Implode Explode

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Tracking the many faces of the global credit implosion.
Updated: 27 min 11 sec ago

Trump Floated Post-2007 By Secretive, High Money Laundering-Risk Condo Purchases

Sun, 01/14/2018 - 12:45
More than one-fifth of Donald Trump's US condominiums have been purchased since the 1980s in secretive, all-cash transactions that enable buyers to avoid legal scrutiny by shielding their finances and identities, a BuzzFeed News investigation has found.

Records show that more than 1,300 Trump condominiums were bought not by people but by shell companies, and that the purchases were made without a mortgage, avoiding inquiries from lenders.

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Treasury's financial-crimes unit has, in recent years, launched investigations around the country into all-cash shell-company real-estate purchases amid concerns that some such sales may involve money laundering. The agency is considering requiring real-estate professionals to adopt anti-money-laundering programs.

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The surge was driven by the opening of 11 Trump condo buildings between 2008 and 2010 as Trump shifted his real-estate business from developing high-rises to licensing them. Nine were Trump-licensed, and they drew hundreds of shell companies that paid an average of $1.2 million in cash for a condo. In six of the licensed buildings, cash-paying shell companies bought at least a third of the condos, records show.

It's not clear how much Trump received from the sale of Trump-licensed condos, but when Trump announced his candidacy in 2015, he said his "real estate licensing deals" and other brands were worth $3.3 billion.

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Eighty-three percent of the secretive sales occurred in markets that FinCEN is investigating for possible money laundering in real estate sales. In those markets -- Manhattan, South Florida, and Honolulu -- FinCEN is examining every luxury-home sale to a shell company that paid cash.

At least 28 shell companies resold their Trump properties within six months of buying them in cash. The National Association of Realtors says that immediate resales can indicate money laundering, "especially if the resale price is significantly higher or lower than the original purchase price."

At the Trump SoHo Hotel Condominium New York in Manhattan, 77% of the sales were to shell companies that paid cash. One of the project's Russia-born developers was convicted of money laundering in the 1990s. A pending lawsuit calls Trump SoHo a "monument to spectacularly corrupt money-laundering and tax evasion," though it says in a footnote that "there is no evidence that Trump took any part in, or knew of, their racketeering."

SEC Now Investigating Kushner's Use of "Cash for Visas" Program (EB-5)

Sun, 01/07/2018 - 10:16
The Securities and Exchange Commission sent the Kushner Companies a subpoena asking for information about the firm's petitions for EB-5 visas, which allow wealthy foreign nationals to obtain green cards if they invest in job-creating projects in the U.S.

The subpoena, which had not been previously disclosed, was sent in May 2017, The Wall Street Journal reported Saturday, citing people familiar with the matter.

Kushner Cos. makes frequent use of the EB-5 program to raise investment capital for its real estate development projects. The company came under scrutiny last year when it was reported that Jared Kushner's sister, Nicole Kushner Meyer, was using the family's connection to the White House in presentations to Chinese investors. In her presentation, Meyer suggested the company was in a position to guarantee approval of the EB-5 applications because Trump was a "key decision maker" in the process.''

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The program is also susceptible to massive fraud schemes. In several cases in recent years, U.S.-based real estate developers have collected hundreds of millions of dollars from unsuspecting foreigners for projects that never materialize or were outright fabrications from the start.

Chinese investors dominate the EB-5 program -- roughly two-thirds of the 10,000 investors visas issued in 2016 were given to Chinese nationals.

Canada's insane housing bubble is just starting to burst with home values dropping for the first time since Q1 2009

Wed, 01/03/2018 - 10:42
``The Canadian housing bubble is massive because when US real estate values were correcting and the market was being flushed, prices in Canada simply kept on climbing higher oblivious to what was going on in the south.  The excuse was "hey, we didn't have NINJA loans so we are good!" but this is nonsense.  As we noted, out of the over 7 million US foreclosures most happened on plain vanilla 30-year fixed rate mortgages.  The wild loans were simply the tip of the iceberg... The end result is that you have a nation with massively indebted people. The entire pyramid is built on ever growing housing values. And values are so out of sync that even a minor correction is set to topple this weak foundation. Are prices falling? Oh yes they are...''

