Month: July 2024

As previewed earlier, today’s TSLA print is likely to be ugly: the company was the only Mag7 member expected to report negative earnings growth as a result of continued anemic sales, even though unlike Q1, in Q2 Tesla sold more than 33,000 cars than they produced which cleared out some inventory that had been a real overhang. So once again, a key metric for Wall Street this quarter is gross margin, or how much of a profit hit Musk took to clear out the inventory. That said, in a note last week, Ben Kallo of Robert W. Baird wrote that “we think gross margin likely benefits from higher mix to the energy segment as well as higher regulatory credits.”

The other big thing markets want clarity on is the great Robotaxi unveil: last month, we learned that it was delayed from Aug. 8, so Musk will likely announce a new date. To be sure, investors will be counting on the Robotaxi, which Musk has also called a “Cybercab,” to drive the company’s next wave of growth. So, as Bloomberg asks, “are we going to just get a new date, or actually hear more about this vehicles capabilities, regulatory approvals and business model?”

Turning to the company’s existing products, one can argue that Tesla’s existing car lineup is old, while Cybertruck sales are off to a slow start as interest rates remain sky high. So what is Tesla’s sales outlook for 2024? Tesla sold about 1.8 million vehicles globally in 2023. So far this year, they have sold about 831,000. Tesla will surely need to pick up the pace in the back half of the year and deliver a million units just in order to keep sales flat.

Finally, while TSLA’s quarter’s earnings call isn’t expected to be very exciting, there are still some important topics that Musk and the team might touch on:

• Cheaper Tesla models. On the previous earnings call, Musk mentioned that Tesla was still committed to more affordable models and accelerating their launch. But few details were provided. Do these models – which Musk promised by early 2025 at the latest – exist?
• NACS integration. After laying off the entire supercharging team, Tesla appeared to hire back some of them. That team had been responsible for integrating other companies’ electric vehicles with the ability to access the Tesla Super Charging Network. Only Rivian and Ford have access to date — what about everyone else?
• Autonomy and Robotaxi. Will Musk be able to keep investors happy with Tesla’s Robotaxi unveiling moved to October?

With all that in mind, here is the hot mess the company reported for the second quarter, which reveal that the margin pain taken to clear out all those excess cars was all too real:

• Q2 Revenue $25.5BN, up 2% YoY, and beating estimates of $24.63BN. That’s the good news…
• Q2 Adj EPS 52c, down 43% YoY, and missing estimates of 60c
• Q2 Operating income $1.61BN, down 33% YoY and missing estimates of $1.81BN
• Q2 Automotive Gross Margin Ex-Regulatory Credits 14.6%, missing estimates
• Q2 Free Cash Flow $1.34BN, +34% YoY but missing estimates of 1.92BN

In short: a hot mess as summarized below:

Charted, the results are not pretty but certainly an improvement from last quarter.

No amount of charts however will deflect attention from the ongoing double-digit drop in profits – and the fact that this was the fourth straight quarter that Tesla has missed profit expectations – and margin decline, which the company explained as follows:

Our operating income decreased YoY to $1.6B in Q2, resulting in a 6.3% operating margin. YoY, operating income was primarily impacted by the following items:

– reduced S3XY vehicle ASP as noted above
– restructuring charges
– increase in operating expenses largely driven by AI projects
– decline in S3XY vehicle deliveries

+ higher regulatory credit revenue
+ growth in Energy Generation and Storage gross profit
+ lower cost per vehicle, including lower raw material costs, freight and duties
+ lower cost of production ramp of 4680 cells and other related charges

What’s worse, it was once again the sale of regulatory credits that saved the day: $890 million this quarter, more than double from $442 million last quarter.

“We recognized record regulatory credit revenues in Q2 as other OEMs are still behind on meeting emissions requirements,” says Tesla in the shareholder deck.

That’s the bad news. The good news is that this was the first quarter in a year that revenues beat estimates, and the outlook got a boost as TSLA now expects a “sequential increase in production in Q3″ as it “continued to add to our vehicle lineup globally, including the introduction of new Model 3 and Model Y trims and additional paint options for the S3XY lineup.”

