en Mnuchin/Cohn Unveil Trump's "Biggest Tax Cut Ever" Tax Reform Plan - Live Feed <p>Having promised <strong><em>&quot;the biggest tax cut in history,&quot; </em></strong>and seemingly desperate for a win <em>(given his folding on the funding of the wall),</em> one wonders why President Trump has delegated the announcement of his Tax Reform plan to Treasury Secretaty Steven Mnuchin and Chief Economic Advisor Gary Cohn. <em><strong>Reduction, repatriation, simplification, and de-itemization</strong></em> appear to be the cornerstones.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 301px;" /></a></p> <p><strong>What we think we know so far:</strong> (<a href=""><em>via CNN&#39;s Jim Acosta</em></a>)</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><h3><u>Personal Tax Reform</u></h3> <p>- Provide Tax Relief for Middle Income Families<br />- <strong>Simplify the Tax Code by Moving from 7 to 3 brackets (35, 25, 10)</strong><br />- Modernize Tax Code to Help Families Struggling with Child and Dependent Care Costs<br />- Repeal 3.8% Obamacare Tax on Investment Income<br />- <strong>End Alternative Minimum Tax</strong><br />- <strong>Eliminate Itemized Deductions Except Mortgage Interest and Charitable Contributions</strong><br />- End the Death Tax</p> <h3><u>Business Tax Reform</u></h3> <p>- <strong>15% Corporate Rate</strong><br />- Small Business Owner/ Operators Eligible for Business Rate<br />- Territorial Tax System to End Penalty on Companies Headquartered in the U.S.<br />- <strong>Onetime Tax for Repatriation to bring back Trillions of Dollars from Overseas</strong><br />- Eliminate Tax Breaks for Special Interests</p> </blockquote> <p>Who also asks a very important question - <strong><em>With The White House targeting deductions to help pay for tax plan (but mortgage/charitable are protected), how does this not blow up deficit?</em></strong></p> <p>We look forward to Steve Mnuchin and Gary Cohn explaining it all (with as many superlatives as possible we are sure).</p> <p>Perhaps the most concerning aspect is the apparent <strong>expectations management</strong> that is being undertaken this morning:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The White House&#39;s <strong>presentation will be&nbsp;&quot;pretty broad in the principles,&quot;</strong>&nbsp;said Marc Short, Trump&#39;s director of legislative affairs.</p> <p>&nbsp;</p> <p>In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The&nbsp;<strong>specifics should start to come this summer.</strong></p> <p>&nbsp;</p> <p>Short said the <strong>administration&nbsp;did not want to set a firm timeline,</strong>&nbsp;after demanding a quick House vote on a health care bill and watching it fail.</p> <p>&nbsp;</p> <p>But, Short added,<strong><em>&nbsp;&quot;I don&#39;t see this sliding into 2018.&quot;</em></strong></p> </blockquote> <p>Live Feed (due to begin at 1330ET)</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <p>The biggest question is - <strong><em>will this be enough to satisfy the market?</em></strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="727" height="365" alt="" src="" /> </div> </div> </div> Alternative minimum tax Business Business Donald Trump Economy of the United States Fail Flat tax Itemized deduction Obamacare Politics Social Issues Steven Mnuchin Tax reform Taxation in the United States United States White House White House Wed, 26 Apr 2017 17:25:00 +0000 Tyler Durden 594398 at Freedom Caucus Confirms Support For Revised Obamacare Replacement Bill <p>Moments ago the House Freedom Caucus announced their support for a revised version of an Obamacare replacement bill that includes the so-called "MacArthur Amendment."&nbsp; Here is the official statement from Freedom Caucus Chair Mark Meadows:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>"Over the past couple of months, House conservatives have worked tirelessly to improve the American Health Care Act (AHCA) to make it better for the American people. Due to improvements to the AHCA and the addition of Rep. Tom MacArthur’s proposed amendment, the House Freedom Caucus has taken an official position in support of the current proposal.</strong></p> <p>&nbsp;</p> <p><strong>The MacArthur amendment will grant states the ability to repeal cost driving aspects of Obamacare left in place under the original AHCA.</strong>&nbsp; While the revised version still does not fully repeal Obamacare, we are prepared to support it to keep our promise to the American people to lower healthcare costs. <strong>We look forward to working with our Senate colleagues to improve the bill. Our work will continue until we fully repeal Obamacare.”