Zillow: As Rents Rise, More Renters Turn to Doubling Up

Sat, 12/30/2017 - 11:17
``30 percent of working-age adults--aged 23 to 65--live in doubled-up households, up from a low of 21 percent in 2005 and 23 percent in 1990... There is... evidence that doubling up is motivated by affordability concerns. The median individual income of an employed adult in a doubled-up household is $30,000, compared to the $45,000 earned by their non-doubled-up counterpart. In other words, adults living with roommates or family members earn 67 cents for every dollar made by adults who live on their own (or with a partner). This suggests that in many places, employed people who currently live in doubled-up households would not be able to afford rent if they lived by themselves.''

Zillow: U.S. homes gained $2 trillion in value this year

Thu, 12/28/2017 - 15:42
``The value of the entire U.S. housing stock increased by 6.5 percent -- or $2 trillion -- in 2017, according to a report from Zillow. All homes in the country are now worth a cumulative $31.8 trillion. The gain in home values was the fastest since 2013, when real estate was in the early stages of its recovery from the recession. Yet it still trails the surge in other assets, with the S&P 500 Index up about 19 percent, and bitcoin increasing exponentially.''

California renters will come out ahead with new tax plan while homeowners will see a higher tax bill

Tue, 12/26/2017 - 20:58
`` Every tax bill that comes out seems to favor homeowners.  In fact, I haven't seen one that hasn't favored homeownership.  But the way the tax bill is setup, crap shack owners are going to actually have to pay more and renters are going to benefit nicely from the much larger standard deduction.  We are now seeing some scenarios where this is playing out.''

China Tightens Overseas Investment To Reduce Risks

Tue, 12/26/2017 - 09:47
China has followed up earlier restrictions on outbound investment with new regulations on foreign investment by private firms. The 36-point code of conduct for private firms seeks to ensure that overseas deals are rational and legal. This is part of an effort to regulate outbound investment, which had been strongly encouraged between 2012 and 2016, in order to reduce risks.

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Outbound investment reached $170 billion in 2016, but was curtailed at the end of 2016 as yuan depreciation pressures mounted. At that time, authorities cracked down upon companies with fraudulent or "irrational" foreign investment. In addition, this past August, specific categories were created to specify banned, restricted, and encouraged overseas investment industries for mergers and acquisitions. As a result, this year saw a decline in the value of outbound direct investment, dropping 42% year-on-year in the first three quarters of this year. The new measures imposed on private firms will further reduce capital outflows and debt used to finance overseas deals.

When Trump forbade a Christmas tree -- and other forgotten stories from the ‘war on Christmas'

Mon, 12/25/2017 - 22:36
In the 1980s, his political rise still decades away, Trump bought an old apartment building across the street from Central Park in New York that he hoped to tear down and rebuild as a high-rent tower.

When the longtime residents wouldn't move out voluntarily, the New York Times wrote, Trump hired a management company that essentially ran the building into the ground.

And while Trump threatened to house homeless people in the building, the management company used creative tactics that included covering windows in tin and forbidding Christmas decorations in the lobby.

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Bill O'Reilly aired an exposé in 2004 on how the generic word "holiday" was supplanting traditional "Christmas" language. It would be even longer before Trump demonstrated any real concern about the distinction... While Trump continued wishing "happy holidays" for years, his first use of the word "Christmas" on Twitter appears to have been in 2011 -- shortly after he expressed interest in running for president.

As Bill Murray says in "Scrooged" when transported by the Ghost of Christmas Present to a sub-terranean NYC gutter: "Where are we, Trump Tower?" (classic!)

New York's vanishing shops and storefronts: 'It's not Amazon, it's rent'

Mon, 12/25/2017 - 09:54
"It's not Amazon, it's rent," says Jeremiah Moss, author of the website and book Vanishing New York. "Over the decades, small businesses weathered the New York of the 70s with it near-bankruptcy and high crime. Businesses could survive the internet, but they need a reasonable rent to do that."