Some more highlights from the letter:

• Tesla Still Sees ‘Notably Lower’ Volume Growth Rate for 2024, as its teams “work on the launch of the next generation vehicle and other products. In 2024, the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should outpace the Automotive business.”
• Tesla’s “purpose-built Robotaxi product will continue to pursue a revolutionary “unboxed” manufacturing strategy”
• Here, the company notes that the timing of Robotaxi deployment depends on technological advancement and regulatory approval, and TSLA is “working vigorously on this opportunity given the outsized potential value.”
• Focus remains “on company-wide cost reduction, including reducing COGS per vehicle, growing traditional hardware business and accelerating development of our AIenabled products and services.”

In other words, Tesla is saying that they it deliver less than the 1.8 million cars they delivered in 2023:

As for the Cybertruck – which became the best-selling EV pickup in the U.S. in Q2 – the company reported that “production more than tripled sequentially and remains on track to achieve profitability by end of year.”  Oh, and the Semi got an honorable mention: discussing the car which was unveiled in November 2017, Tesla said that “preparation of Semi factory continues and is on track to begin production by end of 2025.“

While the disappointing results would likely have been enough to hammer the stock – even more – after hours, TSLA is only modestly lower thanks perhaps to these three paragraphs in the company’s “product outlook” section, which reaffirm what everyone has been hoping for: cheaper cars are coming some time in H1 2025.

Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.

This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times. This should help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines.

Our purpose-built Robotaxi product will continue to pursue a revolutionary “unboxed” manufacturing strategy.

Here, Tesla again notes that it will release more “affordable models” by the first half of 2025; then again, in the last earnings call, Elon Musk made it seem like it would be early 2025, so perhaps the timeline was once again pushed back a bit. Offering a clearer product pipeline like other automakers in the US – such as Rivian or GM – might help ease concerns that the company is ignoring the core EV business.

Understandably, Tesla dedicated a section of the report to its AI efforts, as follows:

Artificial Intelligence Software and Hardware

In Q2, we focused on reducing interventions with FSD (Supervised), while improving driving comfort. Notably, we rolled out a version of FSD (Supervised) that primarily relies on eye tracking software to monitor driver attentiveness. We also increased the robustness of our next gen FSD (Supervised) model with substantially more parameters. Looking ahead to future autonomous driving and robotaxi service, we continued progress on software and hardware development. Optimus is performing its first task handling batteries in one of our facilities. The south extension of Gigafactory Texas is nearing completion and will house our largest cluster of H100s yet

Elsewhere, Tesla deployed a staggering amount of energy storage during the quarter — 9.4 gigawatt hours — and revenue for that part of the business doubled from the second quarter of 2023. The company previously predicted storage would grow faster than car sales. As Bloomberg notes, that turned out to be quite an understatement.

Even though it is no longer a pressing issue, Tesla noted that its quarter-end cash was $30.7B, with the sequential increase of $3.9B a “result of positive free cash flow of $1.3B, driven by an inventory decrease of $1.8B and partially offset by AI infrastructure capex of $0.6B in Q2.”

With the stock soaring in the past month, if sliding modestly in the the past week, TSLA shares dipped as much as 4% after hours before recovering some of their losses to last trade around $237.

The full Tesla earnings presentation can be found here.

Authored by Debra Heine via American Greatness,

Senate Majority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.) failed to drum up enthusiasm for Kamala Harris among reporters while endorsing her bid for the Democrat presidential nomination during a press conference on Capitol Hill, Tuesday.

Schumer, 73, said Joe Biden’s “selfless decision” not to run “has given the Democratic Party the opportunity to unite behind a new nominee,” and since his announcement, the party has “swiftly coalesced” around Harris, “and boy oh boy are we enthusiastic.”

Schumer then ludicrously told reporters that the machinations of the Democrat party’s power brokers to oust Biden once he was deemed unelectable was a “grassroots, bottom up” process.

“When I spoke with her Sunday, she said she wanted the opportunity to win the nomination on her own, and to do so from the grassroots up, not top down,” Schumer said.

“Now that the process has played out, from the grassroots, bottom up, we are here today throw our support behind Vice President Kamala Harris!” Schumer declared with gusto, while clapping his hands.

Schumer went on:

“…we are brimming with excitement, enthusiasm, unity.”

In reaction to the dead silence that ensued, Schumer told reporters:

“I’m clapping—you don’t have to.”

