Auto Sales, Inventory and the Economy
Earlier I speculated on the new 50th anniversary Ford mustang and likely long product cycle. Here is a more short term industry oriented snippet:
Detroit News - All three Detroit automakers — including Chrysler Group LLC and General Motors Co. — reported Tuesday that vehicle inventories are now above 90 days’ supply. A normal level is considered 60 days, but can change depending on season.
Slowing demand, growing inventory. That usually means something. Add the recent death of lending standards in the auto sales sector and I suspect my next car may have been sold in November.
Magic Kingdom Come
All of a sudden last week, based on some first-hand reports, there was
reason to suspect that the Disney MagicBands do, after all, contain the
capability to be read at a distance. The assumption until now was that
Disney would only be able to track its visitors when they took the step
of placing their MagicBands (MB) within millimeters of the readers to
pay for purchases or join the FASTPASS+ line, and that customers were
therefore in charge of deciding when Disney would know where they were.
But if Disney can read MagicBands from a distance, they will be able to
track users much more closely, and without their knowledge or
minute-by-minute consent. Visitors may feel their privacy is at its
lowest ebb when on a Disney World vacation.
Seems to be a race whether Apple, Google or Disney are the first to successfully tag their product. And by "product" I mean consumers.
More Listing Misdirection
1619 Linnet 92397
Decent place, decent 'hood, decent comps. What's the problem? All the usual things. First there's the inability to follow the property history. The San Bernadino Assessor's Office has a 2004 transaction that doesn't show up in the listing history. Also the total square footage is ummmm... generous. See the square feet in the second floor:
You could rent this for $1100 and cover the mortgage; $800/mo and taxes $170/mo and misc $100 but just barely. Hardly a decent return on $40,000 down.
Baby It's Dry Outside
It is still very early in the "water year" but mid and long range forecasts offer little hope for snow accumulation in the amounts necessary to backfill last year's extraordinarily low water content. Hopefully the arctic blast this week is followed up with moisture.
To follow along this winter here is the source for the chart:
Buy the sizzle, sell the steak
"Ford Motor's November sales rose 7.2% to 190,449, as its Fusion sedan
sales zoomed 51% and its F-series trucks hits 60,000 sales for the
seventh consecutive month. Ford said it was the best November since 2004.
This from USA Today
of all places.
And Ford stock? Down 3%. Talk about a disconnect. I used to talk about the difference twixt good companies and good stocks but that is not even enough. These days it is necessary to be cued into where the stock is going to be thrust regardless of any technical or fundamental issues.
The "new" Mustang 2014 design is an interesting direction for the company. Very inexpensive to produce via common components. Very popular and looking at a long platform run. Winner? Hard to bet against a 50 year old streak. My bhet is that it is even more important to the Fusion line of subcompact sporty vehicles.
Never Trust a Listing
Come on. How incompetent can you get? Here is a routine 1br/1ba listing with unapproved attic conversion trying to pass itself off as having twice the square footage and still pushing the price envelope for even the fake footprint.
1619 Linnet 92397
There's nothing wrong with this house. There is everything wrong with the listing. Too bad agents are not liable for misrepresentation.
Nobody "gets it." 2014 vehicles are good for 400k miles. No misprint. Four... hundred... thousand... miles. When I was a sprout my dad knew his slant six Dodge was good for 45,000 mil;es and after that it was a case of luck and/or Tuesday or Friday assembly. I recall when he and a few friends went to the Hershey antique swap meet as it was known in those days to trade and pick. The Dodge Dart being a throwaway piece of rolling ... you know. Despite that it was low mileage and had an advance. He had bought radial tires. Mein Gott! POS late capitalism rolling sh¡tbox turns three passengers into converts. This was a turning point in industrial production. Making more turned into making better for the same price or less. No coincidence this was the same time Erlich made his famous bet.
Where are we now? Precious metals crushed. Commodity inputs crushed. Maybe the Central Banks aren't able to keep up with deflationary pressures.
Home Price Increases 2014
Who doesn't love DQNews?
The question of this post is where are house prices headed next year. Sometimes it is impossible like when there are inflection points. Sometimes it is difficult like when trends are so strong as to develop inertia or as I call it; "make their own weather." Mostly it is dumb extrapolation which is what keeps the lame stream media interested because that is the limit of their perceptions. When you couldn't get into a math or sciences program and business degrees were too hard there was always "Communications" or whatever they call it these days. Here is what DQNews has charted for rolling price increases. Keep in mind these are house prices not home prices. That's an important distinction.
See anything? Yup. You (we?) missed the boat. The other thing? Yup. Interest rates matter.
