Credit deflation and the reflation cycle to come.

[Barnsey]

Oh. Dear. 

U.S. ADP employment number comes in way below expected, 27,000 jobs added rather than the expected 185,000. Worst jobs number since March 2010!

[Barnsey]

1 hour ago, UmBongo said:

Used car prices seem extremely strong at the moment. I'm looking at city cars and superminis and in my part of the country they're around £2.5k for a 9 or 10 year old example. . 

Folks downgrading due to tightening their belts?

Definitely non-existent demand in new and nearly new car showrooms right now as just got myself a huge amount off a rare 6 month old ex-demo (35%).

[Bricks & Mortar]

39 minutes ago, Barnsey said:

Folks downgrading due to tightening their belts

Getting refused finance?

[Funn3r]

On 04/06/2019 at 13:59, DoINeedOne said:

When I quit carpentry in 2009 I had a few friends working on new builds they told me that sites were getting the front doors on and locking up the buildings to pull everyone off the site, there a few new build sites around me I should take drive around them

There's a Redway site near me which was "houses and flats Coming Soon" for years, the whole area has always been a bit of a swamp so I assumed they might never build on it. Maybe they were saving it for last, anyway they have now developed it and it has finished-looking houses, although definitely still a construction site. One or two genuinely look lived-in but mostly not. 

Anyway my point is there are quite a few Dalek things dotted about the site. About the size of a litter bin with rubber antenna on top, black with yellow warnings about security alert monitoring. Never seen anything like it and my take on it was that they expect these to stand empty for the foreseeable. 

[Loki]

Someone just bought 33 million quids worth of NG shares

https://imgur.com/8GTU1oO

[UnconventionalWisdom]

9 hours ago, kibuc said:

Taking only two incomes into consideration is also very 1990 and probably ménage à trois phobic.

It might sound tongue-in-cheek, but when you think about it, the latest initiative by Lloyds or whatever to let people's parents put their money into a saving account as deposit actually makes as many as 4 (or is it 6?) people and their money involved in a mortgage on a single property.

Lloyd's have been pushing people to sign up with mates to get a house. They make videos on the guardian labs website in a bid to make it look like a load of young people have figured out how to get a place. In reality it's the banks lowering our standard of living whilst keeping us borrowing from them. 

[UnconventionalWisdom]

9 hours ago, Democorruptcy said:

Corbyn's popularity among the young at the last election was his fake promise to abolish tuition fees

This was suggested and the media went to town on it. He said 5hey would deal with student debt. I think he was referring to the fact it's at 6% interest rate. It's a bloody chrime and needs to be addressed, sucking money out the real economy. He didnt make it clear, if he had I think he would have got more young votes. 

Young people voted for Corbyn because they are happy to roll the dice. 

 

[MrXxx]

9 hours ago, UmBongo said:

Top stockpicker apologises:

https://www.bbc.co.uk/news/business-48523968

(sorry the the source) 

Well the Finance Director at Kent C C must have been `asleep at the wheel` then!...wonder if they will forsake their raise this year as a sign of remorse?!

[Lavalas]

4 hours ago, Funn3r said:

There's a Redway site near me which was "houses and flats Coming Soon" for years, the whole area has always been a bit of a swamp so I assumed they might never build on it. Maybe they were saving it for last, anyway they have now developed it and it has finished-looking houses, although definitely still a construction site. One or two genuinely look lived-in but mostly not. 

Anyway my point is there are quite a few Dalek things dotted about the site. About the size of a litter bin with rubber antenna on top, black with yellow warnings about security alert monitoring. Never seen anything like it and my take on it was that they expect these to stand empty for the foreseeable. 

Interesting - do you mean this sort of thing?

https://pid-systems.co.uk/sectors/civil-engineering

 

[spunko]

15 hours ago, MrXxx said:

Well the Finance Director at Kent C C must have been `asleep at the wheel` then!...wonder if they will forsake their raise this year as a sign of remorse?!

KCC have a history of poor investing. They lost hundreds of millions in the Icelandic bank scandal too. They were lucky to get most of it back, due to Icelandic law.

[Bricormortis]

17 hours ago, Loki said:

Someone just bought 33 million quids worth of NG shares

https://imgur.com/8GTU1oO

 Ah not Erroll after all.