Laughing, he added, “it’s a happy day, what can I say?”

The New York Democrat continued, saying:

 “Kamala Harris and her candidacy has excited and energized the House Democratic Caucus, the Democratic Party and the nation.  I’m proud to strongly endorse Kamala Harris to be the 47th president of the United States of America!”

He paused and waited for applause, but there wasn’t any.

“Applause?” he asked weakly, pointing to members of the press.

Schumer then handed the mike over to Jeffries, who said that Harris is “ready, willing and able to lead us into the future.”

When Schumer was asked during the Q&A whether he had “personally asked” Biden to step down during his visit to Biden’s beach house in Delaware on July 13, the senator didn’t deny it.

“Look, what I would say is that the president has done an amazing, amazing job as president—one of the best we’ve ever had and he put his country first and made the right decision,” he said.

Watch the farcical cringefest here…

Authored by Patrick McDonald via Campus Reform,

A recent graduate of St. Cloud State University in Minnesota is suing the university administration, alleging that she was forced to pay a fee that went to a liberal student activist group.

Tayah Lackie filed the lawsuit in the U.S. District Court for the District of Minnesota in May, with assistance from the Liberty Justice Center and the Upper Midwest Law Center.

Lackie’s lawsuit contends that a mandatory fee going to a political agenda that she disagrees with violates the First Amendment because it compels speech.

“A state school can’t make you pay a political group just to be enrolled,” Liberty Justice Center President Jacob Huebert said.

“The Students United scheme violates students’ First Amendment rights, and we look forward to the courts saying so in our case.”

The lawsuit alleges that all students at St. Cloud State must pay “union dues” to a group called Students United, which “advocates for and takes positions on controversial policies and legislation, and which purports to speak on all students’ behalf.”

The lawsuit then proceeds to give examples of Students United making political statements and expressing potentially controversial political advocacy.

“For example,” the lawsuit details, “Students United has aggressively advocated for the abolition of student debt—including through a website called ‘Fck Student Debt’ and a Twitter/X account, @FckStudentDebt.”

“According to the website, Fck Student Debt is ‘a special project by Students United to eliminate all of the student loan debt created by higher education institutions in the state of Minnesota and to push federal legislators to cancel student loan debt,’” the lawsuit explains.

On Students United’s website, the group states that its “vision” is to “create the model of inclusive higher education policies and leadership.” The group currently has a “Director of Student Leadership & Equity,” and each of the group’s officers have pronouns following their names on their bios.

Yet, despite specific political arguments being made by Students United, the lawsuit states that “every” student in the Minnesota State Colleges and University system “is forced to associate with and subsidize Students United and its speech—even if the student disagrees with it.”

The state of Minnesota filed a motion to dismiss Lackie’s complaint on July 15.

Campus Reform has contacted St. Cloud State University, the Liberty Justice Center, and the Upper Midwest Law Center for comment. This article will be updated accordingly.

Authored by Jack Phillips via The Epoch Times,

Lawyers for former President Donald Trump on July 22 asked a New York appeals court to overturn the $454 million New York civil fraud judgment that was handed down earlier this year.

In court papers filed with First Department of the State Supreme Court’s Appellate Division, the state’s mid-level court, his lawyers wrote that Manhattan Judge Arthur Engoron’s Feb. 16 finding, that claimed former President Trump made false statements to insurers, banks, and other entities about his wealth, was incorrect.

“Based on the ruling in this case, no company will want to come to New York to do business, and many businesses are fleeing,” his attorneys wrote.

“The economic aspects of this decision are a disaster for New York.“ The New York Attorney General’s office ”has used the statute in a way never seen before,” they added.

The lawyers said “there were no victims and no losses,” adding that the former president’s business partners “raved internally about their business with him and were eager for more.”

In their appeal, they contended that the judge made an “erroneous” decision and, during the case, “struggled to understand basic banking concepts” before he handed down the fine. They further said that he erred in rejecting an earlier appeals court decision regarding the statute of limitations for the case, arguing that New York Attorney General Letitia James’ civil lawsuit should have been dismissed.

The former president’s team also contended that after Justice Engoron’s decision, it gives the state attorney general’s office “limitless power to target anyone,“ including ”political opponents,” according to the 116-page filing.

