A report from CNBC. “‘The fact that almost all participants agreed that it was appropriate to initiate the balance sheet runoff after the first increase in the target range for the fed funds rate implies that there’s not a big appetite for ‘let’s wait and see.’ Kathy Jones, chief fixed income strategist at Charles Schwab, said of the Fed minutes, which had a special section titled ‘Discussion of Policy Normalization Considerations. ‘Last time, they waited two years. This time, it looks like they’re ready to go.’”
Fromm Yahoo Finance. “‘There is no question that Fed members are becoming more worried about the higher inflation that they’ve so aggressively tried to stoke,’ said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Not only is the central bank openly musing about higher rates and a quicker end to bond-buying stimulus, policymakers are also entertaining the once unthinkable: a reduction of a balance sheet that’s been swollen since the 2008 financial crisis.”
“‘The Fed’s unprecedented injection of $120 billion of liquidity into the capital markets per month heavily favored higher risk, speculative investments such as meme stocks, money losing concept stocks and cryptocurrency,’ noted Jay Hatfield, CIO of Infrastructure Capital Management.”
From Nasdaq. “The fact that ZG stock has had losses of about 57% over the past year does not make me bullish on the stock. On the contrary, I am bearish on Zillow Group as the company is unprofitable, and its business model has yet to prove its effectiveness in delivering value to the shareholders. The business decision to exit the iBuying business in 2021 was a very important one that has to do with the financial performance of the company. Zillow Group lost money in this business venture. It is fine yet unpleasant to fail, and it is finer to accept that bad decisions in business cannot be supported forever.”
“A red flag of paramount importance is that in Q3 2021 the firm had cash and investments of $3.2 billion on its balance sheet. The reported negative free cash flow of $2.82 billion in this quarter signals that the firm has less than a year of cash runway. Zillow Group has been reporting net losses in the past five years, despite robust sales growth. Q3 2021 financial results showed a quarterly sales growth of 32.57%, yet a very large net loss of $328.17 million and a similar negative free cash flow figure.”
From KTXL. “The nation’s biggest effort to help homeowners who are struggling to pay their mortgage because of the pandemic is underway in California. ‘Twelve percent of California homeowners are facing foreclosure and 6% percent are behind on mortgage payments due to the pandemic,’ said Consumer Services and Housing Agency Secretary Lourdes Castro Ramirez.”
“The architect of it all, Congresswoman Maxine Waters, D-Los Angeles, fought for $10 billion to be included in the plan. Californians will benefit from the biggest state pool in the country, $1 billion. ‘I was so very worried that while we were doing forbearance and people were not be able to pay and not forced to pay their mortgages for maybe several months and the devil would come due,’ Waters said.”
The Los Angeles Times in California. “As of now, no rent hikes will be allowed for most L.A. tenants until 2023. And possibly beyond. What is celebrated by tenants and their advocates is lamented by landlords, who say the freeze puts them in an untenable situation. ‘We have to pay a mortgage and pay utilities,’ said Ari Chazanas, president of Lotus West Properties, which manages about 1,000 apartments across the city. ‘I think there’s a lot of fatigue from people like me because it’s been going on for so long.’”
“Landlords have also been frustrated. Chazanas said he also has been waiting for months for the state to clear payments for his tenants, with $1 million in back rent still outstanding. State officials say they’re moving money much more quickly since the program began in March and expect to send out an additional $1 billion in the next three months.”
From Chronicle Live in the UK. “In the Chathill postcode NE67, one sale was recorded last month with an average drop of £27,000 between asking and sold prices. Meanwhile, both the Corbridge postcode NE45 and the Bamburgh postcode, NE69 had an average drop of £20,000 with one recorded sale in each area last month. Also seeing hefty differences between asking and sold prices was the Barnard Castle postcode DL12 which saw 15 recorded sales last month and an average difference of -£18,213.”
From News.com.au in Australia. “Geelong’s home value jumped more than $160,000 in 2021. But CoreLogic is showing further signs that the rate of growth is easing in Geelong. Houses in Geelong climbed 1 per cent in December to $820,000, with units up 2 per cent to $574,000. CoreLogic head of Australian research Eliza Owen said it was ‘inevitable that the rate of growth of going to soften and the downturn in the cycle would follow.’”
“‘We’ve had a very strong period of growth, which has incentivised more vendors to come to market,’ she said. Ms Owen said that increased supply is also seeing less urgency among buyers. ‘They understand that if they miss out on this one, because they’re not willing to pay an exorbitant price, there might be another listing that will come up soon.’”
From Bloomberg. “Shimao Group Holdings Ltd., a bellwether for financial contagion in China’s embattled property industry, suffered its biggest-ever bond rout on Thursday after a creditor said one of the developer’s units defaulted on a local loan. The Shimao unit failed to pay 645 million yuan ($101 million) of a total 792 million yuan due by Dec. 25, according to a notice sent to investors by China Credit Trust Co. The trust firm had demanded early repayment by Dec. 25 after the developer failed to meet installment requirements, according to the notice.”
“Long considered one of the healthier builders, Shimao Group had until recently appeared largely unscathed even as junk-rated rivals including China Evergrande Group and Kaisa Group Holdings Ltd. defaulted. The plunge in Shimao bonds is likely to stoke fears of financial contagion in a sector that accounts for about a quarter of output in the world’s second-largest economy.”
From Reuters on China. “Guangzhou R&F Properties said it did not have sufficient funds to buy back a $725 million bond as sales of its assets had not come through as planned. It said in a filing late on Wednesday that the funds available to settle its tender offer for an offshore bond were materially less than the $300 million it previously expected, due to continued volatility in the property sector.”
“Last month, R&F proposed two tender offer options to bondholders of the 5.75% notes, while seeking their consent to extend by six months the maturity of the bond due Jan. 13. The options were buying back the notes at a 17% discount, or $830 for every $1,000 in principal; or buying back at most half of bondholders’ notes in full, both with accrued interest. R&F said in the filing that 71.7% of the bondholders had tendered for the first option and 24.2% for the second – but it added that it expected to have ‘materially less’ than the $300 million previously anticipated to buy back the bonds.”
“‘Proceeds from certain asset sales contemplated by the group may fail to materialise by the settlement date,’ it said, adding the settlement date has been postponed by two days to around Jan. 12.”
From Vision Times. “Many experts compare the Evergrande crisis to the Lehman Brothers event. Just like the bankruptcy filing of Lehman Brothers played a big role in pushing the United States into the 2007 financial crisis, some feel that Evergrande’s collapse under the weight of its debt will also trigger an economic crisis in communist China.”
“However, Vinesh Motwani of Silk Road Research notes a major difference between the Lehman event and what is happening with Evergrande. ‘The biggest difference between the two is that Evergrande was a train wreck that everyone saw coming… When the ‘three red lines’ policy was announced more than a year ago, it was clear that Evergrande was one of the worst offenders, so the reaction in China was ‘this was a long time coming,’ Motwani said.”