employment report’s gauge of hiring in the economy, and the four-week moving average of new jobless claims rose about 3 percent from the corresponding week in April.

That might point to a weaker pace of job creation this month…”

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Wall Street Gambles on Debt Ridden LBOs

Wall Street banks are financing more private-equity takeovers with high levels of debt, despite warnings by regulators to reduce the amount of risky loans they make.

“The Federal Reserve and the Office of the Comptroller of the Currency last year issued guidance urging banks to avoid financing leveraged buyouts in most industries that would put debt on a company of more than six times its earnings before interest, taxes, depreciation and amortization, or Ebitda. The Fed and the OCC also told banks to limit borrowing agreements that stretch out payment timelines or don’t contain lender protections known as covenants.

Still, 40% of U.S. private-equity deals this year have used leverage above that six-times ratio deemed the upper acceptable limit by regulators, according to data compiled by S&P Capital IQ LCD. That is the highest percentage since the prefinancial-crisis peak of 52% of buyout loans in 2007. Such lending all but disappeared during the crisis but has risen each year since 2009.

In recent months, bank regulators have impressed upon banks that they aren’t happy with the amount of loans fueling buyouts, in which private-equity firms borrow money to buy companies with the intention of later selling them for a profit.


When a private equity firm buys a company, it typically borrows money to help fund the purchase that goes on the acquired company’s books. If the company runs into trouble, paying that debt can prove difficult, and investors in the debt can suffer.

The guidance is designed to deter banks from funding deals that regulators feel are too laden with debt, as companies with higher debt ratios are considered more likely to run into financial trouble.

These loans, provided by a group of banks, are often sold to a wider group of lenders and investors. Regulators are concerned that in the event of a financial downturn and diminished demand from investors, banks may find themselves stuck with large pipelines of risky debt.

The Fed and OCC, which issued the guidance in conjunction with the Federal Deposit Insurance Corp., declined to elaborate beyond previous statements. The agencies have said they share the same goal of ensuring proper risk management and are coordinating closely to implement the leveraged-lending guidance.

Leveraged-finance bankers have complained that the guidance isn’t clear, and adherence to the guidelines hasn’t been uniform, which some in the industry attribute to the Fed and OCC applying them inconsistently and to confusion around what exactly is allowed under the new policy.

The OCC has articulated a “no exceptions” policy, while the Fed has told the banks it oversees on this issue that they may participate in a small number of the leveraged-buyout deals that stray from the guidance, according to a person familiar with the matter….”

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Vladimir Putin to the EU: How Do You Like Me Now Biatch

“Beijing and Moscow said they signed a much-anticipated contract to supply China with hundreds of billions of dollars worth of Russian natural gas following a decade of difficult talks.

Neither side released details about the price, long the major sticking point of a deal. The two sides in the past have announced supply deals but said a final price would be negotiated later.

Gazprom OGZPY -1.73% CEO Alexei Miller told Russian media that the two sides had signed a contract worth a total of $400 billion over its 30-year life. “This is Gazprom’s biggest contract. We don’t have a contract like this with any other company,” Mr. Miller told reporters in Shanghai, the Interfax news agency reported.

Russian news agencies said the contract called for supplies of 38 billion cubic meters of gas a year, which would imply a price of about $350 per thousand cubic meters, at the low end of what Gazprom currently charges export clients.

Mr. Miller said the price in the China deal “is a commercial secret,” Russian news agencies reported.

China’s official Xinhua news agency said documents related to the deal were signed in Shanghai by Chinese President Xi Jinping and Russian President Vladimir Putin, who had made the multibillion-dollar deal the top item of his two-day visit there.

China National Petroleum Corp. said Gazprom would be responsible for developing natural gas supplies in eastern Siberia, while CNPC would develop transport and storage facilities within China’s borders.

A deal would allow Gazprom to make a strategic shift toward Asia, just as the European Union is seeking to extricate itself from Moscow’s energy grip….”

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