“If Appellants’ conduct constituted ‘fraud’ […] then that word has no meaning, and [New York Attorney General’s] power to seize and destroy private businesses is boundless—and standardless,” the attorneys added.

Before the trial, Justice Engoron rejected many of the Trump attorneys’ objections as the case proceeded, at one point equating them to the plot of the movie “Groundhog Day” and fining some of the lawyers $7,500 each for “repetitive, frivolous” argument. The Appellate Division previously denied former President Trump’s bid to end the case on statute of limitations and other grounds.

After the judge handed down the judgment, former President Trump posted a $175 million bond in April to halt its collection and prevent interest from accruing. The move also blocked Ms. James from seizing some of his assets in New York City while he appeals the matter.

The Epoch Times contacted the New York Attorney General’s office for comment Tuesday.

In a statement to multiple news outlets, Ms. James’ office said that the appeal filed Monday repeats some arguments that were already rejected. “We won this case based on the facts and the law, and we are confident we will prevail on appeal,” a spokesperson said.

Former President Trump, the Republican nominee for the 2024 presidential election in November, has maintained his innocence in the fraud case, saying he’s being unfairly targeted.

Should former President Trump and his company, the Trump Organization, have to pay the entire judgment, it could imperil his cash reserves, although he might be able to recoup some of those losses due to his large stake in Trump Media, which owns his Truth Social platform.

Earlier this year, he was ordered in a separate case to pay nearly $84 million in damages after a New York jury found that he defamed a writer, E. Jean Carroll.

In May of this year, he was convicted by a Manhattan jury on 34 felony counts of falsifying business records in relation to payments made during the 2016 campaign. Sentencing for that case is scheduled for September.

The Manhattan case may be the only one of four cases against former President Trump that goes to trial before the November election. A federal judge in Florida last week dismissed federal charges involving his handling of classified documents after leaving the White House, arguing that the special counsel appointed in that case, Jack Smith, was improperly appointed by the Department of Justice. Mr. Smith has vowed to appeal the judgment.

Two other election-related cases brought against him in Washington and Georgia have been stalled, and it’s not clear when either will go to trial, if ever. The former president had pleaded not guilty to all charges in the four cases.

It was ugly in macro-land today with existing home sales crashing (as home prices hit record highs). But a couple of Regional Fed surveys really laid an egg…

First out of the gate was the Philly Fed Services Activity Survey, which puked in July from two-year highs to near four-year lows…

Source: Bloomberg

The indexes for general activity at the firm level, new orders, and sales/revenues turned negative. The full-time employment index suggested a decline in employment, and prices are rising once again…

• New orders fell to -7.1 vs 6.7

• Sales fell to -3.5 vs 14.3

• Prices paid rose to 30.2 vs 24.4

• Full-time employment fell to -4.9 vs 14.6

• Part-time employment fell to 4.0 vs 13.1

Of particular note was that the capital expenditures-equipment fell to 10.8 vs 24.5… not a great sign for the future of AI investment that is still supporting stocks.

And it’s not just Services, The Richmond Fed Manufacturing Survey crashed to -17 (the worst since the peak of the COVID lockdowns)…

Source: Bloomberg

And under the hood, it was even more of a shitshow…

• Shipments fell to -21

• New order volume slowed to -23

• Order backlogs rose to -20

• Capacity utilization slowed to -13

• Inventory levels of finished goods increased to 20

Overall, it’s bad news as Bidenomics shits the bed…

Source: Bloomberg

We just cannot wait to hear what Harris has up her sleeve to ‘fix’ this…

Tesla is set to report earnings after the bell today, with the street expecting a hefty EPS drop and 2% revenue decline. Sellside consensus expects Tesla’s Q2 earnings per share to drop 33% to 61 cents, with sales dipping to $24.38 billion. Here are the expectations on other metrics:

• Gross profit margin (exp. 17.7%).
• Free cash flow (exp. 1.2bln).
• CapEx (exp. 2.5bln).
• Average selling price (exp. 42,736).

Q3 2024 GUIDANCE:

• EPS exp. 0.55.
• Revenue exp. 25.4bln.

FY24 GUIDANCE:

• EPS exp. 2.02.
• Revenue exp. 98.6bln.

As we noted this morning, with valuations among technology firms still high after last week’s retreat, investors are looking for more evidence that their businesses are on track and the euphoria around artificial intelligence is justified.