Part of the problem is the changing make-up of New York landlords. Many are no longer mom-and-pop operations, but institutional investors and hedge funds that are unwilling to drop rents to match retail conditions. "They are running small businesses out of the city and replacing them with chain stores and temporary luxury businesses," says Moss.

In addition, he says, banks will devalue a property if it's occupied by a small business, and increase it for a chain store. "There's benefit to waiting for chain stores. If you are a hedge fund manager running a portfolio you leave it empty and take a write-off."

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But there are glimmers of turn-around. Zendell has observed five deals in SoHo in the past month, indicating that landlords are becoming too nervous to sit around. "They helped to create the bubble, but now it's our market."

Renters insist landlords have an investment in the game, either through taking a performance-based interest in the tenant or some other mechanism. Retailers that signed 10-year leases at a high number per sq ft and then had to pay to get out of that lease are insisting on some participation.

Doug Noland: Epic Stimulus Overload

Sat, 12/23/2017 - 11:57
Between tax legislation and cryptocurrencies, there's been little interest in much else. As for tax cuts, it's an inopportune juncture in the cycle for aggressive fiscal stimulus. And for major corporate tax reduction more specifically, with boom-time earnings and the loosest Credit conditions imaginable, it's Epic Stimulus Overload. History will look back at this week - ebullient Republicans sharing the podium and cryptocurrency/blockchain trading madness - and ponder how things got so crazy.

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U.S. and global growth surprised on the upside in 2017, explained by monetary conditions that somehow became only more extraordinarily loose. The Fed, with its dovish approach to three baby-step hikes, failed to tighten conditions. Led by the Bank of Japan and the European Central Bank, it was another year of massive global QE. Meanwhile, Chinese "tightening" measures couldn't restrain record Credit growth. At the "periphery," EM were the recipients of huge financial flows, spurring domestic Credit systems and economies around the globe. It's been a huge year for Credit on a global scale.

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President Trump is now wedded to the U.S. Bubble. President Xi Jinping is wedded to the Chinese Bubble. I've posited a global "Arms Race in Bubbles." With Trump in charge and the Republicans now pushing through aggressive stimulus, perhaps Chinese officials are rethinking the geopolitical risks associated with efforts to rein in their Bubble excess.

Existing Home Sales Post Largest Gains Since 2015

Thu, 12/21/2017 - 09:29
``Sales of existing single-family homes, townhomes, condos, and cooperative apartments were at a seasonally adjusted annual rate of 5.81 million, up from a revised (from 5.48 million) 5.50 million sales in October. The increase brought sales to a level 3.8 percent higher than in November 2015, and the highest since December 2006... Sales were strong in every region but the West.'' -- Well, we guess this must mean that happy times are here again...

The Tax Bill's Impact on Fannie/Freddie:Possibly $14 bln Write-Down

Wed, 12/20/2017 - 16:14
``The Wall Street Journal reports that the Republican tax plan could trigger a roughly $14 billion accounting loss at Fannie Mae and Freddie Mac, leading to the first taxpayer-funded infusion since they became profitable firms in 2012. "At issue is an accounting change tied to lower corporate tax rates in the legislation, which requires the companies to recognize losses on around $45 billion in tax-deferred assets they hold. The decline in the tax rate to 21% from 35% will require the companies to write down the value of those assets, resulting in losses to the companies. Since they have little capital and must sweep their profits to the Treasury, they will likely need a new, one-time infusion from government coffers.''

The Kushners' New York City Buildings Are Mostly Owned By Others (HEY, BIG PRETENDERS!)

Tue, 12/19/2017 - 15:09
When Kushner Cos. joined Normandy Real Estate Partners to buy a 40-percent stake in two Manhattan office properties three years ago, most reports of the purchase gave Kushner top billing.

"Kushner, Normandy pick up downtown tech haven," declared the New York Post. Forbes estimated Kushner's stake in the buildings at 80-90 Maiden Lane to be $75 million, indicating about one-third of the property.

Early this year, the pair sold half their stake to Meadow Partners in a deal that hasn't been previously reported. The property tours and e-mail exchanges finalizing the transaction involved no Kushner representatives. The reason is simple: The Kushners actually owned less than 2 percent of the buildings.

