Tuesday April 26 2016 Housing and Economic stories

TOP STORIES:

Make No Mistake: Puerto Rico Will Default on May 2, Moody's Says - (www.bloomberg.com) Make no mistake about it: Puerto Rico will default in May on some of the $470 million it owes, according to Moody’s Investors Service. The cash-strapped commonwealth is expected to fall short of paying $422 million to holders of bonds from the Government Development Bank, the credit rater said Friday in a report. It may also default on debt from the Employees Retirement System, Industrial Development Co. and Highways and Transportation Authority because the GDB has just $562 million in liquidity as of April 1, Moody’s said. “These impending defaults would follow the government’s efforts to emphasize its severe cash depletion during the past year,” Moody’s analysts led by Ted Hampton and Emily Raimes wrote. “Even if federal oversight legislation is passed by the end of next week, Puerto Rico will still default because the commonwealth treasury and the GDB, which has long been the government’s fiscal agent, have insufficient liquidity for upcoming debt payments.”

Topless dancers, champagne, and David Bowie: Inside the crash of a $2.7 billion unicorn - (www.businessinsider.com) Powa Technologies collapsed in February after blowing through more than $200 million of investor money. Insiders claim its flagship product was a "basket case" and company was plagued with management dysfunction. Former staff recall wild Christmas parties with bottomless champagne and topless dancers. Deal that valued Powa at $2.7 billion was a "dud" according to insiders. CEO surrounded himself with "yes men" and allegedly wouldn’t listen to criticism. Rumours that CEO could have saved the company if he’d stepped aside, but refused.

Oil is heading toward another crash - (www.businessinsider.com) Some analysts are betting that the recent jump in oil prices will be short-lived. A big meeting of producers in Doha, Qatar last Sunday ended without an agreement to cap output. Christopher Wood, author of CLSA's weekly GREED & fear letter, said Thursday that this proves oil will drop to $20 a barrel — one of the most bearish calls out there. West Texas Intermediate crude, the US benchmark, traded as high as $44.45 a barrel Friday. Brent crude, the international benchmark, rose to $45.89. To recap Doha, members of the oil cartel OPEC and nonmembers met to try and agree on output ceilings in an effort to help lift prices. Many economies, including OPEC's de facto leader Saudi Arabia, have been strained by the price collapse.

Junk downgrades already outpace 2015 - (www.ft.com) The debt doghouse is filling up fast. More companies were downgraded to junk status by Moody’s in the first three months of the year than in the whole of 2015. In total, 51 companies were pushed into junk territory, up from eight in the fourth quarter and 45 in 2015. The sharp increase in number of so-called “fallen angels” — as those companies stripped of their investment grade status are known — comes as focus intensifies on whether the current credit cycle, which began after the 2008-2009 financial crisis, is turning. Pressure on borrowers’ balance sheets has been particularly acute among those exposed to the falling price of commodities. Moody’s also blamed the travails of the commodities market on the significant swelling in the number of “potential angels”, or those companies at risk of being cut to junk.

Half of Middle-Class Americans Are Living Paycheck to Paycheck – (www.theatlantic.com) Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

OTHER STORIES:

Asia Stocks Drop as Japan Falls on Yen, Investors Weigh Earnings - (www.bloomberg.com)
S&P 500 Loses Grip on 4-Month High as Stocks Fall Amid Earnings - (www.bloomberg.com)
Microsoft Profit Misses Estimates on Weak PC Market - (www.bloomberg.com)

Merkel says criticism in Germany of ECB is not interference - (www.reuters.com)
ECB's Draghi Defiant After Central Bank Keeps Rates on Hold - (www.bloomberg.com)
Draghi Says Stimulus Is Working as ECB Defends Independence - (www.bloomberg.com)