That said, unlike other Mag7 stocks, TSLA has largely missed the meltup in the past year, with the stock only enjoying a sharp move higher in recent weeks. Even with that though, Goldman calculates that TSLA’s positioning score among hedge funds is only 3.5, meaning this name is extremely shorted and there is major risk of a continued squeeze (just as we correctly warned 2 months ago).

Robotaxis In Focus

Analysts and investors eagerly await details on Tesla’s robotaxi reveal, initially set for August 8 but now delayed to October. Investors will also look for information on new affordable models, the Optimus humanoid robot, and spending on AI and autonomous driving.

Tesla’s 11-day winning streak earlier this month, that saw the stock rise about 50% from its YTD lows, abruptly ended on July 11 after a Bloomberg News report revealed that the EV maker plans to delay the unveiling event of the highly anticipated ‘robotaxi’ from August 8 to sometime in October.

In early June, we told readers, “TSLA remains one of the most shorted names in the hedge fund space and is one of the biggest mutual fund underweights.” 

Shares soared nearly 62% from June 10 to July 11 in a massive short squeeze. We penned this note: “Tesla’s Furious Rally Is Another Massive Short Squeeze.”

But the tide could be changing unless the company unexpectedly beats expectations after the bell today. As a reminder, here is GLJ Research’s take on the Robotaxi disappointment for Tesla earlier this month:

A lot of investors trade around these TSLA days/events, many of which have turned out to be sizeable disappointments (i.e., Battery Day + Cybertruck Unveil + AI Day 1.0 + Optimus Day 1.0 + etc.); and now that “Robotaxi Day 8/8” its not happening as originally scheduled, the folks trading TSLA’s stock into this event are likely now sellers (welcome to investing in 2024). Furthermore, given the run-up in TSLA’s shares the past 11 days (the 74-day RSI is a whopping 74.6), the selling could be quite material.

JPMorgan analyst Ryan Brinkman penned a note after the JPMorgan European Automotive Conference in London last month explaining that robot taxis are “years” away. 

Deliveries And Cybertruck

Yet Tesla surprised investors at the beginning of July with better-than-expected deliveries for the second quarter despite a global electric vehicle market downturn.

It delivered 443,956 vehicles in the second quarter, better than the 439,302 average analyst estimate.

The Austin-based carmaker delivered 422,405 of its top-selling Model 3 and Model Y vehicles in the second quarter, down from 446,915 a year ago.

The company produced 410,831 vehicles during the quarter.

While sales were down 4.8% from a year ago, Tesla improved on a sequential basis from the 386,810 vehicles delivered in the first three months of the year.

New estimates from Fred Lambert, the editor-in-chief and main writer at Electrek, speculated that after parsing through the delivery report, “Tesla Cybertruck might have become the best-selling electric pickup truck in the US.” 

Lambert’s extended take on Cybertruck is that it will likely become (if not already) the best-selling EV truck in the world’s largest economy: 

I predicted that despite the Cybertruck coming a long time after the F150 Lightning and Rivian R1T, it would likely achieve higher volume than those quickly after its launch for the simple fact that Tesla is second to none when it comes to ramping up EV programs.

We can’t confirm it because of the lack of transparency in Tesla’s sale disclosure, but I think it’s likely true that Cybertruck has become the best-selling electric pickup in the US right now.

Regarding demand, a ZH reader contacted us last week. They said their Cybertruck delivery date was moved up from the estimated second half of 2025 to August.

For some context, the reader paid $100 for the Cybertruck reservation in late 2022. Recall that reservations first opened in November 2019. 

Tesla and AI

As far as Tesla and AI, in July Morgan Stanley’s Adam Jonas suggested that Tesla could be poised for the powering up America theme with its solar energy and storage business.

This comes as artificial intelligence data centers are being constructed across the country, and once completed, demand a whole heck of a lot more power than traditional data centers, which means power grids must be upgraded to handle the new load capacity. 

“At first glance, the rapid growth in AI and its impact on electricity demand may not seem to have relevance to Tesla or the broader auto industry,” Jonas wrote in a note to clients in late June.

