Royal Arse

Cash for Clunkers grinds to a halt just six days after it starts, after unexpectedly high demand burns through the program's entire $1B budget. Lawmakers are pushing for additional funding to help keep the program running.

"government subsidized car buying...what a joke...really..what a joke...."

Without car sales Goverment Motors will find it difficult to justify the auto bailout. This program is the unintended consequence of the US government throwing good money after bad.

The hilarity is realized upon the incessant repetition of the aforementioned back-stopping strategy.

Auto dealers are raising their prices as auto firms push for higher profitability on lower volume. The strategy could backfire as consumers feel the pinch, leaving the sector even worse off.

The trouble with green-shoot optimism in the equity market(s) is exactly this. Mortgage rates are climbing every slightly higher, car manufacturers are jacking prices all while the purchasing power of the dollar erodes and joblessness plagues consumer spending.

This model will be short lived -- unless there is some more miracle grow sprinkled on these shoot via a second stimulus. How ironic the US gov. will be printing money to buy their own product...

Zubin Jelveh suggests if you extrapolate from a Fed paper on metals by George Korniotis, the conclusion is: No, speculators aren't driving oil prices.

The Fed is about as credible as the ratings agencies...

Buffett warms to a second stimulus: "The first stimulus bill was sort of like taking a half-tablet of viagra and also having a bunch of candy mixed in."

Just when you thought Buffett couldn't be any more loved in the investment community he sprinkles this gem on us -- classy!

Consumer loan delinquencies climbed to 3.23% in Q1, the highest since the ABA began watching them in 1974. Delinquent home-equity borrowing also set records; loans rose to 3.52% from 3.03%, and lines of credit jumped to 1.89% from 1.46%.

The consumer is still lifeless.

How are we to revive the real economy when delinquencies are still rising? If you can't pay your debts, how much disposable income could one have?

If the US consumer was 70% of the US economy and the US GDP accounts for X% of global GDP how do we account for this shortfall: the second stimulus coming October 2009?

U.S.'s sovereign credit rating remains "a solid AAA," Moody's says, but adds a couple caveats: 1) Its assumptions of "debt reversibility" prove to be overly optimistic. 2) A potential challenge to the dollar as the main reserve currency. More here.

They (Moodys and other ratings agencies) have to be last to the dance so as not influence the markets' perception and induce fear.

Maybe after we re-test March 9 they'll figure the market has priced it in and then tell the truth about the US?

Looking at the Fed's Flow of Funds report (.pdf), Karl Denninger notes that while household wealth declined by just $1.3T in the first quarter vs. Q4's $4.9T drop, debt declined by only $178B. "That is, asset values have declined at a rate nearly ten times that of the debt in the system against those assets." As debt service gets more difficult, he says, the permanent drag on consumption remains.

Excellent article! Piece of mind for those questioning the sustainability of this bear rally.

In April, 21 states recorded month-on-month unemployment rate decreases, 18 states and Washington D.C. registered rate increases, and 11 states had no rate change. Unemployment in April reached 8.9% vs. 8.5% in March.

On the heels of this and previous post re: layoff - what is the effective underemployment rate in the US? In EU?

Black Swan author Nassim Taleb says today's crisis is "vastly worse" than the 1930s, because global economies have become uncontrollably intertwined. The NYU professor of risk engineering says gold, copper, and other assets "that China will like" are the best investment bets.

The most crutial thing I have learned from Taleb is how to ignore noise aka the news.

Focus on the data rather than the Alice-in-Wonderland headlines and you'll see why the realists are bearish, while the shills and traders are bullish. Its sad to think the degree of manipulation taking place in global capital markets might support the irrationality of the optimists.

With the Phoenix Coyotes officially bankrupt (though maybe someone should have told the NHL), Research In Motion (RIMM) CEO Jim Balsillie has launched a full-rink press to get the team back in Canada. Meanwhile, a livid Gary Bettman tells CNBC the Coyotes will be in Phoenix next year.

Ballsillie is pulling the same power-of-the-people stunt with his website makeitseven.ca. We know last time Bettman shat himself when Jim embarrassed him, and he re-upped and did it again?

Bettman should be out of the NHL executive ranks, but until that happens RIMM Arena might not get built.

With all that's riding on the results of the government's stress tests, Bronte Capital wonders who on earth is leaking the results, and what's their motivation?

The information is leaked because the banks are still grossly insolvent and if the Stress Tests results were released as once (as they should be) it would cause an enormous sell-off (esp. at these overbought and rosey-levels) setting us back into the fear or REALITY.

Instead the man behind the curtain has carefully orchestrated this info be disseminated in the form of leakage through the press.

Internet Infrastructure Stocks on a Tear

"Without the humble server jockey, tending his flock of racks, the code geeks got nothin'."

Great touch to an otherwise solid article. Being long technology (*of the belief that tech, commodities and financials will lead us out of the recession) demands you consider investing in the fundemental infrastructure required to make it 'go'.

S&P gains 9.38% in April. Dow +7.35%. Nasdaq +12.35%. Financials gain 16.39% over the month. Consumer cyclical +25.91%. Basic materials +9.81%. Tech +13.18%.

Consumer cyc. and Fin's leading the way prematurely surely screams head fake. For no reason other than being oversold did these dead cats bounce and take the rest of the rosey-eyed market makers along for a spin.

Do you think consumers are going to be putting money to work in the real economy any time soon? No. Fade the rally.

Eli Broad, the billionaire who founded U.S. homebuilder KB Home (KBH), says mortgage rates need to drop below 4% (now 4.8%) to make a meaningful dent in a glut of foreclosed properties. Broad predicts Pulte Homes' (PHM) April 8 deal to buy Centex (CTX) won't be the last.

Sounds lending includes more than just the down payment. Net worth, previous and current job and residence stability, income levels, credit history, personal character.

Now that banks are exhibiting prudent lending behaviour, how do you think record unemployment, consumer credit defaults and systemic uncertainty will impact personal lending? Forget about it, housing inventories will remain high well into 2010.

Sellers are stepping it up after Chrysler's bankruptcy-filing announcement, with indexes striking new intraday lows, and two now in the red. DJIA -0.1% to 8180. S&P -0.02% to 873. Nasdaq +0.8% to 1726.

The auto bankruptcies + Stress Test results = Pullback.