A public appearance of big stakes, often at odds with a more modest reality, turns out to be typical of the Kushner portfolio, according to a Bloomberg analysis based on loan documents, agency ratings, deeds filed with New York and interviews with eight people familiar with the deals who asked not to be identified discussing private transactions.

Kushner Cos. has a stake in more than 60 buildings in New York City, including Greenwich Village apartments and tony Brooklyn offices. In 60 percent of the properties, the Kushners own less than half of each, the analysis shows. In nearly half, they own less than 20 percent. In some high-profile cases, such as Brooklyn's Watchtower Building, their ownership is in the single digits.

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There's nothing unusual about being a minority partner that manages or develops properties for others. But Kushner Cos. often projects a different image. On its website, for example, the company lists 80 and 90 Maiden Lane as a "key asset" despite its tiny, non-controlling share.

Typical of the Trump-Kushner clan... "would you like a side of reality with your heaping serving of hype? Wait, we're all out of reality..."

U.S. Homebuilder Sentiment Hits 18-Year High, Beating Forecasts

Mon, 12/18/2017 - 09:45
``The surprisingly strong reading shows developers expect demand to advance amid steady economic growth and a tightening job market. Mortgage rates remain close to record lows, making borrowing attractive for prospective buyers, while the homebuilders also cited easier regulation under President Donald Trump as helping the housing market.'' -- This is pretty much insane (especially in view of the pending tax bill); seems peaky to us...

Homeowners Have Had It Good. Too Good, Says the Tax Bill.

Sun, 12/17/2017 - 18:01
Today, a little under half of American homes are worth enough to justify itemizing mortgage interest and property taxes. Under the tax legislation, that figure would fall to close to 14 percent, according to an analysis of the plan by the online real estate marketplace Zillow.

The Republican plan, in short, is tinkering with subsidies so entrenched in the social fabric that they have become entitlements in all but name.

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All this has made homeowner subsidies, in particular the mortgage interest deduction, one of the rare tax breaks with critics across the political spectrum. Matthew Desmond, a Princeton sociologist who studies how eviction wreaks havoc on the lives on the poor, has documented how the deduction became the "engine of American inequality" because it favors higher-income homeowners.

Edward J. Pinto, co-director of the conservative American Enterprise Institute's Center for Housing Markets and Finance, has described the interest deduction and other homeowner subsidies as a wasteful giveaway that inflates home prices and encourages people to borrow excessively.

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The bill does retain significant subsidies, allowing home buyers to deduct interest on mortgages as high as $750,000 -- accounting for the vast majority -- and up to $10,000 total in property taxes and state and local income taxes. But real estate agents have portrayed the changes as a full-blown attack on their industry.

Glut of New Manhattan Luxury Apartments Masks Rent Decline

Thu, 12/14/2017 - 15:49
Rent-free months, price cuts, gift cards, gym memberships. Manhattan's apartment landlords have been offering all sorts of enticements month after month, hoping to lure renters to their units amid a surge of new supply.

So why hasn't the median rent declined? Blame all those fancy units in just-built towers with swimming pools and yoga rooms, where rents are so far above the rest of the market that they're keeping the overall rate elevated -- even when the properties lease at a discount.

NYC Townhouse in Contract for a Record $80 Million (DOWN FROM $114M!)

Mon, 12/11/2017 - 09:20
A roughly 20,000-square-foot mansion with its own red velvet movie theater and panic room is in contract for about $80 million, according to people with knowledge of the deal.

If it closes for that price, the property would become the most expensive townhouse ever sold in New York City, according to appraiser Jonathan Miller. The current record was set in 2006, when financier J. Christopher Flowers paid $53 million for the Harkness mansion on East 75th Street, Mr. Miller said.

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The townhouse at 12 East 69th St. is owned by Vincent Viola, the billionaire owner of the National Hockey League's Florida Panthers who was briefly President Donald Trump's nominee for secretary of the army, and his wife Teresa Viola. They paid $20 million for the property in 2005, according to public records.

