WHO COULD HAVE PREDICTED?

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Posted on 16th May 2013 by Administrator in Economy |Politics |Social Issues

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I wrote an article eight months ago called Subprime Auto Nation http://www.theburningplatform.com/?p=40182.

I went out on a limb and speculated that if you loan money to deadbeats who have no means to pay you back there is a high likelihood that the loan might go bad. In a truly shocking development it appears the loans doled out by the US government through their subprime loan specialists at Ally Financial are going bad rapidly. When 50% of all the auto loans in the country are made to subprime borrowing deadbeats, what could possibly go wrong?

Auto sales have been juiced by the easy credit being doled out. Sales are up 10% this year. The only thing rising faster are delinquencies and auto repossessions. Can you blame the deadbeats? They get to tool around in a Cadillac Escalade or Mercedes SUV for at least a year without making payments before the repo man appears. Their credit can’t be ruined because it already was ruined.

This is the Federal Reserve/Wall Street/Obama economic recovery plan. And guess who is paying the bill for the current and future auto loan losses? I bet you know.   

Subprime 2.0 – Auto Loan Deliquency Balances Rise 24% YoY

 
Tyler Durden's picture

Submitted by Tyler Durden on 05/15/2013 15:16 -0400

As we warned six weeks ago, the Fed’s ZIRP side-effects have driven auto-lenders to scrape the bottom of the subprime-lending barrel once again (loans to subprime borrowers +18% YoY). It seems, based on the Fed’s latest data, that this over-exuberant lending is coming back to bite once again as delinquent balances surge 23.9% year-over-year (though optimistically Experian reflects “obviously, we never want to see a rise in delinquencies or repossessions, but… they are still lower than the recession-level rates,”). As Experian also notes today, repossessions rose 16.9% year-over-year. All this as lending volumes overall rose 9.6% to $726 billion in Q1 2013 but average charge-off amounts rose by 9.8% to $7,401 on each defaulted loan – and the worse is yet to come, as “we continue to move forward, we should start to see more increases as some of the subprime loans coming onto the books begin to deteriorate.” This will end well.

 

“STRONG” RETAIL SALES???

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Posted on 13th May 2013 by Administrator in Economy |Politics |Social Issues

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The markets are attempting to rally on the “unexpectedly positive” retail sales numbers for April. The bullshit is getting so deep in this country, you have to wear hip boots. Even though I’m a trusting soul and know the MSM and our Wall Street economist “experts” will tell me what I need to know, I decided to go directly to the report. Here is a link in case you want the actual data:

http://www.census.gov/retail/marts/www/marts_current.pdf

Here are my observations about the “strong” retail sales:

  • Through the beauty of seasonal adjustments the actual 2.7% decrease in retail sales in April versus March becomes a .09% increase, which is rounded up to .1% by the MSM. The government drones would never use seasonal adjustments to make numbers look better than they really are. Right?
  • Even with seasonal adjustments, retail sales only went up $377 million. The subprime financing scam being run by the Obama owned Ally Financial and the other government subsidized Wall Street shysters resulted in a $783 million increase in auto sales. Therefore, retail sales excluding this government use of your tax dollars actually declined by $406 billion.
  • The MSM is crowing about the lower gasoline sales which are benefitting the American consumer. If you look at the 4 month trend versus last year, you see that retail sales at gasoline stations is down 1.1% versus last year. Let me remind you that last year was the highest average price for gasoline in history, so a 1.1% decline is not exactly a windfall to the consumer. Do you see the MSM reporting the facts on this chart?

  • The first four months of retail sales in 2013 have sucked. Overall, they are up 3.3%. Subtracting the government boosted auto sales and the increase is 2.5%. Even using the government manipulated CPI yields basically flat retail sales with 2012. Using a real inflation rate of 5% reveals that real retail sales are declining by 2.5% in the first four months of 2013.
  • If there is a real housing recovery how could retail sales of furniture, electronics and building materials be languishing in the -0.7% to 3.6% range? How can general merchandise sales (Wal-Mart, Target) be 3.4% below last year?

The fact is that real retail sales are falling. The Obama tax increases and Obamacare insurance premium increases have sucked the life out of the consumer. Gas prices have risen 10 cents per gallon in the last two weeks. The busy driving season is coming. The Middle East is a powderkeg. Hurricane season isn’t far off. Companies are cutting the hours of their employees. The savings rate is already at 2.7%. Consumers are reducing credit card debt. There are 10,000 people per day turning 65. Sounds like a recipe for strong retail sale growth. Right?

Maybe a government drone economist could chime in and explain the extreme wide variation in seasonal adjustments over the last ten years. Shouldn’t seasonal adjustments for the same month be fairly consistent over time? Inquiring minds want to know.

 

CONSUMER REVOLVING CREDIT AT 2005 LEVELS

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Posted on 7th May 2013 by Administrator in Economy |Politics |Social Issues

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I find it fascinating that the horrible consumer credit data was released at 3:00 pm by the Federal Reserve and the “journalists” at the Wall Street Journal owned Marketwatch did not feel it warranted a headline on their site. You see the stock market is above 15,000 and they need to convince the sheep that this is great news for them. Therefore, they wouldn’t want any negative news to derail their 15,000 Dow storyline.

