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As Ömer Özkizilcik writes alongside this somewhat iconic photo, “Russian and American troops crossing each other’s route in northeast Syria.”

We wonder what messages were exchanged as the two entities crossed each other…

“All yours (except for the oil)…”

 

“…tag, you’re it!“

Authored by Mike Shedlock via MishTalk,

As cars become more expensive, and trade-ins worth less and less, buyers go deeper in debt on new cars.

Please consider taking a $45,000 Loan for a $27,000 Ride.

Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred to as negative equity, or being underwater—can leave car owners trapped.

Some 33% of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28% five years ago and 19% a decade ago, according to car-shopping site Edmunds.

Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer.

Borrowers are responsible for paying their remaining debt even after they get rid of the vehicle tied to it. When subsequently buying another car, they can roll this old debt into a new loan. The lender that originates the new loan typically pays off the old lender, and the consumer then owes the balance from both cars to the new lender. The transactions are often encouraged by dealerships, which now make more money on arranging financing than on selling cars.

“These aren’t Rolls-Royces,” said David Goldsmith, a lawyer who defends consumers in auto cases. “They’re Ford Escapes.”

Some 5.2% of outstanding securitized subprime auto-loan balances were at least 60 days past due on a rolling 12-month average during the period ending in June, up from 4.8% the year before and 4.9% two years before, according to Fitch Ratings.

Examples to Consider

The Journal cited the case of Mr. John Schricker who kept rolling over loans to the point that it took a $45,000 loan from Ally Financial Inc. to buy a $27,000 Jeep Cherokee.

Also consider the case of Yolanda Finley. She bought a bought a used 2011 Chevy Traverse with a loan of $25,585 from Santander Consumer USA Holdings Inc. in 2014. Finley could not afford the payment. Her car was repossessed. She now owes $27,000 on a car she does not even have.

Nicole-Malia Tennent and Shyanne Fernandez, both in their early 20s, wanted to trade in the car they shared for something less expensive last year. Instead they splurged on a new 2018 GMC Sierra truck, moving the unpaid loan balance of $12,500 into a new loan. The new loan balance is over $66,000. The old loan payment was $500. The new loan payment (I presume for longer), is $900.

What the hell do two friends need a $66,000 truck for? How will they allot the time between them?

This is how crazy it’s gotten.

Three personal anecdotes don’t constitute data but other evidence suggests the problem is widespread.

Car Dealers Make More Profit On Loans Than Selling Cars

A third of auto loans in 2019 had a term period over six years. People cannot afford the cars they are buying.

For discussion, please see Car Dealers Make More Profit On Loans Than Selling Cars

Families Go Deep in Debt to Stay Middle Class

On September 9, I noted Families Go Deep in Debt to Stay Middle Class: Revolving Credit Jumps 11.2%

These are all signs of a “Late Stage Credit Bubble“

Ability to buy things one cannot really afford does not make or keep someone in the “middle class“.

Wages are not keeping up with needs and desires.

Collectively, these reports show a late stage credit bubble the Fed desperately wants to keep inflating.

As the long-awaited ‘public’ impeachment hearings loom – seemingly to discuss the opinions of various leftists about the actual words that Trump and Ukraine’s president spoke according to the actual transcript – it appears President Trump has another ace up his sleeve.

As he hinted at on Friday, the president just confirmed by tweet that he will release the transcript of the “most important” first call with the President of Ukraine this week…

In order to continue being the most Transparent President in history, I will be releasing sometime this week the Transcript of the first, and therefore most important, phone call I had with the President of Ukraine. I am sure you will find it tantalizing!

— Donald J. Trump (@realDonaldTrump) November 11, 2019

President Trump was not done, however, as he took aim once again at Rep. Schiff…

Schiff is giving Republicans NO WITNESSES, NO LAWYER & NO DUE PROCESS! It is a totally one sided Witch Hunt. This can’t be making the Democrats look good. Such a farce!

— Donald J. Trump (@realDonaldTrump) November 11, 2019

Just like Schiff fabricated my phone call, he will fabricate the transcripts that he is making and releasing!

— Donald J. Trump (@realDonaldTrump) November 11, 2019

Grab your popcorn, it’s going to be a fun week.

Read the Transcript. It is PERFECT!