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The house came on the market in 2013 for about $114 million but was delisted after a price cut to $98 million in 2014, according to listings website StreetEasy.com

Living in cars, working for Amazon: meet America's new nomads

Sun, 12/10/2017 - 09:18
Despite a lack of hard numbers, anecdotal evidence suggests the ranks of American itinerants started to boom after the housing collapse and have kept growing.

The cause of the unmanageable household math that drives some people to become nomads is no secret.

Federal minimum wage is stalled at $7.25 an hour. The cost of shelter continues to climb. There are now only a dozen counties and one metro area where a full-time minimum-wage worker can afford a one-bedroom apartment at fair market rent.

At the same time, the top 1% now makes 81 times more than those in the bottom half do, when you compare average earnings. For American adults on the lower half of the income ladder -- some 117 million of them -- earnings haven't changed since the 1970s. This is not a wage gap -- it's a chasm.

The most widely accepted measure for calculating income inequality is a century-old formula called the Gini coefficient. What it reveals is startling. Today the United States has the most unequal society of all developed nations. America's level of inequality is comparable to that of Russia, China, Argentina and the war-torn Democratic Republic of the Congo.''

Stockman: Lemmings In Full Stampede Toward The Fiscal Cliff

Fri, 12/01/2017 - 19:44
... the promised balance sheet shrinkage process is going to rapidly escalate from $10 billion per month of Fed bond sales now, to $30 billion by spring and $50 billion by next October. That amounts to a $600 billion annual run rate; and when the ECB and other banks join the "normalization" party in 2019 and beyond total central bank bond sales will pierce through the $1 trillion per year level.

And that's a very big deal because the law of supply and demand has not yet been abolished, meaning prices and yields in the global bond market are heading for a big reset. For instance, if the UST 10-year benchmark note normalizes to a yield of 4.0%, its price will fall by more than 40% from current levels (2.35%).

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But what they will be talking about soon is a US Fiscal Cliff like none before. It now seems that the desperate GOP politicians of Capitol Hill have come up with so many fiscal gimmicks that they may actually cobble together 51 votes in the Senate.

But the emerging Rube Goldberg Contraption, which sunsets all of the individual tax cuts after 2025, and then piles on top a "trigger tax", which most surely would turn the whole things into massive ($350 billion) tax increase after a 2024 "growth" test, is actually a giant debt trap... between 2018 and 2024 the emerging Senate "compromise" would generate upwards of $1.4 trillion of new debt including interest on the added borrowing... the massive front-loaded borrowing embedded in the Senate tax bill would come on top of the $6.1 trillion already built into the CBO baseline for the 2018-2024 period and another $1 trillion that will be needed for disaster relief and the Donald's massive defense build-up and dramatically heightened pace of global military operations.

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In a word, we do not think you can finance $8.5 trillion of new Federal debt in an environment in which the Fed and its convoy of fellow traveling central banks are also selling bonds by the trillions. That is, without triggering a "crowding out" effect of the kind that has been in hibernation ever since Greenspan's cranked up the Eccles Building printing presses after the 22% stock market plunge in October 1987.

The Dirty Shopping Season Secret

Fri, 12/01/2017 - 10:13
 Black Friday results mean absolutely nothing at all. Not for the U.S. economy, and not even for the retailers themselves. Most of the stuff sold on Black Friday was going to be sold during the holiday season anyway.  What retailers have done is brought it forward into one weekend and marked down the prices, damaging margins. It is not a smart move on their part.

The interesting thing about all this Black Friday perusing is that most of it is wrong. The numbers will be revised several times before the end of December, and many erroneous conclusions will be reached based on incomplete data.

Even highly accurate numbers wouldn't tell you much. Consider the fact that in 2007, Black Friday sales were up 3.2% after an impressive gain of 6.2% the year before. Looking at that data, one would think the economy was in great shape.

Of course, we all know now that precisely the opposite was true, as toxic real estate assets were building up on bank balance sheets, and the economy was about to fall off the precipice. Like I said, Black Friday sales tell us nothing about the health or direction of the economy.