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Thread: Credit Conditions

  1. #41

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    It appears that the crisis facing auto dealerships is far more dire than any of us thought.

    https://www.zerohedge.com/personal-f...ut-if-was-true

    It was posted by a highly respected account known as “CarDealershipGuy”, and it contained some rather ominous news…

    Past 10 days have been wild:

    — Capital One shut off all dealer floorplans (aka inventory lines of credit)

    — USA Auto Sales shut down 39 dealerships after losing its Ally floor plan

    — Wells Fargo laid-off all its junior Auto loan underwriters and capped future loans


    It’s been a weird few years for the car market, and things could get weirder still. As first reported by Twitter user CarDealershipGuy and now confirmed by Automotive News reports, Capital One is out of the dealer “floor plan financing” business, and while I realize this may not sound like the sexiest of topics, it could have some interesting effects on the car market. In case you think of homes when you think of the term “floor plan,” allow me to introduce the way dealers are able to hold massive inventory.

    Here’s a little secret: Dealerships usually don’t pay for every car on their lots, just like how consumers don’t usually buy cars outright. Instead, they take advantage of a form of financing called floor plan financing. Companies that offer this sort of financing give dealers lines of credit to buy vehicles with an interest-free period. If a car on floor plan financing sells within that period, the dealer takes the customer’s money or the customer’s lender’s money and uses some of it to pay off the line of credit. If a car doesn’t sell within that period, the dealership gets charged what has usually been a small fee since credit was nearly free for a decade. This allows a dealership to have very little money tied up in inventory despite amassing a huge selection of cars.
    What's the Frequency, Kenneth?

    432Hz

  2. #42

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    — Capital One shut off all dealer floorplans (aka inventory lines of credit)

    — USA Auto Sales shut down 39 dealerships after losing its Ally floor plan


    Interesting article on the US auto wholesale financing situation Red. Bears watching.

  3. #43

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    And car loan repos are going up too. Both those were used car dealer organizations I think.

    Saw my first Carvan flatbed the other day.
    What's the Frequency, Kenneth?

    432Hz

  4. #44

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    Still no stress in financial conditions. This index has a phenomenal track record of detecting periods of ' pain'
    Loosening financial conditions is contrary to what you hear recently, but not contrary to markets etc. ( YET)

    I remain confident it is the calm before the storm, it is just how far out this year, the storm is, in my opinion.
    I am convinced it will be sparked primarily by credit ( not liquidity) concerns.


    -----------------------------------------------


    Index Suggests Financial Conditions Loosened Again in Week Ending April 21
    The NFCI moved down to –0.30 in the week ending April 21. Risk indicators contributed –0.12, credit indicators contributed –0.11, and leverage indicators contributed –0.07 to the index in the latest week.

    The ANFCI also moved down in the latest week, to –0.28. Risk indicators contributed –0.18, credit indicators contributed –0.09, leverage indicators contributed –0.05, and the adjustments for prevailing macroeconomic conditions contributed 0.05 to the index in the latest week.

  5. #45

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    oak333 brought this to the 'who buys gold' thread, very applicable to this Credit conditions thread.

    Before you know it a particular bot will be telling us it is raining so hard we need an ark to make it through intact.

    https://dohmencapital.com/wp-content...Free-Issue.pdf

  6. #46

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    Quote Originally Posted by ynot2k View Post
    oak333 brought this to the 'who buys gold' thread, very applicable to this Credit conditions thread.

    Before you know it a particular bot will be telling us it is raining so hard we need an ark to make it through intact.

    https://dohmencapital.com/wp-content...Free-Issue.pdf
    Great article. Lots of data and indicators and common sense, saying it will certainly be rough waters ahead.

    Here is an indicator that is screaming something is probably broken in the credit market, which could have an impact, as soon as tomorrow.
    ( it may mean nothing or it may mean everything) we will see

    The spread between a 4 week and a 8 week US Tbill should be pretty close. Historically this is true. They should only differentiate a bit due to perception of imminent rate hikes and supply demand issues, but since they are close approximates of each other and the maximum rate hike usually thought to happen within 4 weeks is .5%, and that needs to be spread, it is extreme to have a differentiation of more than 50 basis points. Currently you would think maybe a 25 basis point differentiation is warranted at the most. Like I said in normal times it would be about the same yield.