— Donald J. Trump (@realDonaldTrump) November 11, 2019

Update (Nov. 11): The murder crisis in Baltimore City could set a record this year.

The current homicide count is 296 as of Sunday afternoon, following a fatal shooting Saturday morning. 

In the next week, the murder count could breach 300 for the fifth year in a row.

With 57 days left in the year, the city could record the most murders ever, would need to break 344 homicides, a record that was set in 2015. 

Councilman Leon Pickett, who represents Baltimore’s seventh district, told CBS 13 Baltimore that the murder crisis is “unacceptable.” 

“Let’s be clear that one murder in our city is too much,” Pickett said. “The fact that we’re yet again approaching almost 300 murders is unacceptable. Everybody needs to rise up and express the outrage that should be with city approaching that.”

This time last year, the city saw about the same number of homicides (around 300). 

“We’ve got to change the culture in our city where people are resolving issues with violent means,” Pickett said.

Baltimore has the second-worst homicide rate in the country, right behind St. Louis. 

For the past several years, homicides across major US metropolitan areas have declined, except for Baltimore City.

The media has widely criticized President Trump for tweeting about the social-economic chaos in the Baltimore metro area.

….As proven last week during a Congressional tour, the Border is clean, efficient & well run, just very crowded. Cumming District is a disgusting, rat and rodent infested mess. If he spent more time in Baltimore, maybe he could help clean up this very dangerous & filthy place

— Donald J. Trump (@realDonaldTrump) July 27, 2019

And the tragedy of Baltimore is widely due to five decades of deindustrialization, coupled with severe wealth inequality in the inner cities. 

The opioid epidemic, sparked by local hospitals handing out Oxycontin like candy for two decades, has undoubtedly weighed on the local population. 

Also, five decades of Democrats running the city have certainly accelerated Baltimore’s demise.

Baltimore City will continue to descend into chaos into the early 2020s. 

* * * 

So here we go again, another depressing story from Baltimore City, a region that is imploding on itself and suffering from a murders crisis, opioid epidemic, a wide gap in wealth/health/education inequalities, and deindustrialization. 

In this report, we’re only going to focus on the murder crisis and gently touch on the opioid epidemic (because they go hand in hand), however, please search our archives for other stories on Baltimore, because the implosion there is what will be coming to many other inner cities across the country in the 2020s. 

With that being said, Baltimore City could be on track to surpass last year’s 309 homicides, and if current trends persist, there is a chance that homicides could hit a record high, which means the city could see 342, a level that was previously set in 2015 and 2017. 

“Baltimore is on course to reach more than 300 homicides for the fifth year in a row, with 232 killings through Wednesday compared to 199 at the same time last year,” The Baltimore Sun said.

To combat the murder crisis, the federal government and Baltimore City Police unveiled a permanent “strike force” comprised of detectives, prosecutors, and federal agents will begin operations to target Baltimore drug gangs and their Mexican suppliers, who have been flooding the city with heroin and fentanyl.

No details were provided if the strike force will target hospitals and pharmaceutical companies who continue pumping legal opioids onto the streets. Legal opioids kicked off the opioid crisis across the city several decades ago, not Baltimore gangs and their Latin American suppliers.

As shown in the chart below, cumulative homicide trends are likely to record the 5th consecutive year of murders over 300. 

The next chart shows most of the homicides this year have been caused by a gun. 

Geographically speaking, the killings aren’t situated in just one part of the town but are more widespread.

Last week, we reported how one neighborhood in the city transformed into a warzone. We said: “There was so much gunfire at one point that not even a single rat was spotted on the streets of East Baltimore City.” 

🚨Officer Down🚨 Officer struck by gunfire in Baltimore during pursuit as innocent civilians jump for cover during the shooting. If you see Officers pointing their weapons at a suspect, please get out of the line of fire. Find a safe place if you really need to record. pic.twitter.com/OKD6aAWZsq

— Sgt.Helper (@1Cycle20) August 29, 2019

On a per-capita basis, Baltimore’s homicide rate is the highest in the country and is on par with a war zone.

We said this last week, and we’ll repeat it: “There’s no meaningful policy in place to turn Baltimore around in the next decade. So in the meantime, if you value your life, stay away from Baltimore.” 