So, 2014. Flat. The wild cards being inflation and employment. Inflation looks to be deflation. Just look at commodities. And that includes PMs. Weird that glod and silber are base metals in a deflationary environment eh? Employment looks to be so buffered by oversupply that wages won't rise for the 80%.
What if interest rates fall again in accord with long and really long term trends? That depends upon the lenders being willing to follow with lower mortgage rates. These are like gasoline prices at the pump. Quick to rise in response to input shocks, slow to fall.
May you live in interesting times.
Balanced Budget Math, College Edition
|Isn't this just the coolest representation of California? |
There's a rumor going around that with the passage of Prop 30 and a recovering economy California is nearly back to a balanced budget. Okay, the rumor is that State officials will "claim" we are almost back to even. Set aside that we have a Constitution that forbids deficits. Set aside enough wiggle room for dynamic budgeting, optimistic projections, etc. What's the real story? It's an old story, you may have heard it before. Borrow, lie and spend.
Despite very low interest rates (remember this) the portion of revenue dedicated to debt service continues to grow. That is not necessarily a bad thing. It is only bad when at it comes at the expenses of ongoing obligations. And guess what? Yup, at the expense of ongoing payments.
With wickedly low interest rates why would you enter into a variable loan? Because your Wall Street advisors said it was good. And what if it was not good? Why then your Wall Street advisors have an answer; Swaps. Uh oh. You know where this went. It gets worse. Say you are a CS or UC campus and "need" a new building. How to get it as cheap as possible meaning as gold plated as you can get away with? One way is with cheap credit. How to make credit cheaper? Your Wall Street advisors have a solution. Just like companies; issue preferred debt. That means every dollar every semester every year goes to paying off bondholders and finance charges before everything else. Getting this now? The money doesn't pay teachers or anything else until the debt is serviced.
For years, state schools have used tuition increases as a crutch to
bolster revenue in the face of declining state support. Now, however,
about four in 10 public universities report tuition revenue is not
keeping pace with inflation, according to a new report by Moody’s Investors Service
In putting together its report, Moody’s surveyed 114 four-year public
universities and 173 four-year privates and found that negative trends —
inability to raise prices, declining enrollments and heightened
regulatory and political pressure to keep down tuition — are “now
buffeting public universities with greater intensity.”
Revenue from tuition is projected to grow at a rate below inflation
at 44 percent of publics and 42 percent of privates surveyed by Moody’s.
Conditions at colleges and universities outside the survey could be
even worse because Moody’s rates colleges that are in a position to
There's plenty of dispute about why college costs so much today. As The Times notes, it could be that colleges got caught up in big spending when economic times were good to attract the best and the brightest students and faculty. Maybe education is just inherently pricey as universities try to keep up with higher health care costs and new technologies.
But one important factor is being overlooked: Pay packages at the top. While students languish in debt, many university presidents enjoy lofty paychecks. Since 1991, salaries of university presidents at at public and private universities have roughly doubled, says Andrew Hacker, co-author of Higher Education? How Colleges Are Wasting Our Money and Failing Our Kids – and What We can Do About It.
At public universities, the median compensation for presidents was $375,442 in 2009-2010, according to The Chronicle of Higher Education's latest figures. The top 10 highest paid boasted compensation ranging from $1.8 million to $728,350, with Ohio State University president E. Gordon Gee at the top, followed by former University of Washington president Mark Emmert with $904,004 (he's now president of the National Collegiate Athletic Association), Francisco Cigarroa of the University of Texas System with $813,892 and John Hitt of the University of Central Florida with $800,703. That's way more than what many of today's most high-profile public servants earn.
So there it is. While education should be getting cheaper the same problems that hit US corporations a 40 years ago and the FIRE sector 20 years ago are arriving in academia at the same time, now.
What we put into it
Nothing is sadder than people who bought at the peak and poured cash into their house who then think they need to be made whole. Wait... there is something sadder. When they might get it. And thus I present:
Nice place, nice 'hood. Nice schools, etc. What's the problem?
|Year||Property taxes||Change||Tax assessment||Change|
Yup, last sold 08/09/2006 for $1,410,000 and assessed at that time $608,682. This needs a little explanation for the non-California reader. In CA you can transfer a tax basis if you meet certain conditions. Prop 60 allowed seniors to transfer their old Prop 13 tax basis to a new property provided the new property was of a lesser price. No trading up but only cashing out. So the tax history isn't a reflection of transactions in this case. Lucky we have the transaction history of $1,410,000.
What is the asking price?
$1,399,000. We aren't going to give it away.
10yr Rates Spain & Germany minus US
Here's the Graph
I didn't fluff the data to make my point blatanly obvious. you are all too smart for that. Just like you are smart enough to break out your crayons and complete the next 5 years of data.