    Since April 11th the difference exceeded 50 basis points and has remained well in excess of this. Peaking at 161 basis points on 04/20.
    That is an absurd differential. WHY is the question. The common perception is that the Fed will only hike by 25 basis points once more.
    There is minimal difference in holding one T bill over the other. All other maturities are exhibiting normal behaviour.

    These 2 maturities would be considered the safest and most liquid securities in the world by the financial establishment.
    Presumably the 4 week is the King due to its even shorter duration. Is there a stampede to get ones hands on the supposedly best in class collateral?
    Why?




    I hear nothing in the establishment press about this unprecedented irregularity. It was nowhere near the differentials that we have this month, when Lehman Brothers collapsed in Sept 2008.

    Time will tell what its significance means, I do not think it will be long to find out one way or the other. ( extremely significant or minimally significant)

    This link shows all the historical differentials in an easy to read way, right up until Friday.


    https://home.treasury.gov/resource-c...ate_value=2002

  7. #47

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    Jamie D got a new bank to own, but FDIC is on the hock for $15B, I believe.
    American Legion Preamble: https://www.legion.org/preamble

  8. #48

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    Quote Originally Posted by LongDonSilver View Post
    Jamie D got a new bank to own, but FDIC is on the hock for $15B, I believe.
    Always first in line for the bail outs. Could it be he has friends in high places? In 2008 he got my bank Washington mutual.

  9. #49

    Default Financial Conditions Index Week Ending April 28th

    Amazingly this index continues to loosen. It is an extremely reliable indicator, far more than the shrills on the main financial news.

    The massive fiscal stimulus in a supposedly ' okay' or Goldilocks economic environment is the main reason for this. ( in my opinion)

    The deficit will finish the fiscal year at about 7.5% of GDP but the nominal growth in GDP will be only around 5.5% ( in my opinion)
    That means we would be in a recession if it was not for the growth in government deficit. Note the actual growth in government debt will probably be more like 9%.of GDP.

    We should be in a recession, a fairly significant one. One of the few things that was suspicious was that was the consensus going into this year.
    Perhaps we just needed a change of viewpoint in this regards. Government will be out of money and tricks by mid June so they will need more ammo
    to keep the dog and pony show going. ( no doubt they will get it). I still think there is something wrong with credit markets, but way under the surface, that I have alluded to in prior posts.






    Index Suggests Financial Conditions Continued to Loosen in Week Ending April 28
    The NFCI edged down to –0.27 in the week ending April 28. Risk indicators contributed –0.11, credit indicators contributed –0.08, and leverage indicators contributed –0.07 to the index in the latest week.

    The ANFCI ticked down in the latest week to –0.21. Risk indicators contributed –0.14, credit indicators contributed –0.06, leverage indicators contributed –0.05, and the adjustments for prevailing macroeconomic conditions contributed 0.04 to the index in the latest week.

  10. #50
    Join Date
    Jan 2010
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    13,315

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    Imagine a scenario where the market economy collapses to half it's (sayyyy 10 years history). And let's say the government prints to pump "the numbers" to offset the 50% reduction. Would we say that nothing has changed? That this year, we are still at the last 10 year average?

    But even still, do we really "think" creative re-jiggering of numbers that keep the metrics static in absolute numbers is what our economy and lifestyles are all about? Of course not.

    There was a time when all or most of the calculations and expectations were based upon the mass of our citizenry being required to work so that they could consume and save for a rainy day.

    I know that was a good thing because in those times, if someone was stranded by the side of the road, we'd stop to help them without fear.

    I know because we'd all hitch-hike to where we needed to go.

    I know because our family only had one car which on occasion dad would let me borrow. The rest of the time I had to hitch.

    I know, because we all knew what we had to do, knew when to hold 'em and knew when to fold 'em - walk away and run.

    Yesterday's way was better than today's - for most people. Even though we did not have as much stuff.
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

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