Titled “Tesla Energy Storage: Can GenAI Electrify This $130bn Business?” Jonas continued, “We recently published an analysis showing how US data center power usage may be equivalent to the power used by 150 million electric cars by 2030; the forecasted increase in US data center power from 2023 through 2027 is the electrical energy equivalent to adding 59 million EVs to US roads, or a 21% increase in total vehicles in service.”

Jonas seemed to embrace ‘The Next AI Trade,’ a theme we introduced to our pro subscribers in early April. We outlined how the AI revolution will drive a significant increase in electricity demand from AI data centers, reshoring trends, and other electrification trends, necessitating an upgrade of the nation’s grid. 

Musk’s Pay Package

Investors will also be looking for any new updates on Tesla’s move to Texas. Tesla investors voted for CEO Elon Musk’s compensation package and moving the company’s state of incorporation to Texas, signaling confidence in his leadership, in early June.

Tesla is banking on the reapproval aiding in its effort to overturn Delaware Chancery Court Judge Kathaleen St. Jude McCormick’s ruling, which means a likely appeal to the state’s Supreme Court.

Still, the outcome is uncertain, with Tesla stating in its proxy statement that it “cannot predict with certainty how a vote to ratify Musk’s compensation would be treated under Delaware law in these novel circumstances.”

Tesla Stock: Most, If Not All Good News, Appears To Be Priced In

As we said in our note earlier this month, with the stock price surging 50% in just a few days, one can make the argument that most if not all good news for the foreseeable future was promptly priced in.

Meanwhile, there is a growing sense of uncertainty around how to treat the wider EV market, amid a sea of conflicting dynamics. The industry benefits from generous tax credits. Yet it’s also contending with significant hurdles in the form of tariff wars and even identity politics, with some consumers rejecting EVs as a form of “woke” transport.

In the US, Donald Trump has said that if he becomes president again after November’s election, he’ll undo existing laws supporting battery-powered vehicles, calling them “crazy.” That said, Trump is a “huge fan” of Tesla’s Cybertruck, according to Elon Musk, who recently told staff to brace for major job cuts, with sales roles among those affected. And the Cybertruck, Tesla’s first new consumer model in years, has been slow to ramp up.

For that reason, some hedge fund managers have decided the stock is off bounds altogether. Tesla is “very difficult for us to position,” said Fabio Pecce, chief investment officer at Ambienta where he oversees $700 million, including managing the Ambienta x Alpha hedge fund.

Basically, it’s not clear whether investors are dealing with “a top company with a great management team” or whether it’s “a challenged franchise with deficient corporate governance,” he said.

However, “if Trump wins, it is truly going to be very positive” for Tesla, though “obviously not amazing for EVs and renewables in general,” he said. That’s because Trump is expected to impose “massive tariffs towards the Chinese players,” which would be “beneficial” to Tesla, Pecce said; this is also wrong since there is virtually no Chinese EV penetration in the US, and if anything it would force even more dumping of Chinese EVs in Europe which is also a huge market for Tesla.

And as usual, skeptics will also be looking into the company’s accompanying 10-Q when it is released for potential updates on the company’s numerous legal liabilities.

Authored by Mike Shedlock via MishTalk.com,

The economy is slowing and that will hit the zoomers first and the hardest, especially renters…

Shaky Ground

The idea for this post comes from the Wall Street Journal article American Borrowers Are on Shakier Ground.

Years of higher inflation and interest rates have left consumers mired in debt, even as overall economy hums.

I dispute the Journal’s statement the “overall economy hums”.

If the economy was humming we would not see charts like I am about to present.

Unexpected Expenses

That chart is from the Federal Reserve Report on the Economic Well-Being of U.S. Households

The report was updated May 21, 2024 but it it only through 2023. Zoomers and younger Millennials are in trouble.

Rot Starts at the Periphery

The Wall Street Journal comments Big Banks and Customers Continue to Feel Pressure From Higher Rates

JPMorgan’s second-quarter profit declined 9% year-over-year to $13.1 billion. That figure excludes one-time items, including a $7.9 billion gain on an exchange of the bank’s shares of Visa.

Credit-card loans rose faster than spending at all three banks, a sign that more borrowers carried over balances month to month.

“When you really dig into what’s happening across different consumers, the folks on the lower end of the wealth or income spectrum are struggling more,” Wells Fargo Chief Financial Officer Mike Santomassimo said on a call with reporters.

