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Wednesday, September 05, 2012


The weekly summary: (for prior week)

Total products supplied over the last four-week period have averaged 19.2 million barrels per day, down by 2.1 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged about 9.1 million barrels per day, down by 1.0 percent from the same period last year. Distillate fuel product supplied has averaged 3.6 million barrels per day over the last four weeks, down by 6.2 percent from the same period last year. Jet fuel product supplied is 3.8 percent lower over the last four weeks compared to the same four-week period last year.
Obviously not much heating oil is being bought. Trucking can't be that hot either. Still, stocks of distillate are very low, so I wonder what is going on? Propane stocks are way, way up. The other part of the release.
JPM Global PMI:
At 48.1 in August, down slightly from 48.4 in July, the JPMorgan Global Manufacturing PMI™ – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM – remained below the neutral 50.0 mark that separates expansion from contraction for the third consecutive month. The headline index currently stands at its lowest level since June 2009.
Hmm, I wonder why June 2009 sounds so familiar? Was that the end of the recession in the US? Are the good folks at JPM trying to hint at something with this?
ISM data indicated that US manufacturing production contracted for the first time since May 2009.
I just have to tuck this in somewhere, so here it is. Look at this article about car loans and subprime loans in particular. And look at the LTVs!!!

Am I reading the LTV numbers correctly. For both new and used cars, they are lending more than the value of the vehicle. I guess that is because it worked out so well for mortgages.
You are reading the LTV numbers correctly. Most of the borrowers are serial borrowers. They never pay off a car loan. So they come into the dealers underwater on their loans, i.e. their existing loan is more than the value of their car. So, after the trade-in, in order to pay off the old loan and get a new car (or another used car) they must borrow more money then the value of the new/used car.
I observed this first hand at a new Subaru dealership. The buyer was a woman with two children accompanied by her mother (to co-sign the new loan). She was trading in a perfectly fine two year old car for a brand new one. The salesman started off with the classic line "how much would you like to pay a month?". I felt like pouring my hot coffee over her head.
Right now they are getting huge returns on the securitiztion of the loans. The average subprime loan commands an interest rate of more than 15 percent on used cars!
That serial borrowing has been going on forever. Find out how much serial borrowers have saved for retirement and you will understand why people are still working in their 70's.
Rick, you are indeed. This is about as bad as it has ever been in car lending.

There will be a price to pay eventually, but those sweet, sweet returns are so outsize that the train is rolling along.

An eye-opener, isn't it?
PS: This is why I just roll on the floor laughing so hard I'm close to peeing on myself every time I read references to "tight credit".

Great article...
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