</strong></p> <p>&nbsp;</p> <p>Mission statement of the House Freedom Caucus:</p> <p>&nbsp;</p> <p>“The House Freedom Caucus gives a voice to countless Americans who feel that Washington does not represent them. We support open, accountable and limited government, the Constitution and the rule of law, and policies that promote the liberty, safety, and prosperity of all Americans.”</p> </blockquote> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">NEWS: Freedom Caucus announces support for AHCA with Rep. MacArthur's amendment included. Statement: <a href=""></a></p> <p>— House Freedom Caucus (@freedomcaucus) <a href="">April 26, 2017</a></p></blockquote> <script src="//"></script><p>&nbsp;</p> <p>As we noted previously, the "MacArthur Amendment" (summarized <a href="">here</a>) effectively allows individual states to 'opt out' of certain Obamacare regulations which require minimum coverage and restrict the ability to insurers to charge varying rates based on an individual's health.</p> <p>Of course, only time will tell if appealing to the more conservative wing of the Republican party will now result in defections of more centrist votes.&nbsp; As John Boehnor said best, <strong>"Republicans have never, ever, not once agreed on what a healthcare bill should look like."</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="698" height="471" alt="" src="" /> </div> </div> </div> 115th United States Congress American Health Care Act Freedom Caucus Internal Revenue Code Mark Meadows Obamacare Patient Protection and Affordable Care Act Politics Politics of the United States Republican Party Senate Statutory law United States Wed, 26 Apr 2017 17:04:15 +0000 Tyler Durden 594399 at Trump Individual Tax Plan To Have 3 Brackets: 35%, 25%, & 10% <p>As the minutes tick by ahead of the announcement of<em> &quot;the greatest tax cut in human history,&quot;</em> we are getting more information on the personal tax rates (<a href=""><em>something Treasury Secretary Mnuchin failed to mention earlier</em></a>). As Fox News reports, in addition to raising deductions, the Trump administration will <strong>collapse the current seven-tier bracket system into just three tax brackets under the new plan, taxed at rates of 35 percent, 25 percent and 10 percent</strong>.</p> <p><a href=""><img height="301" src="" width="600" /></a></p> <p><a href=""><em>As Fox News reports,</em></a> President Donald Trump&rsquo;s tax plan, which will be unveiled Wednesday, <strong>calls for a sizable increase to the standard deduction Americans can take when filing taxes, potentially allowing taxpayers to keep more of their income </strong>&ndash; to the tune of a couple thousand dollars, White House sources told Fox News.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A piece of the proposed tax overhaul would <strong>nearly double the standard deductions that both individuals and families can claim on their returns,</strong> Fox News reported. Under the proposal, the tax cuts for individuals and married couples filing separately will increase from $6,300 to $12,600. The standard deduction for a married couple filing jointly will jump from $12,700 to approximately $24,000.</p> <p>&nbsp;</p> <p>White House sources also said the plan would<strong> eliminate the marriage penalty.</strong></p> <p>&nbsp;</p> <p>In addition to raising deductions, the Trump administration will <strong>collapse the current seven-tier bracket system into just three tax brackets under the new plan, taxed at rates of 35 percent, 25 percent and 10 percent...</strong> this is slighlty different than Trump&rsquo;s previously proposed tax rates were 33 percent, 25 percent and 12 percent.</p> </blockquote> <p>We look forward to hearing from Mnuchin and Cohn in an hour on the details... and of course any guesstimate at whether this will pass.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="223" height="154" alt="" src="" /> </div> </div> </div> Business Donald Trump Donald Trump Draft:Modern Tax Policy Economy of the United States Fox News Income tax in the United States Marriage Marriage penalty Standard deduction Tax bracket Taxation in the United States Trump Administration United States White House White House Wed, 26 Apr 2017 17:03:59 +0000 Tyler Durden 594396 at Treasury Sells $34 Billion In 5Y Paper In Ugly, Tailing Auction At Lowest Yield Since November <p>After yesterday's stellar 2Y auction, moments ago the Treasury sold $34 billion in 5 Year paper in what can only be described as a quite ugly auction.</p> <p>The high yield printed at 1.875%, which maybe because it was the lowest stop since November's 1.76%, drew far less bidside interest than yesterday's auction. It also tailed by 0.7bps to the 1.875 When Issued. </p> <p>The internals were just as ugly, with the Bid To Cover slumping to 2.34 from last month's 2.37 and the 6 month average of 2.45. </p> <p>Indirects took down 57.3%, well below the 6 month average of 63.5%, and the lowest since July 2016. With Directs expressing little interest too, it meant Dealers were stuck taking down 37.4% of the final allotment, the highest since last July.