The blatant manipulation of our financial markets by Wall Street and their cronies in Washington DC is completely revealed by the data reported today. Revolving credit card debt tells the story. We already know that real wages have been falling since the mid 2000′s. We know there are 2 million less full-time jobs than there were in 2007. We know that payroll tax increases and Obamacare premium increases have sucked the life out of the consumer. Not only is credit card debt lower than it was 6 months ago, but it is lower than it was in May 2005. It isn’t lower because consumers are paying it down. It is lower because they can’t take on any more debt.

So riddle me this. If they aren’t buying Chinese shit with credit cards and their disposable income is declining, how does a country that depends on consumers to generate 71% of its GDP by spending on shit happen to be in an economic recovery?

Government sanctioned fraud, financed by you the taxpayer. Total consumer credit did hit a new all-time high in March. Since 2009, credit card debt has declined by $71 billion. Over this same time frame non-revolving debt has increased by $458 billion. That sure sounds like a disconnect to me. Using your credit card is a personal choice and can be restricted by the credit card issuer through reduced credit lines. Why would consumers be cutting back on credit card debt by 8% and increasing their use of non-revolving credit by 30%?

Easy answer – Obama and his government minions. They have doled out hundreds of billions in student loans to dullards going to the University of Phoenix to keep the unemployment rate on a downward track and they happen to still own 80% of Ally Financial (GMAC, Ditech, Rescap). Obama and his minions have used Ally Financial as their little engine of growth for GM and the rest of the auto industry. While automaker profits continue to fall, Ally Financial is giving auto loans to deadbeat subprime borrowers accounting for 45% of all vehicle sales in the country. 

When has subprime lending created problems in the past? Is there a more subprime borrower than a University of Phoenix dropout or a Cadillac Escalade owner in West Philly? The economy is in the shitter. The average person can’t afford a pot to piss in. The government is using your money to create the illusion of recovery. There will be hundreds of billions in loan writeoffs for this government sanctioned fraud. You will foot the bill, so work harder and pay more taxes. It’s your duty to comrade Obama.  

March Consumer Credit Increase Driven Entirely (And Then Some) By Student And Car Loans

 
Tyler Durden's picture

Submitted by Tyler Durden on 05/07/2013 15:18 -0400

The March consumer credit headline was a disappointment, increasing by just $7.97 billion, on expectations of a $15.6 billion increase, with the February total revised lower to $18.14 billion. So far so bad. It gets worse when one peeks beneath the surface and finds that discretionary consumer credit in the form of credit card and other revolving loans posted its first decline of 2013, dropping by $1.7 billion, the biggest decline since December’s 2.1 billion. So what rose: why debt for purchases of Government Motors and student loans of course, which increased by $9.676 billion in March. In other words: the student bubble keeps getting bigger, more and more GM cars are being bought on subprime credit, while the vast majority of Americans can’t even afford to charge toilet paper purchases as the discretionary deleveraging continues.

In the last year, of the $157 billion in total debt issued, $152.6 billion, or 97.5%, is in the form of non-revolving credit. Consumer credit created? A whopping 2.5% of the total or $4 billion.

Finally, who is the primary source of all this free credit? Why Uncle Sam of course (and all US taxpayers by implication, when the student and second subprime car bubble pops of course).

IF AUTO SALES ARE BOOMING WHY ARE GM PROFITS PLUNGING?

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Posted on 2nd May 2013 by Administrator in Economy |Politics |Social Issues

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Yesterday all of the automakers reported April auto sales to great fanfare. GM sales were up 11% over  last year. Their YTD unit sales are up 10%. The MSM has been touting the “strong” auto sales as proof the economy is recovering and consumers are flush with cash again from those non-existent jobs. If auto sales at GM are booming at double digit rates, why did their profit plunge by 14% in the 1st quarter? Inquiring minds want to know. Something doesn’t pass the smell test.

Here is a link to the results GM reported today:

http://media.gm.com/content/dam/Media/gmcom/investor/2013/q1/2013-Q1-Financial-Highlights.pdf

Here are my comments/questions:

  • How pitiful is it that a company with $36.3 billion in sales can only manage a $865 million profit? A 2.4% profit margin is a joke, especially after the American taxpayer ate their debt in their illegal reorganization.
  • If their reported unit sales are up 10%, how did they manage to report 3% less revenue?
  • Even though the MSM is reporting an auto recovery, GM managed to make $139 million less profit than 2012. This couldn’t be due to channel stuffing.
  • Evidently GM is selling more cars for a lot less money. So let me get this straight. GM is stuffing inventory down the throats of its dealers. It is offering massive incentives to move its trucks. It is using Ally Financial to dole out subprime auto loans to 45% of the “purchasers” of their vehicles. And this constitutes an auto recovery.
  • The good old balance sheet tells an interesting story. Even though revenue is falling, Accounts receivable surged by 20% in three months. GM wouldn’t be helping its dealers finance their bloated inventory, would they?
  • The supposedly strong GM has $34 BILLION of pension and benefit liabilities on its books and only $38 billion of equity. Yeah, that will work out just fine.

