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The Only Chart You Need To See From Today's Wholesale Inventories: GM Channel Stuffing Goes Auto Industry-Wide

Tyler Durden's picture




 

Today we got another confirmation that the only "growth" in the economy comes courtesy of inventory stocking for that eventual day when the economy picks up and inventory can be sold at an actual profit, after wholesale inventories printed at 1.8% on expectations of 0.6%, up from 1.1% previously. We get it: economic growth now comes at the assumption that there will be economic growth in the future, thank you I in the GDP calculation. But the only chart that matters, and in keeping with our observations of pervasive channel stuffing at GM, is the following: the inventory to sales ratio for the car industry, which just surged to 1.62, or a level not seen since the summer of 2009. This is a 16.55% rise in the ratio or the biggest ever relative jump in the auto inventory/sales ratio in history. Translated: nobody is buying already built cars. But yes, keep blaming the collapse in auto "production" on Japan.

 

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Fri, 07/08/2011 - 10:26 | 1436380 Archimedes
Archimedes's picture

The sand is quickly running out of this hourglass...

Fri, 07/08/2011 - 10:32 | 1436406 Cognitive Dissonance
Cognitive Dissonance's picture

Like sands through an hourglass, so are the Day's Of Our Lives.

http://en.wikipedia.org/wiki/Days_of_our_Lives

Fri, 07/08/2011 - 14:26 | 1437545 66Sexy
66Sexy's picture

Fundamentals dont matter anymore; this is a currency collapse that is corrupting and abstracting valuations. This means the markets will always correct to the upside for the forseeable future.. possibly until a new currency is introduced, where silver and precious metals prices are so high that they cannot defacto compete with a new currency .

Fri, 07/08/2011 - 11:47 | 1436912 carbonmutant
carbonmutant's picture

Which is why our "community organizer" is stumping for more...

Fri, 07/08/2011 - 10:28 | 1436396 DosZap
DosZap's picture

With this GLUT of inventory, why is the industry hiring more and more folks.

Makes zero sense to me.

Fri, 07/08/2011 - 10:37 | 1436448 tmosley
tmosley's picture

They are probably getting government munie under the table to hire more people.

Fri, 07/08/2011 - 10:55 | 1436585 Clockwork Orange
Clockwork Orange's picture

Because it is run by the government.

Fri, 07/08/2011 - 11:11 | 1436699 Oh regional Indian
Oh regional Indian's picture

It's wartime hiring Dos. I'm sure MIC is going to need a lot of liberty ship builders in a few months time.

oh, i consider GM totally MIC, with a retail cloak and a banker's heart.

ORI
http://aadivaahan.wordpress.com/2010/11/24/wisdom-for-warriors-5/

Fri, 07/08/2011 - 13:32 | 1437374 Muddy1
Muddy1's picture

Remember, this is GM Government Motors, we need to create jobs so we have the guvment do it because the private sector has been destroyed. 

They "owe" the unions, see this:  http://www.theblaze.com/stories/car-czar-i-did-it-all-for-the-unions/

Fri, 07/08/2011 - 10:29 | 1436398 firstdivision
firstdivision's picture

Cash for clunkers part deux in  4....3....2....

Fri, 07/08/2011 - 10:44 | 1436497 espirit
espirit's picture

Bailout of auto dealerships part deux in 4....3....2....

Fri, 07/08/2011 - 11:48 | 1436918 carbonmutant
carbonmutant's picture

Tax breaks for GM buyers...

Fri, 07/08/2011 - 10:29 | 1436399 Paul Thomason
Paul Thomason's picture

Good.  These guys are all sleazy scumbags, it was a foregone conclusion that they would get up to their old tricks again.  Looks like GM will go bankrupt again - 2nd round there will be no comeback.

Fri, 07/08/2011 - 10:29 | 1436401 qussl3
qussl3's picture

The Chinese will buy them up no worries.

Failing that we got lots of salt.

Fri, 07/08/2011 - 12:00 | 1436996 John Law Lives
John Law Lives's picture

Maybe we can have a nationally sponsored smash-up derby with all the new cars.  Everyone can pay admission to watch on pay-per-view with the proceeds going to pay down the national debt.  Then, all the car repair shops will be fully employed to repair all the damaged cars so they can be resold as "slightly used".  GM can also crank out some more new cars for next year's smash-up derby.  It will be great!  Keynesian dream.