</p> <p>It is unclear what changed so notably in the past 24 hours, but whatever it was it appears to have spooked bidders and certainly foreign buyers.</p> <p><a href=""><img src="" width="500" height="310" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1142" height="709" alt="" src="" /> </div> </div> </div> Auction Auction theory Auctions High Yield Shop at Bid Wed, 26 Apr 2017 17:03:00 +0000 Tyler Durden 594400 at A Rising (Central Bank) Tide Turns Everyone Into A Genius <p><a href=""><em>Authored by Charles Hugh-Smith via OfTwoMinds blog,</em></a></p> <p><em>Until the system implodes--you&#39;re a genius. </em></p> <p><strong>So you&#39;ve ridden the markets higher--stocks, housing, commercial real estate, bat guano, quatloos, you name it--everything you touch turns to gold.</strong> What can we say, bucko, other than <strong>you&#39;re a genius!</strong></p> <p>It&#39;s a market truism that rising tides lift all boats. But that&#39;s not the really important effect; what really matters is <em>rising tides turn everyone into a genius</em>--at least in their own minds.</p> <p>Those of us who have been seduced by the Sirens&#39; songs of hubris know from bitter experience how easy it is to confuse a rising tide with speculative genius. When everything you touch keeps going higher, the only possible cause is.... your hot hand, of course!</p> <p><strong>Stocks--I&#39;m a genius! Housing--I&#39;m a genius!</strong> Commercial real estate--yes, well, I suppose the evidence is overwhelming--it does seem I&#39;m a genius.</p> <p><strong>The only thing better than <em>buy and hold</em> is <em>buy the dips and hold</em></strong>--and use margin or whatever leverage you have to buy more before the price goes even higher.</p> <p>What can we say other than: this is the strategy of geniuses. The proof is in the charts:</p> <p>The S&amp;P 500: margin to the hilt and buy every dip: genius!</p> <p><img align="middle" border="0" class="wide" src="" /></p> <p>Housing in Sweden, Toronto, Brooklyn, West L.A., San Francisco, Seattle, Portland, Shanghai and every other blazing-hot market: borrow more from the shadow banking system, mortgage your house to the hilt, do whatever you have to do to get the down payment and buy another flat: pure genius!</p> <p><img align="middle" border="0" class="wide" src="" /></p> <p>Commercial real estate: everyone who jumped in with all four feet in mid-2009 forward: geniuses!</p> <p><img align="middle" border="0" class="wide" src="" /></p> <p><strong>The source of our collective genius isn&#39;t an act of Nature</strong>--it&#39;s that good old pump inflating every asset bubble on the planet, central banks creating credit-money out of thin air and buying assets hand over fist: stocks, ETFs, bonds, mortgages, and so on.</p> <p>Central banks have collectively purchased $1 trillion in assets year to date:</p> <p><img align="middle" border="0" class="wide" src="" /></p> <p><strong>The Federal Reserve and the other central banks are playing the role of financial gods</strong>, intervening in the interactions of mere mortals to create the illusion of stability.</p> <p>To this end, the Fed has created trillions of dollars and used this money to prop up delusional asset values (high) and destabilizing interest rates (low).</p> <p>If we look at a decentralized financial system as a self-organizing ecosystem, we find that the strength of the system lies in the adaptability of the myriad organisms in its many micro-climates. The key strength of a decentralized financial ecosystem, i.e. one not organized as a top-down command economy, is the &quot;genetic diversity&quot; of its many participants. There is not just one dominant species in the ecosystem, but many interdependent species.</p> <p>In a financial ecosystem, there is not one lender and one class of borrowers, but a huge diversity of lenders, borrowers, creditors and savers, and a wealth of interacting, inter-dependent enterprises.</p> <p><strong>A centrally planned financial ecosystem is a doomed system.</strong> The Fed is the equivalent of an ignorant, hubris-infused agency that seeks to &quot;restore&quot; an ecosystem by flooding it with water and unleashing a single predatory species raised in an unnatural, contrived &quot;factory.&quot;</p> <p>The Fed is wiping out diversity and thus the adaptability of the enterprises that survive its crude flooding and replication of a single predatory species.