Currently, a new form of danger arises. The Keynesian pettifoggers at the Fed have painted themselves into an epochal corner. After 78 months of ZIRP they have no idea about how and why they got here; and now, mired deep in the lunacy of free money, they are clueless about where they are going next. There is not a chance the US economy has decoupled from the rest of the world. The great credit-driven boom was universal and fueled by out of control central banks. Now comes the bust phase, and these same money printing central bankers have no clue what to do about it.
There is no mystery anywhere to be found in the fact that US retail sales don’t follow the jobs trend. Not if you look at what kind of jobs they are, let alone at all the other made up and manipulated numbers that are being thrown around about the US economy. The only mystery is why everyone persists in talking about a recovery. That recovery will never come, simply because all 90% of Americans do is pay for the other 10% to get richer. There are many other factors, but that all by itself makes a recovery a mathematical mirage.
Accused of illegally repossessing cars from active-duty service members, Santander Consumer has agreed to pay $9.35 million to the Justice Department in the largest auto reposession-related settlement in history. A look at the company's subprime auto securitizations speaks volumes not only about the lender, but about the furture course of subprime ABS issuance in the US.
Earlier today we warned readers that based on actual credit card spending data, today's retail sales data would continue the worst trend since Lehman, and sure enough that's what happened: moments ago the Commerce department reported that in February, retail sales missed once again and missed big and across the board, the third big miss in a row, with the headline print coming at -0.6%, far below the 0.3% expected, and in line with the -0.8% drop last month. Putting the headline numbers in context: December -0.9%, January -0.8%, February -0.6%. Excluding the volatile autos and gas, sales dropped once again, sliding -0.2%, below the 0.3% expected - in fact below the lowest estimate - and worse even than last month's downward revised -0.1% decline. And with that the worst run in retail sales since Lehman is now in the record books.
Berkshire Hathaway is getting into the car-retailing business with the purchase of the country's biggest privately-held dealership chain. With auto sales set to stall thanks to subprime jitters, is the Oracle stepping into the wrong business at just the wrong time?
The US economic recovery continues as the number of homeless in New York's shelters rises 50% in three years. De Blasio says New York needs to take "immediate and bold steps" to combat the worsening problem.
For all the talk of a recovery, the recession may have quietly arrived as confirmed first by factory orders and now wholesale trade sales...
To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed's Mester and Kocherlakota speak later today as the Fed is now - supposedly - set to hike no matter what. Here is what the other main events are for the balance of the week.
Goldman confirms precisely what we’ve been saying all along which is that the risks inherent in subprime lending are materializing and at the margin, growth in US auto sales has all been created by lowering credit standards and extending terms to a whole load of 'new' auto buyers.
Last month we observed that in the aftermath of the worst print in non-revolving (i.e., student and auto loans) debt since November 2013, that the subprime-credit driven, pardon the pun, feeding frenzy for cars is now over. And sure enough, following this month's disappointing auto sales which missed virtually for every single producer, we were again correct. This month, however, things are even worse, because while last month it was the collapse in the non-revolving debt that was the highlight, at least it was modestly offset by a surge in revolving credit as consumer loaded up the credit cards. No such luck this month.
Financial systems that seem robust are more often than not inherently fragile - China is no exception!
A running theme here has been the great rotation of bubble-blowing credit from subprime housing to subprime auto-loans. Amid government probes of underwriting standards and soaring delinquencies, it appears when the least-creditworthy Americans are cut off from debt servitude, bad things happen in car sales... FORD FEB. U.S. LIGHT-VEHICLE SALES FALL 2.0%, EST. UP 5.8% (miss!). Worst Still - US Domestic Vehicle Sales Worst Start To The Year Since 2010. Of course, the real blame - as we will be told - is the weather... It seems Obama's new American Dream of a brand new Ford or GM (or Maserati) in every driveway may be another broken promise.
With little newsflow out of Europe, and just as little on deck out of the US (just NY ISM and auto sales later today), the main overnight events were out of Asia where first the RBA decided to leave rates unchanged but not before the announcement was leaked up to a minute early. In China, the rate-cut euphoria lasted just one day, and after a feeble 0.8% bounce on Monday, the SHCOMP was down 2.2% this morning over fears the PBOC is doing too little, too late to halt what is now perceived by many as a massive "tightening" capital flight out of China. Finally, Japan made the newsflow, after it JGBs continued to slide following a weak auction, fears that the BOJ is done easing after Abe advisor Etsuro Honda warned against overheating, and after the biggest jump in base pay in over a decade led some to think the BOJ may soon have to halt easing altogether, especially if real wages proceed to rise