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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (1359)	3/5/2004 8:12:23 PM
From: mishedlo	Respond to of 116555

Interesting snip from Northern Trust weekly commentary. My comments follow: In sum, U.S. businesses, along with the rest of the world, are saving so that U.S. households can spend more on SUVs and McMansions and U.S. government units can spend more on whatever governments spend on. That’s terrific for now. But will these SUVs, McMansions, and government spending programs allow us to grow faster in the future? If not, will we not have to suffer more of a decline in our future (or our children’s future) standard of living when we have to service our foreign debt, or maybe even have to pay down some principal? One last question. Why are businesses so willing to forgo investment spending so that households and governments can spend more? Could it be that the expected return on business capital is very low as a result of the massive malinvestment of the late 1990s? The answer is “yes” if 10-year Treasury TIPS yields can be viewed as a proxy for the real return on capital inasmuch as they currently are yielding only a little over 1-1/2%. What does that say about the health of the U.S. economy? northerntrust.com ======================================================= What it SCREAMS is OVERCAPACITY! Investment is NOT needed. There is OVER-Investment. We do NOT need more stuff. In short DEFLATION! Mish

To: CalculatedRisk who wrote (1359)	3/5/2004 8:18:58 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Upside down Car loans... The automakers released February sales this week, which came in at 16.4 million unit rate. This was 5% better than last year's depressed levels but was under economists' expectations for the second month in a row. We have expressed concern over the past several years that auto sales were being buoyed by easy financing terms that is causing long-term damage to the industry. Our thanks go to Grant's Interest Rate Observer for pointing out an article in Automotive News dated February 16, 2004. The article highlighted the "upside down" nature of current auto buyers. According to Edmunds.com, 30% of car buyers were upside down in 2003, up from 24% in 2002. Moreover, on average, car buyers are rolling over $3,700 of debt from their previous vehicle into the loan for their new car. This is almost twice the level from 2000. In fact, for the first time ever buyers are financing more than the invoice price of the car. According to the Consumer Bankers Association, consumers financed 100.9% of the invoice price compared to 89% just six years ago. This will cause more drivers to be upside down for years to come. Not only are down payments virtually non-existent, the maturity of loans keeps lengthening. Edmunds.com also reported that over the past decade down payments have dropped from 15% to 5% and article mentioned Morgan Stanley's auto analysts said that the average new car loan is over 63 month compared to 55 months in 2001. Additionally, more than 20% of buyers are selecting 72-month loans. The article also offered a few examples of what is happening in the dealership financing office. A local Chevrolet dealer did a 96-month loan for a Suburban. The buyer financed $46,911, which was $18,136 more than the invoice price. Several dealers spoke with candor. One dealer in Killeen, Texas, said, "As long as one guy is doing it, in order to compete I have to do it, too. It's terrible for the consumer, but it would be unwise not to compete in the marketplace. And the consumer only cares about the deal you're going to give him." Another in Ohio said, "The customer comes back in and you're trying to bail him out, and they are so far into negative equity you just keep tacking it on. We're not helping them out because they never get out of it." ====================================================== more good stuff at - safehaven.com

To: CalculatedRisk who wrote (1359)	3/5/2004 9:47:54 PM
From: mishedlo	Respond to of 116555

...is the year-over-year change in hourly earnings. In February 2004, workers only earned 1.6% more than they did in 2003. The last time the reading was this low was in 1986! What's more disconcerting was that in 1986 the Consumer Price Index was only up 1.1%, giving workers the chance to get ahead on their paltry 1.6% gains. These days, that isn't the case. In December, the wage increase was less than the inflation increase for the first time in nine years. Without real gains by workers, the economy could run into a major stumbling block once all of the tax refunds are distributed and spent. At that point look for the consumer to stop propping up the economy. We may then see some economic data that goes from merely disappointing to downright horrendous... - safemoneyreport.com