</p> <p><strong>The Fed is creating a sickly, vulnerable mono-culture of an economy,</strong> one dominated by financial predators which are themselves lacking in genetic diversity.</p> <p>Just as agencies playing god further degrade the natural systems they claim to be &quot;restoring&quot; with ever-grander interventions, so too is the Fed destroying the U.S. economy with equivalent god-like meddling and ever-more grandiose, ever-more delusional interventions in what were once decentralized, self-organizing systems that naturally sought harmony and stability through the low-level churn of bad bets being written off and over-leveraged speculators going bankrupt.</p> <p><strong>Put another way: the Fed has taken the risks generated by predatory institutions and policies, and distributed it throughout the entire financial system.</strong> This distribution of risk in service of maintaining asset bubbles creates the illusion of stability, low risk and &quot;sure thing&quot; speculation.</p> <p>Rather than let over-leveraged speculators and institutions reap the consequences of their excesses, the Fed (and other central banks) have loaded the entire system with risk.</p> <p><strong>Until the system implodes--you&#39;re a genius.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="518" height="293" alt="" src="" /> </div> </div> </div> Bank Banking Business Business cycle Central Banks Commercial Real Estate Creditors Crude Economic bubble Economy Federal Reserve Financial crises Financial services Money Real estate S&P 500 Shadow Banking Shadow banking system Standard & Poor's Systemic risk United States housing bubble US Federal Reserve Wed, 26 Apr 2017 16:56:10 +0000 Tyler Durden 594349 at Canada Housing Regulator Warns Of "Strong Evidence Of Housing-Market Problems" <p>In an perculiar coincidence, just hours after Home Capital Group imploded in what we dubbed Canada's "New Century" moment, Canada's housing regulator, the Canada Mortgage And Housing Corporation, <a href="">which describes </a>itself as "contributing to the stability of the housing market and financial system" moments ago the CMHC <a href=";utm_medium=link&amp;utm_campaign=mac">issued a report</a>, warning that there is "<strong>strong evidence of overall problematic conditions.</strong>"</p> <p>In the report, the Housing regulator again warns that while conditions in Canada's housing markets are showing some signs of improvement, the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at "strong evidence of problematic conditions".</p> <p>Every quarter, the CMHC issues its Housing Market Assessment (HMA) "to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada." The report is meant to serve as an "early warning system" for the country's housing markets "an important tool supporting financial and housing market stability." Or lack thereof because as the CMHC said while "conditions in Canada’s housing markets are showing some signs of improvement" the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at <strong>“strong evidence of problematic conditions”.</strong></p> <p>As noted in the press release, some of the report highlights are the following:</p> <ul> <li>Overall rating to be held at "strong evidence of problematic conditions".</li> <li>Evidence of overvaluation at the national level has been downgraded from strong to moderate. It is now present in six centers instead of eight.</li> <li><strong>Evidence of overvaluation has increased from moderate to strong in Victoria, as fundamentals are not keeping up with higher prices. There is also moderate evidence of price acceleration and overheating, leading to strong overall evidence of problematic conditions.</strong></li> <li>Conditions have improved in Regina, Montreal and Quebec relative to home prices.</li> <li>Overbuilding has gone down from eight centers to six.</li> <li>In Moncton and St John's, the supply of homes is adjusting to the demand.</li> <li>Toronto and Hamilton continue to face price acceleration, overvaluation and overheating. Price growth has intensified and demand is outpacing supply in the rental, resale and new home markets.</li> <li>Vancouver's housing market continues to show strong evidence of problematic conditions due to moderate evidence of price acceleration and strong evidence of overvaluation.</li> <li>Markets in the Prairies continue to show moderate to strong evidence of overbuilding.