Wednesday, February 5, 2014

January Auto Sales Did A "Step-Function" Decline

The distortion and perversion of the truth has reached new levels.  What's going on right now is right out of Animal Farm.  - The Golden Truth
 Winston worked in the RECORDS DEPARTMENT (a single branch of the Ministry of Truth) editing and writing for The Times. He dictated into a machine called a speakwrite. Winston would receive articles or news-items which for one reason or another it was thought necessary to alter, or, in Newspeak, rectify. If, for example, the Ministry of Plenty forecast a surplus, and in reality the result was grossly less, Winston's job was to change previous versions so the old version would agree with the new one.  "1984,"  George Orwell

Blame it on the weather!  January auto sales released on Monday showed a precipitous decline in auto sales in January compared to January 2013.  Of course the first words out of every analysts' mouth was "bad weather."

As it turns out; in order to seek the facts, I did some research on weather patterns across the country in January.  Looking at just the facts, the average daily temperature in January for the top 10 cities by population was about same as the historical average.  In fact, on the west coast (i.e. San Diego and L.A.) the weather was warmer than average.

Furthermore, just because there's a couple days of snow and cold weather in the northeast, that would not prevent someone who wants to buy a new car from waiting until a warmer day to shop ("aw gee, it's cold today and the roads are snowy so I'll wait til next month to buy a new car...").

If you look at the year over drop in car sales for December 2013/2012 and compare it to the year over drop for January 2014/2013, the decline was roughly 7x more for January than December.  December had bad its fair share of bad weather days as well.  Even if the weather affected sales a little, the huge relative decline for January reinforces my theme that the economy hit a wall in November and 2014 will see economic contraction.

You can read my brief article on car sales here:  January Auto Sales: Another Big Drop  Please note that January is one of the lowest seasonal months for car sales, but that's why the January 2014/2013 comparison is so significant - it washes away seasonality.

Just for the record, expect an insanely absurd jobs report on Friday.  It seems that the Government's attempt to cover up the truth varies inversely with the degree to which the U.S. economy is collapsing.


  1. Who Did Bernanke's Helicopter Money Drops Benefit the Most?

    When these guys say Bernanke did a good job, now you will know why. Note well: At the top of the list is Warren Buffett who has been a major Bernanke supporter and benefited directly from the Fed bail out of Goldman Sachs by buying stock in Goldman THE DAY BEFORE THE FED AND THE TREASURY LAUNCHED THEIR BAIL OUT PROGRAMS.

  2. The Buffett derivative mystery gets more exotic

    In the comments on our last piece on Berkshire Hathaway’s very large derivative contracts we and Professor Pablo Triana learned that Warren Buffett treats the put options he sold between 2004 and 2008 as hard-to-value Level 3 liabilities that must be marked-to-model (or myth). See page 84 in the 2009 annual report.

    That helps to explain why the quarterly mark-to-market losses Berkshire reported on the contracts were not larger, given big moves in currencies and equity indices in 2008 and 2009. But in resolving one mystery it created another, because valuing large put options is typically straightforward, even if like Mr Buffett you dislike the theoretical basis for doing so, and Berkshire’s commentary and disclosure has always indicated that the contracts are of the plain vanilla variety.
    This has prompted the good professor to come back with a new question: so what kind of puts did Warren Buffett sell, exactly? And in trying to answer it he has found that to Lehman Brothers at least, Berkshire appears to have sold some exotic derivatives indeed (which would raise another question, were they properly disclosed?).

    A mystery indeed. As we’ve said before, Berkshire is unique in that it engages with its investors and the public entirely on its own terms. The company is trusted to run with a very small staff and minimal central control largely on the strength of Mr Buffett. Perhaps someone could ask him to outline the derivative contracts in more depth when he has his annual question and answer session in May.

    1. Thanks for the link - I would have missed that one otherwise

  3. Fed Vice Chair Nominee Stanley Fischer: Gold Hater

    When asked about the gold standard, Fischer’s stated that “It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now.”

  4. Profits at General Motors fell by 22% in 2013, after a disappointing performance outside North America.

    The US car giant reported net income of $3.77bn (£2.31bn) for the last financial year, down from the $4.86bn (£2.98bn) recorded in 2012.

    The company said the picture was challenging in South America and parts of Asia outside China.

    GM's fourth quarter profits rose by 2% from year earlier to $913m, which was lower than analysts' expectations.

  5. Las Vegas Real Estate Market Update (Jan 2014) Part 2