[kibuc]

43 minutes ago, Bricormortis said:

Someone just bought 33 million quids worth of NG shares

Oh, that NG. I thought you meant New Gold and almost spilled my drink.

[Bobthebuilder]

1 hour ago, Bricormortis said:

 Ah not Erroll after all.

Niel Woodford???

[sancho panza]

On 05/06/2019 at 09:15, Democorruptcy said:

BoE are happy with no more than 15% of mortgages OVER 4.5x household income. 23.5k x 2 x 4.5 = 212k.

Minimum wage is £8.21 25 or over, £7.70 at 21 to 24. Taking the BoE income multipliers above at the middle of the wages, say £8 for a couple is 16 x 40 x 52 x 4.5  = £150k. That's for people earning the minimum wage, before any deposit with no equity from a previous house.

Just because the BoE says it,doens't mean it's sustainable.For the current metrics to work long term,we need to lose the record levels of student debt(growing),near record levels of non mortgage debt/income(still growing),fiscal deficit of 5% plus that funds many public sector jobs,record national debt(growing).
I  agree with you follwoing comment re how quaint lending on single incomes has become-it says it all the way you say it.

Income mulitples are a guide -and I think theyre flagging warning signs but the macro situation is worse.

On 05/06/2019 at 13:32, UmBongo said:

Used car prices seem extremely strong at the moment. I'm looking at city cars and superminis and in my part of the country they're around £2.5k for a 9 or 10 year old example. . 

Whether it be finance availaiblitly or jsut people downsizing,it's demand destruction the old fashioned way.

query people deleveraging by buying a an expensive used car as ooposed to a new one.

https://uk.reuters.com/article/uk-britain-economy-autos/uk-new-car-sales-fall-5-in-may-idUKKCN1T60TB

LONDON (Reuters) - British new car registrations dropped 4.6% last month due to uncertainty over diesel policy and the government’s decision to cut incentives for plug-in hybrid vehicles, an industry body said on Wednesday.

Sales fell to 183,724 cars in May, the Society of Motor Manufacturers and Traders (SMMT) said.

On 05/06/2019 at 14:42, Barnsey said:

Oh. Dear. 

U.S. ADP employment number comes in way below expected, 27,000 jobs added rather than the expected 185,000. Worst jobs number since March 2010!

Misdh had a piece on this pointing out a large discrepancy in the figures.

https://moneymaven.io/mishtalk/economics/adp-shocker-estimate-economy-to-add-only-27-000-jobs-in-may-FKxPQUQXxUuGmUfFd5Wd7g/

ADP estimates the economy added only 27,000 jobs in May. The consensus estimate by the BLS, for Friday, is 180,000.

The ADP National Employment Report for May is worth a look, because the numbers are a bit shocking, at least compared to consensus estimates.

Compared to BLS, sometimes ADP is much higher and sometimes much lower. Misses, assuming the BLS is accurate (not necessarily a good assumption), appear to be random.

ADP vs BLS

 

 

ADP and the BLS both heavily revise numbers over time, so the numbers eventually converge.

Trend Change or Outlier?

 

 

Averages

• The average for the year is 188.
• The 3-month average is 152.
• The 2-month average is 149.

If this is an outlier, then any of the averages are a better indicator than judging from the one-month total.

Consensus Estimates

• The Econoday consensus estimate for ADP was 175,000 jobs.
• The Econoday consensus estimate for the BLS is 180,000 jobs.

Jobs vs Employment

Last month, the BLS said Jobs Rose by +263,000 but Employment Declined by 103,000.

In the past year, the difference between jobs and employment is a whopping 1,191,000. That's a discrepancy of 99,250 every month, in favor of jobs.

In that regard, 27,000 no longer seems shocking.

I suspect the BLS and ADP are double-counting part-time jobs. Neither weeds out duplicate social security numbers.

We hear from the BLS on Friday.

[sancho panza]

Wolf piece:Semiconductors lead the way for the global economy.Very relaible lead indicator for the near term.

Demand destruction without an IR raise in sight.

Backs up what Hodges was saying about smartphone demand

https://www.icis.com/chemicals-and-the-economy/2019/05/smartphone-market-decline-begins-to-impact-global-stock-markets/

The bad news continues for the world’s smartphone manufacturers and their suppliers. 