</li> </ul> <p>CMHC defines “problematic conditions” as imbalances in the housing market. <strong>Imbalances occur when overbuilding, overvaluation, overheating and price acceleration - or combinations thereof - depart significantly from historical averages. <br /></strong></p> <p><a href=""><img src="" width="500" height="357" /></a></p> <p>While previously the general public may have ignored the CMHC's conclusions, instead focusing on the tremendous housing gains in both Vancouver and Toronto, in light of today's developments with Home Capital Group, we urge Canadians to at least familiarize themselves with the report, which can <a href="">be found here</a>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="800" height="479" alt="" src="" /> </div> </div> </div> Affordable housing in Canada Business Canada Mortgage and Housing Corporation CMHC Community organizing Economy Economy of Vancouver Finance Housing in Canada Housing Market Money Mortgage loan New Century Real estate Real estate economics Wed, 26 Apr 2017 16:34:52 +0000 Tyler Durden 594397 at Bubble Alert: We've Passed 2007 and Are On Our Way to 1999 <p>The US stock market is officially in a massive bubble based on the one valuation metric that cannot be faked.</p> <p>Corporations can engage any number of accounting gimmicks to juice their earnings, cash flow, and dividends&hellip; for this reason P/E, P/CF and P/DY ratios are all suspect when it comes time to value a corporations.</p> <p>Sales cannot be gimmicked. Either money comes in the door, or it doesn&rsquo;t. And if a company is caught messing around with its sales numbers, <strong><u>someone is going to jail.</u></strong></p> <p><strong><u>For this reason, Price to Sales is perhaps the single most objective and clear means of measuring stock valuations.</u></strong></p> <p>This metric, above all others, you can point to and say, <em>&ldquo;this is definitively accurate and has not been messed with.&rdquo;</em></p> <p>On that note, as Bill King recently noted, today the S&amp;P 500 is sporting a P/S ratio that is massively higher than it was in 2007 and is only <em>marginally</em> lower than it was during the Tech Bubble (the single largest stock bubble of all time for most measures).</p> <p><img alt="" src="" style="width: 600px; height: 349px;" /></p> <p>(Source:&nbsp;<em>The King Report)</em></p> <p>There is simply no way to look at this and not call it a bubble. It is well above the 2007 bubble and only slightly smaller than the Tech Bubble (which everyone now looks</p> <p>This bubble, like all bubbles, will burst. And when it does, the market will crash, just as it did in 2000 and 2008.</p> <p>To pick up a FREE investment report outlining three investments that you could make you a ton of money when the bubble bursts&hellip; &nbsp;</p> <p><strong><a href="">CLICK HERE!</a></strong></p> <p>Best Regards</p> <p>Graham Summers</p> <p>Chief Market Strategist</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> <p>&nbsp;</p> Bubble Business Corporation Dot-com bubble E-commerce Economic bubbles Economy Finance Information technology management S&P 500 Stock Stock market Stock market bubble Structure Wed, 26 Apr 2017 16:01:14 +0000 Phoenix Capital Research 594389 at Peso Plunges As White House Plans NAFTA Withdrawal Executive Order <p>The Mexican <strong>Peso is tumbling</strong> (and Loonie extending yesterday&#39;s timber-tariff-driven losses),<a href=""> as Politico reports,</a> the Trump administration is considering an<strong> executive order on withdrawing the U.S. from NAFTA,</strong> according to two White House officials.</p> <p><a href="">Politico reports </a>that a draft order has been submitted for the final stages of review and could be unveiled late this week or early next week, the officials said. The effort, which still could change in the coming days as more officials weigh in, would indicate the administration&rsquo;s intent to withdraw from the sweeping pact by triggering the timeline set forth in the deal.</p> <p>The approach appears <strong>designed to extract better terms with Canada and Mexico</strong>, and judging bvy the FX market&#39;s reaction, they agree...</p> <p><a href=""><img height="316" src="" width="600" /></a></p> <p><a href=""><img height="314" src="" width="600" /></a></p> <p>Trump in recent weeks has stepped up his rhetoric vowing to terminate the agreement all together.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;NAFTA&rsquo;s been very, very bad for our country,&rdquo; </strong>he said in a speech last week in Kenosha, Wis.</p> <p>&nbsp;</p> <p><strong>&ldquo;It&rsquo;s been very, very bad for our companies and for our workers, and we&rsquo;re going to make some very big changes or we are going to get rid of NAFTA once and for all.&rdquo;</strong></p> </blockquote> <p>Peter Navarro, the head of Trump&rsquo;s National Trade Council, drafted the executive order in close cooperation with chief White House strategist Steve Bannon. The executive order was submitted this week to the staff secretary for the final stages of review, according to one of the White House officials.