Authored by Ryan McMaken via The Mises Institute,

According to new data from the US Bureau of Economic Analysis, the personal saving rate in the US in September 2019 was 8.3 percent. That puts it near a six-year high, and comparable to the saving rate we saw during the early 1990s.

Indeed, the personal saving rate has been heading upward steadily for the past eighteen months. And that’s a bit of an unusual thing. For at least the past fifty years, the saving rate has tended to increase when the economy is doing poorly, and decrease when the economy is doing well.

We saw this in the late seventies and early eighties during the age of stagflation and the 1982 recession. We certainly saw it in the wake of the 2008 financial crisis, when the saving rate quickly rose from a near-low of 3.8 percent in August 2008, more than doubling to 8.2 percent during may of 2009.

But if the BEA’s numbers are correct, that pattern appears to be over, and Americans appear to be more willing to save even when job growth continues to head upward.

This change could be a result of several factors. It could be Americans are less confident about their prospects for future earnings, even if the current job situation appears bright. Many could be less confident that the assets they do have will provide a cushion in case of crisis. For example, many Americans may have learned their lesson about the myth that “housing prices always go up.”

The fact that these numbers are averages makes it especially hard to guess. After all, surveys suggests a very large numbers of Americans are saving very little.

For example, CNBC reported in January that “Just 40 percent of Americans are able to cover an unexpected $1,000 expense, such as an emergency room visit or car repair, with their savings…”

A separate survey “found that 58 percent of respondents had less than $1,000 saved.“

Regardless of who is doing it, however, increased saving can be a good thing for the economy overall. For instance, even if only the rich are the ones saving more, their saving increases the amount of loanable funds, decreasing the interest rate, and making lenders more likely to lend to riskier borrowers. That’s good for farmers and small business owners.

Moreover, as the wealthy refrain from spending, they increase the value of cash held and spent by people at all income levels. For example, if the rich are spending less on restaurant meals and pickup trucks, this means the prices for those items are not being bid up as much. When the rich save, that means fewer dollars chasing goods and services, which can lead to more stable, or even falling prices. That can be good for many people at lower income levels.

Nonetheless, many mainstream economists continue to get hung up on the idea that saving “too much” hampers economic growth. For example, in a recent article at the Wall Street Journal titled “Americans Are Saving More, and That Isn’t Necessarily Good” Paul Kiernan writes:

if saving outstrips investment opportunities for a long time, some economists say, it can hold down interest rates, inflation and economic growth. Such “secular stagnation” may leave less room to cut interest rates, making it harder for the Federal Reserve to boost growth during downturns.

“Rather than being a virtue, saving becomes a vice,” said Gauti Eggertsson, an economist at Brown University.

This is an old story we’ve been hearing for years, and the idea that there is too much saving certainly received its share of promotion during the 2001-2002 recession, and during the 2007-2009 recession.

Economists do recognize that more saving helps increase loanable funds — and thus puts downward pressure on interests rates — and reduces inflation. But more saving does not, as they think, reduce real economic growth.

True, it might reduce economic growth as measured by government stats which mostly just add up money transactions . But properly understood, economic growth increases with saving, because the capital stock is increasing, making it easier for entrepreneurs to deliver new goods and services — and more goods and services — to consumers. As Frank Shostak explains, we need more saving to create more and better goods:

What limits the production growth of goods and services is the introduction of better tools and machinery (i.e., capital goods), which raises worker productivity. Tools and machinery are not readily available; they must be made. In order to make them, people must allocate consumer goods and services that will sustain those individuals engaged in the production of tools and machinery.

This allocation of consumer goods and services is what savings is all about. Note that savings become possible once some individuals have agreed to transfer some of their present goods to individuals that are engaged in the production of tools and machinery. Obviously, they do not transfer these goods for free, but in return for a greater quantity of goods in the future. According to Mises, “Production of goods ready for consumption requires the use of capital goods, that is, of tools and of half-finished material. Capital comes into existence by saving, i.e., temporary abstention from consumption.”

The common view among many economists today, however, is that it’s better for economic growth to make sure more people spend every last dime on trinkets at the discount store. Those who have been around long enough to remember previous business cycles will remember that this idea manifests itself during times of recession as pundits insist it’s our patriotic duty to spend more, in order to create economic growth.

