Tag: peak

Auto Sales Disappoint Despite Surging Incentives, “Worrisome Trends Are Taking Hold”

Tyler Durden's picture

Submitted by Tyler Durden on 04/01/2016 13:15 -0400

Just as we predicted, it seems – despite the “everything is awesome” jobs data – that auto sales exuberance has hit the wall of credit saturation. Despite a surge in incentives in Q1, GM US auto sales rose just 0.6% (drastically lower than 6.0% rise expectations) and Ford rose 7.8% (missing expectations of a 9.4% surge). As J.D.Power notes “there are worrisome trends below the surface” of auto sales and with inventories at levels only seen once in the last 24 years (and tumbling used car prices), the automakers have a major problem if this is anything but ‘transitory’.

It wasn’t just GM and Ford though:

  • *FIAT CHRYSLER MARCH U.S. AUTO SALES RISE 8.1%, EST. UP 14%
  • *FIAT CHRYSLER HALTED IN MILAN, LIMIT DOWN AFTER FALLING 4.9%
  • *HONDA MARCH U.S. AUTO SALES UP 9.4%, EST. UP 16%
  • *VOLKSWAGEN OF AMERICA MARCH AUTO SALES DOWN 10.4%
  • *TOYOTA MARCH U.S. AUTO SALES DOWN 2.7%, EST. UP 5.6%

U.S. light-vehicle deliveries, aided by low gasoline prices, rising discounts and favorable financing terms, have climbed 3.4 percent this year through February after rising 5.7 percent to a record 17.47 million in 2015. But on a selling-day-adjusted basis, new-vehicle retail sales in March are expected to fall 2 percent from a year ago, according to a joint sales forecast by J.D. Power and LMC Automotive. It would be the first time there has been a year-over-year decline in sales on an adjusted basis since August 2010, Power and LMC say.

What is most troubling however is, as JD Power notes, the worrisome trends below the surface…

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When You Look Back On This Moment In History

I’ve done it again. For those who don’t like to read a detailed analytical assessment of the stock market valuation, I’ve picked out the key bits from Hussman’s weekly letter. When you look back on this time in history, a decade from now, you will wonder how could they have been so foolish. History books will call this the the Era of Delusion & Idiocy. Ignore the words below at your own peril.

When you look back on this moment in history, remember that spectacular extremes in reliable valuation measures already told you how the story would end.

When you look back on this moment in history, remember that the valuation of the median stock was never higher. Ever. Even at the 2000 peak.

When you look back on this moment in history, remember that S&P 500 returns had never materially exceeded zero over the decade following similar valuations.

When you look back on this moment in history, remember that rich valuations had not only been associated with low subsequent market returns, but also with magnified risk of deep interim price losses over shorter horizons.

Continue reading “When You Look Back On This Moment In History”

DOW PRICED IN GOLD 70% BELOW ITS 1999 PEAK

Is the ratio peaking or does it have a long way up to go?

Gold reveals the true nature of Federal Reserve created inflation.

For some perspective on the long-term performance of the stock market, today’s chart presents the Dow priced in another global currency — gold. Today’s chart illustrates how it currently takes approximately 13 ounces of gold to ‘buy the Dow’ (i.e. the Dow / gold ratio) — well off the 44.8 ounces it took back at its peak in 1999. Priced in gold, the Dow had been in a massive 13-year bear market. However, back in the summer of 2011, gold peaked while the Dow continued to rally. While the Dow (priced in gold) has been rallying since 2011, the Dow (priced in gold) remains well below its 1999 highs.

Chart of the Day

AUTO SALES HAVE PEAKED – LOOK OUT BELOW

Charts always tell me a more truthful story than the written and spoke propaganda doled out by the corporate mainstream media. The bimbos and boobs on CNBC and the rest of what passes for financial journalism in the dying legacy media were ecstatic about the fantastic May auto sales. These mouthpieces for the establishment just regurgitate the lines written for them by their corporate PR departments. They blather about new highs and best sales since 2007. Maybe they could try using their brains and dig a little deeper to examine the underlying foundation of these fantastic sales.

With a cursory investigation they would discover that average loan length reached an all-time high of 66 months and the average amount financed exceeded $27,000. I’ve never spent more than $20,000 on a car, let alone finance $27,000. The percentage of people leasing those “sold” cars also reached an all-time high of 26%. And the cherry on top is the 34% of auto loans going to subprime deadbeats. “Selling” automobiles using easy money and extending loan lengths is the same strategy employed from 2002 through 2008. That worked out so well, I’m sure it will work just as well this time.

These same clueless dolts paraded on TV as financial journalists would do well to try and explain the chart below. When the economy is running on all cylinders the motor vehicle inventory to sales ratio hovers between 2.0 and 2.5. So at this current point in time, with auto sales reaching seven year highs, we have an extreme inventory to sales ratio of 3.0. Therefore, we have 20% to 50% too many automobiles for the current sales level. An inquisitive mind might wonder what happens next? Are GM, Ford and Chrysler going to allow 10 year auto loans and bump up their subprime clientele to 50%? The inventory continues to pile up on dealer lots, even with the extremely loose financing deals being pushed on the delusional American public.

Based upon history, only a fool, a CNBC economics reporter, or a Federal Reserve chairwoman would expect auto sales to accelerate above the current level. Real household incomes are back at 1998 levels, financing terms are at the loosest in history, the economy is contracting, and gas prices are near three year highs. Does that sound like a recipe for accelerating automobile sales? The data I see is telling me we have reached a peak in auto sales. The extremely high inventory levels will lead to major discounting by the auto companies and huge profit declines. These companies will have to cut back on production, further pushing the economy into recession. It’s amazing what you can see when your agenda isn’t to mislead, obfuscate and misinform.