JPMorgan’s credit-card arm—the biggest in the country—said charge-offs on loans rose by nearly two-thirds from a year earlier. The rise in part reflected a normalization from years of historically low levels, Chief Financial Officer Jeremy Barnum told reporter

JPMorgan CEO Jamie Dimon repeated his view that interest rates could wind up staying higher than some economists have forecast.

“Market valuations and credit spreads seem to reflect a rather benign economic outlook,” he said in prepared remarks. “But there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”

Auto Loans Plunging

The above chart and the next few are from the New York Fed Household Debt and Credit Report for 2024 Q1.

Are auto loans a sign of a humming economy? I think not.

Transition into Serious 90+ Auto New York Fed Quarterly Report

Transition into Serious 90+ Credit Cards New York Fed Quarterly Report

Maxed Out Borrowers

If you have maxed out your credit card there is about a 33 percent chance you are delinquent.

Who might that be?

Maxed Out Credit Card Users

The preceding two charts are from the New York Fed report Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers

Notably Gen Z has the highest delinquency transition rate, but Millennials were the only group whose delinquency exceeded their pre-pandemic rate.

Let’s return to the first chart, repeated for convenience.

Percentage of Consumers with Unpaid Bills by Homeownership Status

Over 25 percent of those who rent have unpaid bills! Over 10 percent have not paid their water, gas, or electric bills.

This isn’t humming. It’s the verge of disaster. And I have been talking about this setup all year.

April 20: People Who Rent Will Decide the 2024 Presidential Election

May 31: Why Consumers Are Angry About the Economy in Five Pictures

June 19: Why Angry Renters Will Decide the Election, Take II

July 5: The Unemployment Rate Bottomed a Year Ago, Who’s Impacted the Most?

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

The Fed does not see this freight train coming even though it is standing in the middle or the track facing the oncoming train. This is despite nearly all of the charts in this post are from Fed reports.

And most economists are as blind as the Fed.

Unemployment Rate by Age Group

Candidate Preference by Age Group

An amazing 41 percent of those 18-34 are for Trump with only 30 percent for Biden.

That’s an unprecedented 11 percentage point gap for Republicans. In 2020 this age group voted overwhelmingly for Biden.

I discussed the above poll and also candidate preference by race in Post-Debate USA Today-Suffolk Poll Has Grim News for President Biden

Please click on link for 11 charts.

So who are the renters that will decide the election?

Zoomers, millennials, and black renters. They are priced out of a home while watching rent go up at least 0.4 percent every month for 33 months. That string finally snapped in June with a 0.3 percent rise.

Biden Seeks Rent Controls

On July 17, I noted Biden Seeks Supreme Court Term Limits, Medical Debt Cancellation, Rent Controls

Sorry Joe, it’s too late. You are gone and a recession has started, not that rent controls had a chance. They are a terrible idea anyway, but desperation set in.

A recession coupled with a weakening economy for the next three months is hard to overcome, especially given Kamala’s political baggage.

On July 8, I commented Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

Since then, more weak data hit the fan.

I tie the economic picture together in Three Top Reasons Mortgage Delinquencies Are Rising

Rot starts at the periphery then spreads to the core. Panic is coming.

Ahead of next week’s FOMC meeting, when consensus expects no surprises from Powell ahead of a September rate cut, the same can not be said for today’s first of the week coupon auction, when demand for $69BN in 2Y notes (with 5Y and 7Y auctions on deck) was off the charts.

Starting at the top, the high yield printed at 4.434%, down 27.2bps from 4.706% last month, the lowest since January, and stopped through the 4.457% When Issued by a whopping 2.3bps, the second highest stop through on record (only March 2023 was higher)!

The Bid to Cover was 2.814, above last month’s 2.751 and the highest since Aug 23 (and obviously above the six-auction average of 2.58).

However, the internals were truly spectacular, with Indirects taking down an unprecedented 76.6%, up from 65.6% in June and the highest on record!

And with Directs awarded 14.4%, the lowest since Jan 22, Dealers were left holding just 9.0% of the auction, the lowest on record.