In truth, in a time like today, the best thing people can do is save more. We live in a time of multiple economic bubbles and non-productive sectors of the economy fueled by inflationary monetary policy. When recession finally does come, vast amounts of debt will never get paid back and immense numbers of “assets” held on balance sheets will evaporate. The result will be a lot of lost jobs and a lot of failed businesses. The only real cushion will be real savings which will be badly needed in a time of recession.

Despite today’s modest dip, the S&P closed Friday at a new all time high just shy of 3,100, just as Q3 earnings posted their first Y/Y decline since 2016 largely due to a 36% plunge in energy company earnings…

… having broken out to new highs since Oct 28th, led by a continued rotation into more cyclical/value stocks. Meanwhile, it’s not just Q3, but also Q4 earnings that are now expected to post a decline, with consensus expecting a -0.5% drop in EPS next quarter according to Factset.

At a sector level, Industrials and Financials have led since the breakout, both up over 3% in eight trading days heading into last Friday vs. the S&P’s 2% gain, on the back of a continuation of the Value rotation we discussed previously – mostly as a result of sharply higher Treasury yields – and which JPMorgan believes will only escalate from here on the back of even higher yields (Marko Kolanovic is confident the 10Y yield can rise another 150 bps before hitting equity markets) given recent stabilization in macro data and what Bank of America has found is a record discount Value stocks currently offer vs. Momentum stocks.

Some more observations on this from BofA, which agrees with JPM that the recent rotation into Value/out of Momentum could continue:

The “Downturn” phase in our US Regime Indicator has historically lasted eight months on average (we’re now in month eight). The next phase is “Early Cycle,” when Value typically outperforms. Some recent signs of stabilization in macro data also supports that the downturn might be bottoming and the Value rotation could continue. Value also has never been this cheap vs. Momentum (Chart 1), with the relative forward P/E of Value vs. Momentum at two standard deviations below the average. The only time in history that Value has gotten this cheap was in 2003 and 2008, when Value outperformed Momentum by 22ppt and 69ppt, respectively, over the subsequent 12 months.

Putting it all together, the forward P/E ratio for the S&P rose 2% to 17.4x in October according to Factset, the highest level since January 2018, while forward EPS estimates fell 0.3% on downward revisions during this earnings season.

The bottom line, according to Bank of America is that “stocks look expensive on earnings, but there is no alternative (TINA), with the S&P 500 yielding similar to the 10-year Treasury yield.“

Indeed, as BofA shows in its own S&P “cheap or expensive” relative modfel, the the broader stock market is now cheap on just one metric: Price to Free Cash Flow.

What happens then? According to Goldman’s David Kostin, looking into 2020 consensus expectations for 9% EPS growth
appear too optimistic, although as the Goldmanite points out, “consensus estimates are usually too optimistic. Consensus 2020 earnings estimates have come down by 4% since March 2019 and the current trajectory of revisions is consistent with the historical pattern”.

Meanwhile, Goldman’s own topdown 2020 EPS growth estimate of 6% implies just some modest negative revisions, roughly in line with this pattern.

In short, nobody expects a recession either this year, or next.

Authored by Andrew Moran via LibertyNation.com,

When any one of the plethora of bubbles burst – pick your poison – and the next financial crisis impacts Wall Street and Main Street, how will the central banks and federal governments react? They have fired all their unconventional rounds of bullets, from subzero interest rates to vast money-printing. One other proposal could conceivably be giving your deposits a haircut, much like what occurred in Cyprus following the recession. This dyspeptic vision is not hyperbole nor is it paranoia – the tariffs have raised the price of tinfoil! It is unfolding right now as our globalist overlords are executing, or at least entertaining, fiscal and monetary measures to confiscate your wealth – directly or indirectly.

Plugging Holes In Swiss Cheese

Switzerland is one of the few European nations to record a federal budget surplus. The budget for the fiscal year 2020 will record a $615 million surplus, despite imposing pension and tax reforms that slashed revenues and raised spending. The Swiss government is handcuffed by a so-called debt brake, a balanced-budget amendment that mandates the budget to be in balance throughout the business cycle. This policy has decreased the debt-to-gross domestic product ratio to nearly 25%.