Fri, 07/08/2011 - 16:27 | 1438180 Mec-sick-o
Mec-sick-o's picture

LOL, sadly, it is true, although we don't smash cars in derbies, we definitely use them too little before getting a new one.

Some people think that the earlier they sell, the more resale value it has, but also the most depreciation happens in the same period.

Most automakers ask for powertrain parts that should last 10 years or 100,000 miles, I wonder how many cars we should be really building if we used 10 years or 100,000 miles as the clear-cut way of saying my car is old and needs to be replaced.

Fri, 07/08/2011 - 10:29 | 1436404 alien-IQ
alien-IQ's picture

Extend and Pretend Part Deux!

Fri, 07/08/2011 - 10:30 | 1436407 Caviar Emptor
Caviar Emptor's picture

The price of a fake ISM Man: Inventory glut

Fri, 07/08/2011 - 10:31 | 1436409 cpnscarlet
cpnscarlet's picture

At the end of Jan 09, I decided to buy a small Chrysler car, one I didn't really want or need, just to "do my bit" for the economy...how f**king patriot of me!

It didn't help, did it?????

Fri, 07/08/2011 - 10:36 | 1436443 Overflow-admin
Overflow-admin's picture

Straight answer: no.

 

You actually did the opposite, because buying something one's doesn't need only moves the money; it doesn't create any value.

 

Patriotism without thinking is a bitch!

Fri, 07/08/2011 - 10:40 | 1436469 NotAllowed
NotAllowed's picture

Wow, did the same thing, bought a 3/4 ton chevy full size pickup with 0% for 72 months.  Figured in 3 years one ounce of gold would pay the remainder off!  Also did try and do my patriotic duty.  Wont do that again!

Fri, 07/08/2011 - 10:44 | 1436498 trampstamp
trampstamp's picture

Was it a 300C, Magnum or Charger from the SRT line? Then you should be fine.

Fri, 07/08/2011 - 12:06 | 1437023 Max Hunter
Max Hunter's picture

I have a 300.. I'll NEVER buy another Chrysler product again.. NEVER!!

Fri, 07/08/2011 - 16:57 | 1438302 Mec-sick-o
Mec-sick-o's picture

Hahaha, next time just buy it for you.

All other rationalizations won't help much.

Fri, 07/08/2011 - 10:32 | 1436413 matagorda
matagorda's picture

Not to worry.  I saw a headline yesterday that GM's going to start offering free insurance.  (AIG, I presume.)

Fri, 07/08/2011 - 10:36 | 1436414 russwinter
russwinter's picture


Inflation Causes Demand Boom, Then Bust

http://www.wallstreetexaminer.com/blogs/winter/?p=3895

 

In February, farmers moved “to beat the price hikes” by purchasing their fertilizer far in advance, OTR Global  commentary revealed. This is indicative of a classic inflationary environment, not a normal business cycle.

“Many US farmers are already buying nitrogen for applying in spring 2012, before this year’s spring crops have been sown,” OTR Global said. ”All sources said it is highly unusual for farmers to spend on next year’s crop before the current year’s crop is planted, but robust income and farmers’ desire to avoid higher fertilizer prices later is prompting the move,” the intelligence group said.

In response to the boom in orders, fertilizers producers like Potash are taking old facilities out of mothballs, misreading the market signals.

PotashCorp said it was to spend $158m over the next 18 months restarting anhydrous ammonia production at its Geismar plant in Louisiana, which has since 2003 been restricted to production of other nitrogen fertilizers.

The problem is that this  inflationary response infects, maladjusts or badly distorts economic signals. Inflation psychology is driving and pulling forward short-term demand. Demand at some point becomes more of an inflation-coping strategy. Prices reach a tipping point that take some industrial producers literally out of business , leaving the remaining so-called demand in the hands of hedge funds, huge speculative pools, or wherever else Wall Street can suck investors in on the “sustained global commodity bull.” Meanwhile, the real economy is badly weakened and a bust ensues. The Chicago PMI report offers succinct comments that add color to this phenomena.

“Prices on plastic resin and cotton continue to press suppliers to the point where they are increasing prices or refusing business – first time I’ve seen this in years.”