• Global sales fell 4% in Q1 as the chart shows, with volume of 330m the lowest since Q3 2014
• China’s market fell 3% to 88m, whilst US volume fell 18% to 36m
• Apple has been badly hit, with US sales down 19% in Q1 and China sales down 25% in the past 6 months
• Foldables have also failed to make a breakthrough, with Gartner estimating just 30m sales by 2023

This downbeat news highlights the fact that replacement cycles are no longer every year/18 months, but have already pushed out to 2.6 years.  Consumers see no need to rush to buy the latest model, given that today’s phones already cater very well for their needs.

https://wolfstreet.com/2019/06/04/global-semiconductor-sales-plunge-but-why/

Global Semiconductor Sales Plunge 24% from Peak, Deepest % Plunge since Financial Crisis, Deepest $ Plunge Ever. Here’s Why

by Wolf Richter • Jun 4, 2019 • 71 Comments • Email to a friend

A slew of reasons, the China debacle on top.

Global semiconductor sales dropped 14.6% in April from April last year, to $32.1 billion, on a three-month moving average basis, the World Semiconductor Trade Statistics (WSTS) organization reported Tuesday afternoon. The three-month moving average in April has plunged 24% from the peak last October, thus continuing the deepest plunge in semiconductor sales since the Financial Crisis:

In dollar terms, semiconductor sales plunged by over $10 billion in April compared to the pace in October 2018, the largest peak-to-trough dollar-drop ever. During the Financial Crisis, chip sales dropped by $9 billion from peak to trough.

But in percentage terms, the current plunge doesn’t quite measure up: 24% versus the 39% collapse during the Financial Crisis and the 45% collapse during the long dotcom bust.

The Semiconductor Industry Association (SIA) said in its press release that sales, based on the data compiled by the WSTS, dropped in all major geographic regions in April (three-month moving averages compared to the same period last year):

• Americas: -29.5%
• Europe: -8.0%
• Japan: -10.9%
• China: -10.9%
• Asia Pacific/All Other: -10.7

And sales may not pick up anytime soon:

The SIA “endorses” the WSTS projections that chip sales for the full year 2019 will fall by 12% from the record levels of 2018, to $412 billion. In terms of regions, the SIA expects semi sales to fall across the board for the full year 2019:

• Americas: -23.6%
• Europe: -3.1%
• Japan: -9.7%
• China and other Asia Pacific: -9.6%

So maybe next year: The SIA expects that sales in 2020 will “bounce back somewhat, posting moderate growth of 5.4%,” from the much lower levels in 2019.

The huge spike and plunge that the semiconductor industry is facing currently is a result of several factors piling on top of each other.

The China debacle.

Potential tariffs and trade tensions between the US and China and potential export controls of tech products, such as semiconductors, to China has caused a stampede in 2018 to front-run these policies.

Just how prescient this stampede was has now been demonstrated by US efforts to clip the wings of Chinese tech and telecom giant Huawei Technologies, whose telecom infrastructure equipment (think 4-G and 5-G) and smartphones, are sold around the globe. They contain US semiconductors. And Huawei has been preparing for these eventualities.

Since the middle of 2018, Huawei has been stockpiling chips and other tech components. Bloomberg reported that according to its sources, it stockpiled enough components to keep its business running for at least three months after it gets cut off from US suppliers. This would give it some time to realign its supply chain.

The Nikkei, citing “multiple sources,” reported in May that Huawei has stockpiled six months’ to a year’s worth of “crucial components,” such as semiconductors, that had a higher risk of falling under export controls, to prepare for a worst-case scenario where its key suppliers would be barred from doing business with it. And it has stockpiles of less crucial components that would last for three months.

Huawei is not the only Chinese tech company that has been preparing for these scenarios. Acquiring these stockpiles means accelerated purchases. This is likely one of the reasons for the long spike in the chart above that peaked in October. And after these companies had acquired the stockpiles, chip sales began to drop.

Decline in global smartphone sales.

Global smartphone sales went from stagnation in 2018 into decline in Q1 2019. According to Gartner Inc., sales in Q1 fell 2.7% compared to the same period last year to 373 million units. Huawei was number two, behind Samsung, and both of them far ahead of Apple. iPhone sales in Q1 plunged 17.6% year-over-year. You see, Apple is now trying to sell services to brush off its dismal iPhone sales. These dynamics put a dent into semiconductor sales.

