October auto sales beat expectations. Sales are up 10% in the past year, and they have doubled since their Feb. 2009 low. That works out to an annualized rate of increase of 11% per year.
This is one more example of one of the "hot" sectors of the economy. Housing and autos are on fire, and that says this is not a fragile recovery.
And no inflation in autos. Global supply lines. Endless supply.
ReplyDeleteHousing? Bad situation. Every city in the United States restricts the supply of housing through zoning. Single-family homeowner NIMBYs crush investors.
Imagine the supply of housing that would create a boom in the City of Newport Beach, if the city would unzone residential and "allow" (stop depriving landowners of their property rights) 40-story condo towers to be built.
The US economy hardly has any inflation, and that which exists is largely due to restrictions in the supply of housing. There is little the Fed can do to stop this source of inflation--- unless it wishes to suffocate the economy.
Stan Druckenmiller, who produced average annual returns of 30 percent from 1986 through 2010 at the Soros Fund, spoke Tuesday at the New York Times "DealBook Conference" in New York. He said that he was short the EURO and less certain about stocks. And he said it was possible that a Bear Market began in July 2015. Druckenmiller said he was long { 10 } high-beta, high-growth companies and short cyclical companies.
ReplyDelete“I could see myself getting bearish; and I can’t see myself getting bullish.”
Below is a link to his 24 minute interview. Vidoes of other speakers are also at this link.
http://nytdealbookconference.com/gallery/dealbook-0/2015-videos/2058
Add on: This is an amazing stat: There has been no inflation in motor vehicle prices for consumers since...1998.
ReplyDeleteConsumer Price Index for All Urban Consumers: New and used motor vehicles
Fred graph.
https://research.stlouisfed.org/fred2/series/CUUR0000SETA
This underscores the point: There is nothing to fear from demand-pull inflation. The US should be running its economy at much fuller bore. The Fed is suffocating the economy with its 1970s style fears of a 1970s style economy.
Housing is the problem. So, we have to live with moderate inflation if we want robust growth.
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ReplyDeletemarcus: constructive comments and questions please
ReplyDeleteLonger terms and low interest rates along with subprime conduit being opened up via Ally bank formerly GMAC via the fed to push tier pricing below actual risk pricing
ReplyDeletethe fed created artificial inflation in vehicles and housing....they are the largest payments per household, they created more debt to cover their folly..price fixing via mbs-abs buying...what a democracy...more like a corpocracy
Only bankers get away with stuff like this....
grannis: deal with sharp and ad hominem. that's the public forum.
ReplyDeleteand besides in the post before this one you said:
ReplyDelete"this is still the weakest recovery ever, and there are no convincing signs to suggest the recovery is going to get meaningfully stronger."
and here:
"this is not a fragile recovery" you seem to get swept up in your own cheerleading (or not).
Honestcreditguy--- there is no inflation in automobiles. We are seeing the same prices today even nominally that we saw in 1998.
ReplyDeleteThere is inflation in housing which is what you would expect in a nation that suffocates the supply of housing.
Unfortunately, this is a matter of "We have met the enemy and he is us." Who wants their own single family detached neighborhood to welcome ground-floor retail in 40-story condos?
Let me paraphrase my take on the state of the economy: it is still the weakest recovery ever, and unlikely to strengthen near-term, but is not a fragile economy that is likely to slip into recession.
ReplyDeletehttps://research.stlouisfed.org/fred2/series/MVLOAS (motor vehicle loans owned and securitized)
ReplyDelete1990 Q4: $283.8910B
2007 Q4: $801.1755B
2015 Q2: $998.1424B
https://research.stlouisfed.org/fred2/series/DTCTLVENMNM (Average maturity of new car loans at finance companies, amount of finance weighted)
June 2015: 65.47 months
http://www.wsj.com/articles/top-u-s-banking-regulator-raises-red-flag-about-auto-loan-risks-1445446881
Article regarding Comptroller of the Currency expressing concern over auto loan market. Please note, so far there are no increases in delinquencies or late payments. CFPB has also raised alarms over consumers taking on too much auto debt.
“Subprime car loans account for 20% of the car-loan dollars given out from January through June, the highest share for the period since 2008, according to Equifax.”
Followed by...
“Some 29% of new car loans given out in the second quarter of this year had a repayment period of 73 to 84 months, up 20% from a year ago.”
Longer terms, more debt, more subprime borrowing. Should be some cheap repossessed vehicles during the next downturn. What does the CDS market look like for Ally? Not where I want my money invested!
Thinking Hard--Great stuff. Vehicles are cheap---prices have not risen, even nominally, since 1998.
ReplyDeleteBy the way, borrowing money to buy a car that is needed for business purposes or to get to a job, is not necessarily a bad thing. Maybe these are Uber drivers!