ECB – Draghi & Tapering

The European Central Bank (ECB) is expected to begin reducing its bond purchases gradually tampering its stimulation program of Quantitative Easing (QE). Nevertheless, reliable sources tell of the ECB being extremely cautious fearing what will happen if buyers do not appear and rates begin to rise sharply. The difference between the ECB and the Fed is stark. The ECB owns 40% of Eurozone government debt. The Fed does not even come close.
Obviously, the European financial markets have become addicted to the unprecedented inflow of cheap money even though there has been no appreciable rise in economic growth or inflation as was expected. This raises the question only asked behind the curtain: Will the economy spiral downward if QE ends? The Fed never reached the levels of ECB’s QE program so there is no comparison with the States.

This post was published at Armstrong Economics on Sep 4, 2017.

Norway’s Big Fish Story

Submitted by Nick Kamran – Letters from Norway
Decision Season
With Parliamentary elections looming, more Norwegians than usual are asking themselves the tough questions. It is now apparent that the slump in oil is not a temporary one. What will the country do now? Time for the lottery winner, after receiving the last annuity, to get a job before burning out the savings. Many are looking towards the sea, fishing and exploiting underwater natural resources. Others are looking to blast open the mountains to do the same.
However, commodity based economies, third-world in nature, are subject to mother nature’s whims, innovation, and ruthless competition. Moreover, it creates complacency, catching the nation off guard when there is a shift in the supply curve (instead of hitting peak oil, the opposite happened). Hence, the decisions or lack thereof, made during the next four years will impact future generations. Two generations of Norwegians grew up on the delusion that their society, built on pre-socialist values and high oil prices, can endure any challenge.

This post was published at Zero Hedge on Sep 4, 2017.

WHY are banks Too Big to Fail & Too Big To Jail

There is something much more sinister going on behind the curtain. I have warned that you really are taking your life in your hands doing business in New York City with a bank because NOBODY ever wins against the bankers no matter what they do. This begs the question about why are banks paying huge fines, yet nobody goes to jail, and there is never a trial while class action suits are summarily dismissed? Something is seriously wrong here. To discover the answer, as always, just follow the money!
Back in 2003, Judge Milton Pollack dismissed two class action suits against Merrill Lynch for putting out bogus research during the DOT. COM Bubble after the investment bank plead guilty and paid huge fines. Judge Pollack wrote a 43 page decision protecting banks even when they produce intentional fake research. The judge said that investors were eager to take that risk and were to blame for their own losses. Pollack then dismissed another 25 lawsuits against the bankers. Similarly, another judge dismissed suits against Credit Suisse First Boston, Goldman Sachs, and Morgan Stanley. Why is it impossible to sue the bankers in America where justice is supposed to exist for all?

This post was published at Armstrong Economics on Sep 4, 2017.

What Will Stabilize Used Vehicle Sales? (Hint: Nothing Good)

Until this point, a lot of what I’ve shared with you is theoretically based on my knowledge and experience of used vehicle values and how I believe they affect new vehicle sales velocity. Today, I am going to share some some hard data that I’ve been researching with a great deal of effort.
I genuinely believe that used vehicle values have a very significant effect on new vehicle sales velocity. I have explained it on Twitter and on a previous blog post through the concept of trade cycles. Because of this, I am certain that used vehicle values can be used as a leading indicator for inventory management at the manufacturing level, at the retail dealer level and certainly as an investment tool. However, I humbly hold that current used vehicle value indexes sources are not good enough.
There is a very specific group of vehicles that can be monitored in order to better project results. The Manheim and NADA index both have too much noise in the data. For example, the Manheim Index has no model year restrictions and includes new vehicle price inflation in the calculations. NADA goes up to 8 model years. Both average the data over multiple months and include vehicles which, in my opinion, have little to no impact on new vehicle sales velocity. Therefore, I have decided to make my own index.
For now, I’m going to use Ford as an example please ignore the red residual line until later.

This post was published at Zero Hedge on Sep 3, 2017.