People who are unaccustomed to big inflations or who drink the low-inflation kool-aid being dispensed by the Fed and U.S. government can confuse this development for real, sustained economic demand. Indeed, for a time, the numbers make it look so

 

 

Fri, 07/08/2011 - 10:36 | 1436440 nonclaim
nonclaim's picture

If they stuff the channel at 0% rate cost and the FED finally delivers the much promised inflation, say 5%, then they book a 5% "profit", no sales or other "skillz" needed...

Overproduction of unneeded things in low quality finishing was a socialist banner wasn't it?

Fri, 07/08/2011 - 11:08 | 1436509 buzzsaw99
buzzsaw99's picture

the local dealer told me last year that incentives wouldn't be around much longer so I better buy now. LMAO!

Fri, 07/08/2011 - 11:18 | 1436760 DonnieD
DonnieD's picture

I heard a realtor say something similar.....in 2007

Fri, 07/08/2011 - 10:51 | 1436551 Commander Cody
Commander Cody's picture

The automakers are preparing for the deluge in pent-up demand.

Fri, 07/08/2011 - 10:53 | 1436561 johngaltier
johngaltier's picture

Aside from becoming a CB captained ship, the global economy has become an enormous confidence game. It's easy to forget that economies are made up of people. The field is just as much an excercise in mathematics as it is psychology. Teetering on collapse for a system predicated on confidence means one piece of horrific news threatens to send everything into an unbreakable downward spiral. There is no FDIC to prevent capital flight on an international scale. At least, not that I know of. 

Fri, 07/08/2011 - 11:52 | 1436893 TruthInSunshine
TruthInSunshine's picture

Confidence game. They've officially lost the game - it matters not what equity markets do or don't do for some time (real markets reflective of economic activity tell the tale; equity markets are always late to reality).

There's nothing sinister, or new, about it - in generic or historical terms. If consumers and businesses are not confident, they will not spend and hire.

There are new, innovative and sinister aspects to this management (Bernanke, Paulson/Geithner, Friedman & Dudley), however, in the form of TARP, TALF & QE (all highly destructive and even criminal [TARP] programs, designed to purely enrich/bailout Wall Street, which has nepotistic ties with the Federal Reserve (and many in government, including Pelosi and Paulson).

But the idea is simple. If consumers and businesses are not confident, they will not spend and hire.

If consumers don't spend and hire, unemployment can't get better, and ultimately, starts to increase.

If unemployment doesn't get better, or ultimately, starts to increase, consumers spend less and businesses hire fewer people, then freeze hiring, then lay people off.

If consumers spend less and businesses hire fewer people, then freeze hiring, then lay people off...

You get the idea.

Print more fiat you say? They have, it's created outrageous real inflation, and has simply destroyed discretionary purchases (and quite a bit of non-discretionary purchases, hence the need for more and larger government transfer payement assistance; hello SNAP).

This is the real 'virtuous circle' that Bernanke has created.

Bernanke is an absolute failure of a man and an economist and central banker because he tried to fight a structural disintegration of the economy, cause by massive government, business and household debt/leverage (don't believe CNBS - U.S. businesses alone - so "flush" with cash - have a record 11 trillion of debt) and structural changes to the employment, consumption and production patterns ushered in by incredible gaps in efficiencies between new global trading partners (which Wall Street capitalized on by engaging in incredible risk taking, banking massive profits, with the 'too big to fail' designees getting taxpayer bailouts), by using monetary policy (which has flamed inflation and thrown water on any potential embers of structural - employment, organic demand, unsubsidized demand - improvement.

This isn't 1933. Bernanke is not brilliant or wise. Bernanke has taken from taxpayers (watch and see how this transfer of the Fed's balance sheet to taxpayers plays out) trillions to bail out the least useful and I'd argue most destructive segment of the capitalistic base (the money shifters), and with time, the taxpayers, consumers and producers of real wealth (businesses that create things of real value and don't simply shift money from one pocket to another account) will suffer a death of a thousand blows.

The window to truly help the U.S. and global economy has closed. Bernanke & Paulson will go down as not only failures, but criminal accomplices that helped usher in a new economic depression.

