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B4 The Bell Moonday August 23


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Good Morning!

 

The data shows that credit card borrowing is dead in the water, that cash out home equity borrowing is raging on at a bubble blowoff rate, and that Other (Auto, boats, RV`s etc.) loans, while below Spring peaks, have bounced up recently as car buying is subsidized by low interest financing.

 

One thing the current data shows clearly is that the lowering of long term rates in recent weeks has not seen a commensurate increase in demand. As I have alluded to in these reports, this means that underlying demand is weak and not responding proportionately to the stimulus of lower rates. The demand pool at 10 year rates above 3.75% has been emptied. That is one of the reasons rates have dipped back down. Those who are expecting lower long term mortgage rates to spur a new mortgage boom, and a restart of the slowly deflating housing bubble, are going to be disappointed. The demand just isn`t there unless you drop rates another 100 basis points. The bond market will not support another 100 point drop.

 

Aside from that, from a structural, long term standpoint rates would never have gotten this low had not foreign central banks have kept the bond market on life support. They are buying 50% of new Treasury issues. Where would yields be if they didn`t have us beggars on a subsidy? Most typical investors consider this stuff toxic waste as it approaches the 4% level. They may not start selling when it gets down that low. But at least they say, Hell I`m not touching this crap at this price. Which is why what looked like a runaway collapse in yields stopped dead last week. Nobody wants the paper at less than 4.20 any more.  So unless the foreign cb`s start buying more than 50% of new Treasury issues, yields will start gradually ratcheting higher again.

Right on target Doc. ;)

 

Those foreign CBs are the biggest wildcard. Over the week ending last Wednesday, they purchases Treasury securities at a $900 billion annual rate. Is it surprising the bond market stepped out of the way of that elephant? But after the stampede has passed, Treasury demand will fall way back. Of course those CBs could return, but at a cost to the their local economies of higher inflation thorugh the issuance of fiat currency to support those Treasury purchases.

 

Unless there is another way to pump up the credit bubble coming soon, the economy will move from just being flat (the ECRI says its has been so for three weeks now) to actually declining. Be on the lookout for new magic hat tricks - otherwise the market will resume its downward move before too long.

 

September is a poor seasonal month for the market, and this year may be no exception.

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Looks like Greenspin's patch is still soft: WalMart says Aug same store sales up only 0-2% vs their (previously reduced) est of 2-4%.? Haven't they been saying weekly sales were "on plan"?? I guess their plan included a late Aug surge that didn't happen.

Up 0% to 2%???

 

What is up about 0%?

 

This guidance range is going to cause an earthquake. WMT is trending into negative growth and the implications will send shock waves through the market.

 

They are acknowledging that zero-growth is in their guidance range...incredible!

No, no, no, no, no.

 

This can't be happening.

 

The NYT just came out with an article that higher oil prices were bullish for the economy.

 

Several economists said so.

 

The consumer is "resilient" and I expect, given their clientele, WMT sales to be immune from higher fuel prices.

 

:P

Sphinxter,

Remarkably, the Credit Market column in today's Wall Street Journal reaches a similar conclusion: that higher oil prices are a "tax" on the economy and will allow Greenspan to keep rates low, thus sustaining the housing boom! :huh:

 

As Plunger often points out, it looks like everyone got the same "script" this weekend regarding oil!

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They vote Republican because of "values" and don't seem to mind that they are being screwed.

I've learned never to trust anyone in business who "leads" with their religion. People who hand you a business card with the "sign of the fish" or the "Star of David" or any other religious symbol...beware!

 

I've been screwed in business numerous times by those who proclaimed their Christianity on our first meeting.

 

It's a ploy, and has no place in business, or in politics. If you live your life in an ethical way, I'll notice, you don't need to tell me.

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RUT ROH!!!

 

There is little sign that oil's rally is slowing the fuel demand that is fed by global economic growth. OPEC producers are pumping at the highest level in a quarter of a century to take advantage of high prices.

 

Iran's deputy oil minister said OPEC can do no more to control the price rise.

 

"There is no extra capacity. Those that consume oil, they should decrease demand, that is the only solution. I think prices will remain around $50 a barrel," said Mohammad Hadi Nejad Hosseinian. OPEC ministers meet on September 15.

 

http://www.reuters.co.uk/newsPackageArticl...section=finance

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Crude Earl has been transmogrified into a kind of omnipresent leprechaun.

 

Last week alone, he was seen by thousands, engaged in widespread mischief.

