Cash For Clunkers
When we first warned that something was breaking in the American auto market, the Phil-LeBeau-ians crawled out of the woodwork to explain how everything is still awesome (brushing the weakness in stocks) despite soaring inventories and shrinking credit. Then when used-car prices began to leak lower, a few paid attention and the recent weakness in new car sales has shocked most. Now, however, used-car-prices are plunging at a similar pace to 2008 and RBC wonders if declining used vehicle prices (biggest YoY since 2013) is the card that brings the whole house down.
It appears that the Chinese Politburo has also noticed that it finds itself straddled with yet another unsustainable housing bubble, not only in Shenzhen, but also Shanghai, and all other Tier 1 cities and has taken aggressive steps to slow down this exponential surge in prices before it gets even more out of control. As a result, on Friday the local government took the following "sudden" steps to halt the exponential rise in home prices and tighten the local housing market dramatically.
Termites start low and work their way up. By the time you notice them, it’s often already too late to save the place. All you can do is rebuild, start over. This analogy may be useful in terms of understanding what’s going on in the car business...
If Europeans think they have a migrant problem now, just wait until they institute a basic income. It’s obvious what will happen...
As with houses, it doesn’t matter how big or luxurious or complex you make new cars. When the credit bubble bursts, auto prices will not “always go up.”
The continued misuse of capital and continued erroneous monetary policies have instigated not only the recent downturn but actually 30 years of an insidious slow moving infection that has destroyed the American legacy. “Recessions” should be embraced and utilized to clear the “excesses” that accrue in the economic system during the first half of the economic growth cycle. Trying to delay the inevitable, only makes the inevitable that much worse in the end.
Per capita energy consumption remains at recession levels. There are other factors at work here, of course, but if we combine these data series, we get a picture not of robust growth akin to previous post-recession periods, but a "recovery" that by previous standards remains recession-bound.
Retail Disaster: Holiday Sales Crater by 11%, Online Spend Declines: NRF Blames Shopping Fiasco On "Stronger Economy"Submitted by Tyler Durden on 11/30/2014 23:09 -0400
“A highly competitive environment, early promotions and the ability to shop 24/7 online all contributed to the shift witnessed this weekend,” Mr. Shay said.
One can kiss the US subprime-driven "manufacturing renaissance" goodbye. The reason, as we reported moments ago, Industrial Production dropped 0.1%, driven by a -0.4% contraction in manufacturing, the worst print since the "harsh winter collapse" of January 2014. The answer to the key question, what drove the tumble, is simple: what goes up has come down, in this case production of Motor Vehciles and Part, after posting its best number in 5 years, just posted... it worst monthly drop in five years, or since May 2009 to be precise. As the chart below shows, following July's month's 9.3% surge in production of motor vehicles and parts, August has come and wiped out all the gains, with a 7.6% plunge, the bigest collapse since May 2009.
The auto loan subprime bubble may be the latest to burst (after student loans) as the rate of car repossessions jumped 70.2 percent in the second quarter, with much of that increase coming from finance companies not run by automakers, banks or credit unions. "The number of delinquencies and repossessions rising is what we would expect as the auto industry sells more vehicles," "But this slight uptick is one to keep an eye on." The surge in delinquencies and repossessions is being driven primarily by borrowers with subprime and deep subprime credit scores.
In July, the gain in durables was led by an increase of 10.1 percent in the index for motor vehicles and parts, which was the largest since the index jumped 26.9 percent in July 2009. In other words, when it comes to the US economy, subrpime is the new "cash for clunkers" as can be seen on the chart below.
Consumer Credit Has Fifth Biggest Monthly Jump In History; Revolving Credit Soars By Most Since November 2007Submitted by Tyler Durden on 06/06/2014 15:23 -0400
A month ago we pointed out that with April US consumer savings plunging to levels not seen since Lehman, the only place where the tapped out consumer could find some purchasing power is by maxing out their credit cards. This is precisely what happened: moments ago the Fed released its April consumer credit report and it was a doozy: expected to print at $15.00 billion, down from a pre-revision $17.5 billion, the April total instead exploded to a whopping $26.85 billion. This was the fifth biggest surge in history, and was only surpassed by the 2010 "cash for clunkers" record, as well as previous one time outliers in 1998, 2001, and 2006.
When good decisions are no longer possible, bad decisions are inevitable.
The biggest bubble is in investors' belief that there is no risk.
If somehow the scramble to open stores earlier and earlier on Thanksgiving day, until such time as the very Thanksgiving dinner had to be interrupted early for the annual rush out to the (un)friendly neighborhood Thug-Mart (Toys'R'Us opened at a ridiculous 5pm on Thanksgiving day) and punching people in the face just to get that 42 inch, 2010-model Plasma TV for $99, was supposed to boost overall sales instead of merely pulling them forward (see cash for clunkers), it didn't work. According to ShopperTrak, total Black Friday traffic plunged 11% and total sales fell 13.2%, the second consecutive year of declines following last year's 1.8%. The reason, as largely expected, is that a substantial portion of Friday shopping was pulled back to Thursday: as ShopperTrak founder Bill Martin said, "if retailers continue to promote Thanksgiving as the start of the holiday buying season, he thinks the holiday will eventually surpass Black Friday in sales. "We're just taking Black Friday sales and spreading them across a larger number of days," Martin said."