KeNo's Housing and Economic Portal: Friday June 12 Housing and Economic stories

TOP STORIES:

Companies' Borrowing Spree Darkens Stock Market Future - (www.bloomberg.com) A dark shadow is lurking behind the happy façade of rising stock prices. U.S. companies are borrowing money faster than they’re earning it -- and they’re doing it at the quickest pace since the aftermath of the financial crisis. Instead of deploying the debt to build factories, hire new workers or expand product lines, companies are funneling more of their money to shareholders or using it to fund deals. Stock buybacks reached an all-time high last year and the volume of global mergers and acquisitions announced so far this year would make it the second-busiest ever, according to data compiled by Bloomberg. The debt undermines future growth and could dent company income when borrowing costs rise. Higher interest rates will make already indebted companies less desirable to lend to. The consequence: profitability, buoyed by cheap money since rates went to near-zero in 2008, will sink.

Euro Bond Rout Wipes Out 2015 Profit as Inflation Returns - (www.bloomberg.com) For the first time in 2015, investors in European bonds are sitting on a loss. The securities tumbled on Tuesday after a report showed euro-area consumer prices rose in May by more than economists forecast, leaving them down 0.1 percent this year, according to the Bloomberg Eurozone Sovereign Bond index. As recently as April 15, the index was up 4.6 percent. German government bonds held onto their biggest drop since 2012 Wednesday before European Central Bank officials gather in Frankfurt to set monetary policy. Data this week showed the ECB accelerated its 1.1 trillion-euro ($1.2 trillion) bond-buying program in May, before the region’s summer vacation period. “If the market believes the ECB will ultimately be effective, and that inflation expectations should revive and nominal growth will revive, then bond yields should keep going up,” Laurence Mutkin, global head of Group-of-10 rates strategy at BNP Paribas in London, said in an interview on Bloomberg Television’s “Countdown” with Mark Barton.

[CNN] Venezuela's currency isn't worth a penny - (money.cnn.com) Its currency, the bolivar, is literally worth less than a penny. Just a month ago, $1 was worth 279 bolivars. That was already pretty dismal for Venezuela. Now $1 equals 408 bolivars, according to the unofficial exchange rate, which most Venezuelans get when they try to trade currency. Put another way, one bolivar equals $0.002 -- less than a penny. The country's currency has lost nearly half its value since the beginning of May, according to dolartoday.com, a website that tracks the unofficial exchange rate. It's another sign that Venezuela is arguably the world's worst economy. Venezuela primarily relies on oil exports to support its economy, which was already under pressure before oil prices tanked in the fall and winter.

Greek crisis fuels Juncker power grab - (www.politico.eu) For European Commission President Jean-Claude Juncker, the roller-coaster negotiations with Athens haven’t just been about keeping Greece in the euro. Behind the scenes, he has used the crisis to try to establish the European Commission as the union’s indispensable powerbroker, putting him at loggerheads with national governments. At stake is the balance of power in the European Union. There has always been a natural tension between the Commission, as the EU’s executive arm, and the European Council, the forum of member states. Now, Juncker is trying to tip the scales in the Commission’s favor, arguing that as the Commission’s first popularly elected president, he has a mandate to do so. Juncker’s strategy was on full display this week. On Monday, he traveled to Berlin, where he pushed Angela Merkel and Christine Lagarde to take a softer line on Greece. “Grexit is not an option,” he told a German newspaper ahead of the meeting, contradicting recent statements by some of the creditors. Juncker hosted Greek Prime Minister Alexis Tsipras Wednesday evening in Brussels for consultations on Athens’ latest reform proposals.

Length of new-car loans hit new record – (www.usatoday.com) New-car sales are running at near-peak levels, partly because many consumers are financing their purchases for longer terms. The average new car loan has reached a record 67 months, reports Experian, the Ireland-based information-services company. The percentage of loans with terms of 73 to 84 months also reached a new high of 29.5% in the first quarter of 2015, up from 24.9% a year earlier. Long-term used-vehicle loans also broke records with loan terms of 73 to 84 months reaching 16% in the first quarter 2015, up from 12.94% — also the highest on record. "While longer-term loans are growing, they do not necessarily represent an ominous sign for the market," said Melinda Zabritski, Experian's senior director of automotive finance. "Most longer-term loans help consumers keep monthly payments manageable while allowing them to purchase the vehicles they need without having to break the bank.

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