</p> <p>All this rhetoric, however, is sending the dollar surging - something Trump expressed just a few days ago was not great...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 312px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="960" height="506" alt="" src="" /> </div> </div> </div> Alt-right Climate change skepticism and denial Mexico North American Free Trade Agreement Peter Navarro Peter Navarro Politico Politics Steve Bannon The Apprentice Trump Administration Trump’s National Trade Council United States White House White House Wed, 26 Apr 2017 15:54:57 +0000 Tyler Durden 594388 at Canada's Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History <p>Call it Canada's "New Century" moment. </p> <p>We first introduced readers to the company we said was the "<em>tip of the iceberg in Canada's magnificent housing bubble</em>" <a href="">nearly two years ago, </a>in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada's largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices - <a href="">most prominently noted short-seller Marc Cohodes </a>- would constantly remind traders and investors about the threat posed by HCG.</p> <p>Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, <em>its biggest drop on record</em>, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice.</p> <p>As part of this inevitable outcome, one which presages the company's eventual disintegration and likely liquidation, <a href="">Bloomberg reports </a>that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable Group Inc. fell 17 percent, Street Capital Group Inc. fell 13 percent, while First National Financial Corp. declined 7.6 percent. <strong>In short, the Canadian mortgage bubble has finally burst.</strong></p> <p><a href=""><img src="" width="500" height="265" /></a></p> <p>Some more details on HCG's emergency source of funding: Home Capital will pay 10% interest on outstanding balances and a non-refundable commitment fee of C$100 million, while standby fee on undrawn funds is 2.5%. The initial draw must be C$1 billion. The loan has an effective - and very much distressed - interest rate of 22.5% on the first C$1 billion, declining to 15% if fully utilized, according to a note from Jaeme Gloyn, an analyst at National Bank of Canada.</p> <p>Home Capital said the credit line is <strong>intended to “mitigate” a sharp drop in Home Trust’s high-interest savings account balances, which sank by $591 million from March 28 to April 24, at which point the total balance was $1.4 billion</strong>. Home Capital warned on Wednesday that further outflows are anticipated. </p> <p>Translated: what until last night was a depositor bank jog just became a sprint.</p> <p>The loan will provide Home Capital with more than C$3.5 billion in total funding, more than twice the C$1.5 billion in liquid assets it held as at April 24. It also has C$200 million in securities available for sale, and high interest savings account balances fell about 25% to C$1.4 billion over the past month. Home Capital relies on deposits to fund their mortgage loans; following today's announcement the company's liquidity is certain to get even worse as all non-distressed sources of cash are pulled.</p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>Cited by Bloomberg, Andrew Torres, founding partner and chief investment officer at Toronto-based Lawrence Park Asset Management said that "The company is facing a bit of a liquidity crunch and they felt they needed to resolve it quickly." He said the "steep" commitment fee and the interest rate on the loan "are surprising numbers for a company that was ostensibly investment-grade."</p> <p>Well, it was only investment grade because as usual the rating agencies never did their homework. For a real hint into the company's rating, look at the 22.5% interest rate, suggesting the company's days outside of bankruptcy are numbered. </p> <p>Home Capital Group's sudden collapse was actually visible from a distance. While in the summer of 2015, the termination of HCG was still debate, in recent months the company’s woes stemmed from allegations by the Ontario Securities Commission that Home Capital misled investors and broke securities laws. </p> <p>In other words engaged in those "liar loans" which we first warned about back in the summer of 2015. </p> <p>Meanwhile, founder Gerald Soloway will step down from the board when a replacement is named and Robert Blowes will assume the role of interim chief financial officer, the company said Monday. </p> <p>"The company anticipates that further declines will occur, and that the credit line would also mitigate the impact of those," Home Capital said.