 

Sometimes he raises prices, sometimes lowers them. Sometimes both at the same time.

 

Crude Earl seems like a milder bugbear than the Terror Threat. But maybe we haven't seen his dark side yet ... :mellow:

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my 2 cents in the great tire debate: I think Plunger has made some good points, and agree with his comments this weekend that replacement tire purchases are easy to delay when money is tight. But i also agree that if you're going to short the tire makers based on this funnymental argument, it's important to take into account the probable shift from new car tire sales to replacement sales (I don't think there's disagreement on this point though). From a trading perspective, I mentined this weekend I was watching GT, but agree with windy that it's too early to short, it's still in an uptrend. Sorry to be so agreeable. :lol:

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Guest yobob1
Yobob:

 

Every one of those existing autos you mentioned were always going to be in the market and eventually in need of tires (it's already priced in the stocks), regardless of retention of ownership or change of ownership. You might additionally consider that the number of cars that might be taken off the road for up to a two or three months through reposession - or through the slowing in Used Car Sales (a trend) that results in zero miles being logged as they sit on the lot awaiting sale. Additionally, you may hear of two-car families choosing to use the gas hog (which has the most expensive tires) far less than they had previously.

 

Viewing the trend toward reduced new car production, in concert with these other trends, I don't see ANY scenario under which tire manufacturers will become more profitable than their estimates.

 

Of course I could be wrong...I just can't make a case for it.

Oh I don't think they're going to more profitable under almost any scenario due to higher input costs, capacity aplenty and softening of total demand. I would have to say that volume will decline in most cases along with tighter margins. I was really only saying that more of their decline in output might end up being attributed to lower vehicle production than to the softer replacement market.

 

Of course it is considered almost a sin to retain the stock wheels and tires on any expensive SUV/truck. Drive an Escalade with less then 20" wheels? Not permitted. Hummer 2 without flalshy chrome wheels with spinners? Never! Ford F-350 4 X 4 without 38" chunky off road tires that will never see anything but pavement? Not in my neighborhood.

 

Bush and his neocons must go. Kerry is the only viable alternative. Both will spend like druken sailors, but if we can somehow end up with a Republican House and Senate we might get gridlock effectively allowing to government to do as little as possible. The best government is one that does nothing. This only buys us 4 years in which to find a more palatable solution away from Republicrats.

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my 2 cents in the great tire debate: I think Plunger has made some good points, and agree with his comments this weekend that replacement tire purchases are easy to delay when money is tight. But i also agree that if you're going to short the tire makers based on this funnymental argument, it's important to take into account the probable shift from new car tire sales to replacement sales (I don't think there's disagreement on this point though). From a trading perspective, I mentined this weekend I was watching GT, but agree with windy that it's too early to short, it's still in an uptrend. Sorry to be so agreeable. :lol:

Stock charts aside, growth in US per capita auto ownership has been parabolic. Business plan forecasting in the auto industry, and among their suppliers, has been based on this growth trend. Like every other bubble, this trend line is bound to be flattening and may eventually roll over. Any diminution of the number of sets of tires on the road (relative to the projections of growth in per capita auto ownership), will manifest itself in reduced sales for companies that cater to both the new AND used auto market. New car become "Used Cars" immediately upon purchase.

 

They're not making more "Used" cars. They already exist. Any reduction in the pace of new car reduction results in a change of trend both for new AND used cars.

 

Dead Horse...Beaten :rolleyes:

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Sphinxter;

 

I believe Kurt Richebaecher has written that Eurozone aggregate income statistics are not embellished with hedonic adjustment factors.

 

So, direct comparison of Eurozone and USA economic growth figures is as inherently misleading as direct comparison of velocities in miles per hour and kilometers per hour.

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America is basically dead; but like a wounded game bird whose head was pulled off mercifully, it takes a while for the body to realize it is dead and quit gyrating.

 

GATT, NAFTA, Carribean Basin Initiative, and a myriad of other inducements to businesses of all types to relocate outside of the USA form the basis for Treason by Congress and The Executive Branch. Too bad they are not bound by some concept of Fiduciary Reason or bond to their constituents.

 

PT Barnum was right! You can't fool all the people all the time; but if you enlist the aid of John Dewey, you can dumb em down enough to fool enough of them, most of the time. For 150+ years, the conspirators worked tirelessly to termite away the foundations of America; now comes the implosion, the death of the body.

 

To add insult to injury; our reps want UN observers for the elections.

 

Welcome to the NWO, comrades.

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