The middle class revolution in the United States will happen. It won't be bloody or violent, but it will be effective in it's "not buying anything not needed or that which I'm not subsidized heavily to buy" simplicity.

The CONFIDENCE game of having government mouthpieces and the proxy media tell the consumer and taxpayer that all is well and green shoots are blossoming is for naught. Even the sheeple understand that the system is broken and that they're being lied to, even if they don't understand the intricate details of the hows and whys - most undeniably, there's less money in their pockets and less purchasing power to go with the less fiat, so they feel it.

When CONFIDENCE is lost, commerce slows, and as commerce and interchange is the liquidity and oil of the economic engine, things seize up.

Fri, 07/08/2011 - 10:54 | 1436577 Clockwork Orange
Clockwork Orange's picture

.

Fri, 07/08/2011 - 10:55 | 1436590 Jim B
Jim B's picture

Waiting for the clearance sale! LOL

Fri, 07/08/2011 - 11:14 | 1436733 monopoly
monopoly's picture

I just do not understand why so few people are getting what is going on. We have a lot of intelligent humans in this country and they just keep buying Ipads, heading to Kohls and Neiman Marcus and take vacations without paying down debt.

I mean, 21% on a credit card to an insolvent bank. Please!!!!

Mind boggling.

Fri, 07/08/2011 - 11:19 | 1436764 PositivelyNegative
PositivelyNegative's picture

But I thought auto sales were weak because customers couldnt "get their hands on any cars" due to the parts shortage??? What am I missing?

Fri, 07/08/2011 - 11:44 | 1436894 Lord Blankcheck
Lord Blankcheck's picture

Reality

Fri, 07/08/2011 - 11:47 | 1436917 mayhem_korner
mayhem_korner's picture

I think I'll go around to some dealerships this weekend and announce myself as a cash-paying customer with no trade in to deal with.

Fri, 07/08/2011 - 11:48 | 1436921 bam_son
bam_son's picture

"economic growth now comes at the assumption that there will be economic growth in the future" well played

Fri, 07/08/2011 - 13:38 | 1437392 Muddy1
Muddy1's picture

Yes, and we're also seeing were people will be arrested for pre-crimes now because their behavior indicates criminal activity in the future.  When will the tea leaf readers see an economic improvement as well?

Fri, 07/08/2011 - 12:03 | 1437013 Raymond Reason
Raymond Reason's picture

This inventory gamble can also be seen in the crippled housing industry.  My brother in law is still surviving as a builder, building custom homes.  According to him, the people buying these homes are all confident that prices and demand will resume their upward march soon. 

Fri, 07/08/2011 - 12:32 | 1437108 clocksun
clocksun's picture

nothing to worry about. gm is TBTF. will be recipient of QE15. done deal. get long.

Fri, 07/08/2011 - 14:03 | 1437460 Rusty Shorts
Rusty Shorts's picture

GM Globalization ... rewind video to the beginning, apparently they don't want you to see this.

http://www.youtube.com/watch?v=nKD2Zz8x7_k

Fri, 07/08/2011 - 14:55 | 1437710 AldousHuxley
AldousHuxley's picture

GM is done with America. They are now trying to sell s!htty cars to Chinese. Buick is successful Chinese businessmen's luxury exclusive brand. "only rich an afford such an inefficient large car"

Sat, 07/09/2011 - 00:08 | 1439150 Sun Tsu
Sun Tsu's picture

Cash for Clunkers ...... Guvment Motors QE II

Sat, 07/09/2011 - 08:26 | 1439357 lamont cranston
lamont cranston's picture

Screw ObamaMotors. Sold a 2005 LaCrosse w/ 166K for 5500. Could not believe it, but KBB priced it at 5800, but it had dings.

Bought a Jetta TDI wagon for under 30, averaging 36 mpg. My next truck for biz will be a FORD. My father will turn over in his grave.

Sat, 07/09/2011 - 08:51 | 1439375 AustrianEconomist
AustrianEconomist's picture

It is clear that the Economic theories in place are outdated, just look at the unemployment report, 99.99% of professional economist were completely wrong and are all wearing their rose coloured glasses rather be realistic. The US economy is in huge trouble, that’s a fact.

 

Check out the latest from the Capital Research Institute (CRI): Creative Destruction – A New Economic Order www.capitalresearchinstitute.org

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