Bottom line: the market, and especially foreign official entities, are piling into the short end ahead of next week’s FOMC decision in record amount, almost as if someone knows that contrary to expectations for no rate cut, Jerome Powell may actually surprise everyone next week. There were no surprises, however, in terms of the market reaction: yields tumbled after the stellar auction, with 10Y yields also tumbling to session lows.

Authored by Eric Lundrum via American Greatness,

The Biden Administration’s Department of Defense (DOD) has announced that it will begin handing out “economic hardship bonuses” to members of the military, amounting to a mere $20 every month.

As reported by the Daily Caller, the $20 bonus will be given to troops between the ranks of E1 and E3. An anonymous defense official confirmed the bonus on Friday, speaking to Military.com.

“The monthly bonus amounts, on average, will total approximately $120 [over the six months] … and they’re based on the funding Congress has made available,” said the official.

The bonuses will be provided as a result of funds appropriated by the 2024 National Defense Authorization Act (NDAA), which Congress passed last year. The Pentagon calculated that it could provide such payments to around 266,000 members before the funds ran out. As such, the E6 rank will not receive the bonus. Although the funds were first authorized in December, they were not appropriated for the DOD until March.

“While it’s welcome news that the department will provide some junior enlisted service members with temporary bonus pay, as authorized by [last year’s] NDAA, more must be done,” said Justine Tripathi, a spokeswoman for the House Armed Services Committee.

“[This is] why the [2025] NDAA NDAA provides junior enlisted service members with a 19.5% pay raise.”

Concerns have arisen regarding troops’ pay and whether or not it is enough to sustain a family. A study was published in April by the Armed Services Committee, which found that “servicemembers, especially junior enlisted servicemembers and servicemembers supporting large families, struggle to afford housing and feed their families.”

The study also determined that troops within that rank range had received either minimal pay raises or no raises at all in eight of the last 40 years.

A similar study released in June by the Military Family Advisory Network revealed that over half of all military families, active service members, and veterans were in a poor financial state.

In the same study, just 57% of respondents said that they would recommend joining the military, compared to 74% who said they would do so in 2019.

The Department of Justice admitted to a federal judge on Monday that it has located 117 pages of transcripts it previously denied having, related to President Joe Biden’s interviews with a biographer which played a role in the recently completed criminal investigation of his handling of classified material before he became president.

The investigation from special counsel Robert Hur found concluded that while Biden likely mishandled classified info, no reasonable prosecutor would bring charges against him for coming off as “a well-meaning, elderly man with a poor memory.”

What followed was a flood of Freedom of Information Act (FOIA) requests from news organizations and conservative groups seeking information – including audio recordings of Biden’s interviews with Hur – which the DOJ refuses to release over fears that they could be used to create ‘deepfakes‘ of the president. The groups, meanwhile, maintain that the DOJ is covering up Biden’s severe cognitive decline.

It’s unclear whether his exit from the race will affect the handling of Hur’s materials by the Justice Department, which has argued that the release of audio of Biden’s interviews with Hur would violate the president’s privacy, lead to potential abuse — such as deepfakes — and deter other witnesses from agreeing to recorded interviews. Biden asserted executive privilege over the audio recordings of his interviews in a bid to head off House Republicans’ effort to hold Attorney General Merrick Garland in contempt of Congress for refusing to release the recordings. –Politico

At one hearing last month, the DOJ told US District Judge Dabney Friedrich that it would be ‘highly time-consuming’ to process other audio files containing Biden’s interviews with biographer Mark Zwonitzer, which apparently consist of some 70 hours of recordings that the DOJ says is far more difficult to review and process than written material.

“We don’t have some transcript that’s been created by the special counsel that we can attest to its accuracy,” said DOJ attorney Cameron Silverberg in a June 18 hearing in front of Friedrich, in a suit brought by the Heritage Foundation, Politico reports.

On Monday, however, Silverberg admitted in the Monday filing that the department had “in the past few days” confirmed that Hur’s office had created transcripts of Biden’s discussions with Zwonitzer for memoirs published in 2007 and 2017.

Hur’s team determined that some of those conversations contained classified information, however the DOJ barred prosecutors from pursuing charges against a sitting president.

“In the past few days…the Department located six electronic files, consisting of a total of 117 pages, that appeared to be verbatim transcripts of a small subset of the Biden-Zwonitzer audio recordings created for the SCO by a court-reporting service,” reads the new filing.