</p> <p>Amusingly, it was just two months ago when the company set new performance goals after reporting quarterly results, targeting revenue growth of 5% or greater, diluted earnings-per-share of 7% or greater and a return on equity of 15 percent or more over the long term, according to Bloomberg. It should add one more "performance goal" - stay out of bankruptcy for at least 3 months.</p> <p>"They did what appears to be to us a very expensive deal," said David Baskin, president and founder of Baskin Wealth Management in Toronto, a former investor in Home Capital stock. "<strong>Basically they blew up the income statement in order to save the balance sheet, which I guess if you’re facing an existential crisis is what you have to do."</strong></p> <p>The Office of the Superintendent of Financial Institutions (OSFI) told Canada's BNN it does not comment on specific institutions it supervises, but that it maintains ongoing relationships with those institutions and is monitoring the Home Capital situation "closely."</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="288" height="104" alt="" src="" /> </div> </div> </div> Bank of Canada Business Credit Line Economics Economy Finance Home Capital Group Home Capital Group Housing Bubble Investment Grade Money Mortgage industry of the United States Mortgage loan Mortgage Loans New Century New Century Ontario Securities Commission Rating Agencies S&P/TSX Composite Index Subprime crisis impact timeline Subprime mortgage crisis Wed, 26 Apr 2017 15:49:05 +0000 Tyler Durden 594387 at Fannie Introduces "Innovative Solutions" Allowing Student-Debt-Laden Millennials To Buy A Home <p>So what do you do when a massive student loan bubble results in crippling leverage for an entire generation of your population rendering them financially unqualified to obtain mortgage financing and their &#39;God-given right&#39; to a slice of the &#39;American Dream&#39;?&nbsp;<strong> Well, you simply change the rules to allow mortgage lenders to ignore all that pesky student debt</strong>...anything less would simply be evil and potentially racist, sexist and all sorts of other -ist words.</p> <p>Luckily, Fannie Mae is right on top of the issue and has just<a href=""> released </a><strong><a href="">new rules</a> allowing millennial borrowers to, among other things, simply exclude student loans, credit cards and auto loans that are &quot;paid by someone else&quot;</strong>...wink wink...when applying for a new mortgage.&nbsp; As an added benefit, taxpayer subsidized mortgage loans can also now be used to repay student debt...Hooray for taxpayers!</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Fannie Mae announced new policies that will help more borrowers with student debt qualify for a home loan. <strong>These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade </strong>and provide access to credit for qualified borrowers. The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, <strong>allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process</strong>, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Student Loan Cash-Out Refinance:</strong></span> Offers homeowners the <strong>flexibility to pay off high interest rate student debt</strong> while potentially refinancing to a lower mortgage interest rate.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Debt Paid by Others:</strong></span> Widens borrower eligibility to qualify for a home loan by <strong>excluding from the borrower&rsquo;s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else. </strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Student Debt Payment Calculation:</strong></span> Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.</p> <p>&nbsp;</p> <p>&ldquo;We understand the significant role that a monthly student loan payment plays in a potential home buyer&rsquo;s consideration to take on a mortgage, and we want to be a part of the solution,&rdquo; said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae. &ldquo;These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.&rdquo;</p> </blockquote> <p><strong>You know, because more debt is exactly the cure for millennials suffering the financial consequences of too much debt.&nbsp; </strong></p> <p>But, at least this should help with inflating Housing Bubble 2.0.</p> <p><img alt="Housing" height="297" src="" width="450" /></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="717" height="539" alt="" src="" /> </div> </div> </div> Business Debt-to-income ratio Economy Fannie Mae Fannie Mae Finance Housing Bubble Loans Money Mortgage Mortgage industry of the United States Mortgage loan Mortgage Loans Personal finance Refinancing Student Loans United States housing bubble Wed, 26 Apr 2017 15:29:00 +0000 Tyler Durden 594223 at