GM’s results reveals that the MSM bullshit about a strong auto market is just another tired propaganda storyline. The auto sales are being generated by bad loans to deadbeats and huge incentives by the automakers that guarantee a loss on just about every car sold. Sounds like a great business plan.

 

GM Reports First Quarter Net Income of $0.9 Billion

DETROIT – General Motors Co. (NYSE: GM) today announced first quarter net income attributable to common stockholders of $0.9 billion, or $0.58 per fully diluted share. These results include a net loss from special items that reduced net income by $0.2 billion, or $0.09 per fully diluted share.

In the first quarter of 2012, GM’s net income attributable to common stockholders was $1.0 billion, or $0.60 per fully diluted share, including a net loss from special items of $0.6 billion or $0.33 per share.

Net revenue in the first quarter of 2013 was $36.9 billion, compared to $37.8 billion in the first quarter of 2012. Earnings before interest and tax (EBIT) adjusted was $1.8 billion, compared to $2.2 billion the first quarter of 2012. First quarter EBIT-adjusted results for 2013 include the impact of $0.1 billion in restructuring costs.

“The year is off to a solid start as we increased our global share with strong new products that are attracting customers around the world,” said Dan Akerson, GM chairman and CEO. “In addition, we saw progress in Europe thanks to strong cost actions and great vehicles like the Opel Adam and Mokka.”

GM Results Overview (in billions except for per share amounts)

  Q1 2013 Q1 2012
Revenue $36.9    $37.8   
Net income attributable to common stockholders $0.9    $1.0   
Earnings per share (EPS) fully diluted $0.58  $0.60 
Impact of special items on EPS fully diluted $(0.09) $(0.33)
     
EBIT-adjusted $1.8    $2.2   
     
Automotive net cash flow from operating activities $0.5    $2.3   
Adjusted automotive free cash flow $(1.3)   $0.3   

 

Segment Results

Beginning this quarter, the company will report segment revenues and profits based on the geographic region in which a vehicle is sold. Previously, segment results included the impacts of inter-segment sales and profits. Prior year segment results have been reclassified so all information is shown on a comparable basis. Financial results for Chevrolet Europe continue to be recorded in GM International Operations. Consolidated results are unaffected by this change.

  • GM North America reported EBIT-adjusted of $1.4 billion, compared with $1.6 billion in the first quarter of 2012.
  • GM Europe reported an EBIT-adjusted of $(0.2) billion, compared with $(0.3) billion in the first quarter of 2012.
  • GM International Operations reported EBIT-adjusted of $0.5 billion, compared with $0.5 billion in the first quarter of 2012.
  • GM South America broke even on an EBIT-adjusted basis, compared with EBIT-adjusted of $0.2 billion in the first quarter of 2012.
  • GM Financial earnings before tax was $0.2 billion for the quarter, compared to $0.2 billion in the first quarter of 2012.

Cash Flow and Liquidity

For the quarter, automotive cash flow from operating activities was $0.5 billion and automotive free cash flow adjusted was $(1.3) billion. The change in year-over-year cash flow was primarily the result of lower earnings and a series of timing-related items that GM expects to reverse during the balance of the year.

CONSUMER CREDIT SOARS AS OBAMA FUNDS MORONS ENROLLING AT THE UNIVERSITY OF PHOENIX & DEADBEATS WITH SUBPRIME AUTO LOANS FROM ALLY FINANCIAL

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Posted on 5th April 2013 by Administrator in Economy |Politics |Social Issues

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The MSM headline makes it sound like the consumer is back baby!!!

More bullshit. Revolving credit (credit card debt) has barely budged in over a year and is still 16% BELOW 2008 levels. If real wages are lower than they were in 2007, consumers haven’t bought crap with their credit cards, and consumer spending makes up 71% of our economy, how can we be in the midst of a recovery?

We can’t be.

While credit card debt is $157 billion lower than it was in 2008 (all written off by Wall Street and subsidized by YOU), the combination of auto loans (Ally Financial & government backed Wall Street banks) and Federal government issued student loan debt has gone up by $431 BILLION to an all-time record high of just under $2 trillion.

How is the Obama/Bernanke Subprime Solution working out for the country?

 

Feb. consumer credit jumps by most in 6 months

WASHINGTON (MarketWatch) — U.S. consumers increased their debt in February by a seasonally adjusted $18.1 billion, the most since last August, the Federal Reserve reported Friday. The increase is above January’s $12.7 billion pace. Monthly debt rose at a 7.8% pace in February, after a 5.5% pace in the prior month. The increase in consumer credit in February was larger than expected by Wall Street economists. As has been the recent trend, the February gain was led by the non-revolving category of debt, such as auto loans, personal loans, and student loans, which jumped $17.6 billion, or 10.9%, the largest percentage gain since July 2011. Credit-card debt increased by a slight $532 million, or 0.75%, in the month.

 
 
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