Decline in global PC and laptop shipments.

Global PC and laptop shipments in Q1 fell 4.6% year-over-year to 58.5 million units, according to Gartner. The Big Three vendors – Lenovo, HP, and Dell – were able to increase their shipments. And their market share rose to 61.5% in Q1, up from 56.9% a year earlier. The smaller kids on the block lost out. Apple’s shipments fell 2.5%. The remaining vendors were confronted with larger drops, ranging from -7.3% for Asus and -13.2% for Acer to -20.9% for all others.

The Crypto-mining collapse.

Demand for special rigs to mine cryptocurrencies collapsed in 2018, and this hit semiconductor makers, such as Nvidia, that make these specialized chips.

Data Center boom slows down. China’s fault again.

Data centers are part of the infrastructure of the “cloud.” This business had been on a relentless boom. And it may still be, but….  Intel caused its shares to swoon with its Q1 earnings report when it disclosed that chip sales of its data-center unit had fallen 6.3% from a year ago, due to weakness in China and large stockpiles among its customers. This came after a warning in January about slowing data center sales in Q4.

CEO Bob Swan said that Intel’s customers in China had “absolutely” stockpiled extra data center chips in 2018 due to the risks of tariffs or export controls. And those stockpiles are still around and need to be consumed.

This spike and plunge in semiconductor sales is a result of a confluence of factors. The global decline in demand for smartphones and PCs – both now mature markets – would have been enough to turn chip sales down. But the China trade issues, the frontrunning of tariffs and export controls, the stockpiling of chips, now topped off by actual tariffs and export controls did much of the rest.

[sancho panza]

One old adage I really think rings true is

'the more times a resistance is tested,the less likely it is to hold'.

Semiconductor market has a long way to go in terms of long term averages but rallying at the mo.

 

QQQ - US tech ETF-AMZN,MSFT,AAPl etc.Appears to eb plateauing.

[King Penda]

On 05/06/2019 at 09:10, Democorruptcy said:

Single person mortgages, how quaint and old fashioned! They have had another 10 years since the crash, for people who bought houses using one income to sell them to people happy to use two.

Corbyn's popularity among the young at the last election was his fake promise to abolish tuition fees.

The next thing you will be telling me is corbyn will be targeting single home owners for under occuping houses or have haveing The audacity to have a garden

[MrXxx]

8 hours ago, spunko said:

KCC have a history of poor investing. They lost hundreds of millions in the Icelandic bank scandal too. They were lucky to get most of it back, due to Icelandic law.

Well somebody there needs a `kick up the arse` then!

[DurhamBorn]

@sancho panza as i mentioned a long way back in the thread iv always found one of the best lead indicators is lumber prices

https://markets.businessinsider.com/commodities/lumber-price

It picks up a slowdown in construction and consumption.Semis can often be one of the last sectors to roll over,so the fact they might be would signal to me everything else is already heading down.

 

[Straingone]

On 04/06/2019 at 14:58, Cosmic Apple said:

If anything prices on used cars seem to be UP at the moment. I don't have full market data but purely anecdotal based on my own search

 

On 04/06/2019 at 14:15, Yellow_Reduced_Sticker said:

I will say this there is NO RECESSION in the used car market thats for sure! 

The wholesale used car market is currently crashing. Used cars values moved down the largest amount in many years last month and that decline is continuing this month. This is not reflected at the retail end yet as many retailers are carrying old stock which they can't turnover. The last time I remember the market like this  was 2008 where nobody was able to value cars as they were depreciating so quickly. I think we are at the start of the second leg down in used car residuals

May delivers biggest used car price decline 'since records began'

[Democorruptcy]

On 05/06/2019 at 18:53, Loki said:

Someone just bought 33 million quids worth of NG shares

https://imgur.com/8GTU1oO

It's the after the markets close 16:35pm "trade" which can be either a huge buy or sell for each firm.

On HL's individual share price page select the 'Trades by Volume' tab 5pm or later

NG a £32m buy on 6th https://www.hl.co.uk/shares/shares-search-results/n/national-grid-ord-12,-204473p

[Democorruptcy]

10 hours ago, sancho panza said:

Just because the BoE says it,doens't mean it's sustainable.For the current metrics to work long term,we need to lose the record levels of student debt(growing),near record levels of non mortgage debt/income(still growing),fiscal deficit of 5% plus that funds many public sector jobs,record national debt(growing).
I  agree with you follwoing comment re how quaint lending on single incomes has become-it says it all the way you say it.

Income mulitples are a guide -and I think theyre flagging warning signs but the macro situation is worse.

If the current metrics start having a problem, the BoE could change them - up! No more than 25% over 4.5x household income, No more than 15% over 5x household income. Nothing would surprise my any more.

[spygirl]

FT paywall n all

https://www.ft.com/content/18869458-889c-11e9-97ea-05ac2431f453

Article on Fed pissing around with concept of full employment.

Obvious comment - by a non economist - theres a job and a job i.e. crap one v well paying open with benefits. SOmething that seems to go over the (academic) economists head.

My solution to that would be to remove all health care and pensions from academic economist. Let them pay their own way and eat their own dogfood (economic fuckups).

Chart on employment - hopefully  ti shows

 

 

Comment - Labour market has tightened but inflation is not moving.

US labour market is red hot.

Cut bit:

In particular, Ms Brainard is focused on the labour force participation rate. As America’s baby boomers age, the participation rate should drop; instead, it remains stable. This means that pay and conditions are attractive enough that people who would have been out of the labour force have returned, or that older workers are choosing not to retire.

Had the FOMC raised rates sooner or more aggressively, satisfied that it had reached its employment targets, said Ms Brainard, “we would have left a lot of jobs on the table”.

Balls IR/Fed do not create well paying jobs.

My explanation is simple - and one not ever discussed.

Despite what you think, Americans retire a few years earlier than Europeans workers.

As they retire they look to live off investments that are or very near cash (money market).

The low yield caused by ZIRP, is making them hang on for a few years - Well, Maud, We're not getting much return from out (near cash) account. Ill get a job a the <DIY>, tie us over till the rates go up a bit.

If the Fed wants to create inflation then it needs to normalise IRs - not tighten! - , raising the return on cash/nearcash investments, odlsters will ealve labour market, wages will rise.

 

 

 

[spygirl]

And the highest rated comment just repeats my observation:

In a monetary loose environment, with very low interest rates, baby boomers don’t dare to retire as they see the value of their monies being diluted and give them no return/interest. Fear has crept in they won’t have enough to last until the end. They must continue to work. I would think it is sad instead of a positive. The permanent sign for hiring was there too, in 1999 and 2007, when we heard the same self-congratulating tone from the Fed. The potatoe-production finetuners of the Politburo in Washington have no clue about the real world, and they manage our economies like bureaucrats from the Eastern bloc. Bouts of famine ensue, and poverty spreads, while all have indeed a job. We are in total delusion of the horrific consequences of our central banks’ policies, starting with the return of populism. Same policies of the past bring the same consequences. People can’t put the finger on the culprit, so they point at whatever politicians will throw at them, preferably some minority, or the foreigner. All the direct consequence of monetary insanity and dilution of the middle class’ prudent saving behaviour and moderate thought processes. Coin clipping has never ended well.

[Yellow_Reduced_Sticker]

11 hours ago, Shaneyson said:

 

The wholesale used car market is currently crashing. Used cars values moved down the largest amount in many years last month and that decline is continuing this month. This is not reflected at the retail end yet as many retailers are carrying old stock which they can't turnover. The last time I remember the market like this  was 2008 where nobody was able to value cars as they were depreciating so quickly. I think we are at the start of the second leg down in used car residuals

May delivers biggest used car price decline 'since records began'

 

Thanks for the info, in which case I'll go to 'Hall 1 REDUCED Section' when i pop over to Blackbushe Car Auctions next Monday...

 

After all wouldn't want to splash-out MEGA cash on a motor ONLY for it to depreciate in value, as soon as i drive off!

 

So YES its a £100 car bargain for me, I'll be joining the bottom feeder bargain hunters there, however those bottom feeder bargain hunters ain't seen nothing ...cos I'm bringing me own YRS Tea FLASK & SANDWICHES!