Although national debt levels are still at multi-decade highs, the fact that the government is taking red ink seriously should be music to the ears of fiscal conservatives. But to others, it is headache-inducing.

The Organisation for Economic Cooperation and Development (OECD) published a new report that lamented on the nation’s unwillingness to spend like some of its European partners. Authors stated that the Swiss are saving too much and spending too little, despite possessing the third-highest gross domestic product (GDP) per capita of all OECD members. It asserted that policymakers could “increase expenditures” within the debt brake framework that “would serve monetary policy, and economic and social positive impact.”

There are a few other European states that are living within their means. Germany is projected to maintain its budget surplus for the next three years: 1.2% of GDP this year, 0.6% of GDP in 2020, and 0.2% in 2021. The Netherlands is also recording a surplus of 1.2%.

At a time when European Union members are in dire straits, you would think that they would be championed as model E.U. states. Not quite.

Christine Lagarde

As Liberty Nation recently reported, European Central Bank (ECB) President Christine Lagarde bemoaned their surpluses, complaining that they would be better off spending the money on infrastructure and education. Desperate a modicum of growth, Lagarde is of the philosophy that the only way to grow an economy is through government intervention.

Unfortunately, this is now the hive-like opinion in the international monetary order. You better watch out. The globalists are coming for your savings – and they have already initiated the war on your piggy bank, emergency fund, and retirement investments.

It’s War!

In the immediate aftermath of the global financial crisis, central banks worldwide axed interest rates to historic lows. When the ZIRPs failed, some jurisdictions took it a step further and brought them into the subzero territory. Today, a handful of countries have adopted negative rates, and many are on the brink of slipping into this terrain.

The purpose was to push consumers into spending more and encourage financial institutions to lend at a greater rate. Interestingly enough, these efforts failed because citizens did the opposite: They saved more. Experts who studied the population of contrarians did so because subzero rates spurred a bearish sentiment on the economy.

One of these countries is Switzerland, which has maintained negative rates for nearly five years. The Swiss National Bank (SNBS) has called them “essential,” arguing that they are necessary to prevent further appreciation of the franc and to boost exports at a time of being hampered by global trade tensions and anemic economic growth in Europe. The private sector is not happy about it. A recent UBS survey found that two-thirds of businesses say they are concerned that these rates will hurt the domestic economy in the long-run and the cost of this measure will “outweigh their benefits overall.”

If you ask the new ECB chief, however, she would tell you that you should be grateful for leaders implementing negative rates:

“Would we not be in a situation today with much higher unemployment and a far lower growth rate, and isn’t it true that ultimately we have done the right thing to act in favor of jobs and growth rather than the protection of savers?

We should be happier to have a job than to have our savings protected. I think that it is in this spirit that monetary policy has been decided by my predecessors and I think they made quite a beneficial choice.”

Lagarde is a proponent of the NIRPs, championing the unconventional mechanism to achieve growth. Since the eurozone has barely cracked 2% GDP, many are anticipating that Lagarde will deepen negative rates during her term as president. Anytime she has mused on the subject, Lagarde has usually dismissed concerns about the saver, noting that they are also consumers, borrowers, and workers.

Unfortunately, this contempt for savers is commonplace because it is antithetical to the Keynesian approach of spending. Disciples of John Maynard Keynes will contend that consumption over saving should only happen during the bust phase of the business cycle, but if you peruse any opinion pieces by individuals subscribing to this ideology, you will only come across spending prescriptions for every type of economy – boom or bust. They dismiss the fact that capital accumulation, not consumption, creates wealth.

John Maynard Keynes

This myth originates from Keynes’ The General Theory and Treatise on Money, in which he posits that a saver is reducing the income of another person because he or she is not consuming the goods or services extended by somebody else. Put simply, he considered saving a self-defeating act.

“Saving is the act of the individual consumer and consists in the negative act of refraining from spending the whole of his current income on consumption,” he wrote.

The crusade against savers has been prevalent in the Democratic primary. The likes of Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (I-VT) have grieved about hoarders, particularly those who are the top 0.1% (no longer just the 1% anymore; likely because these two people are the 1%, too). The presidential candidates are perturbed that the supposed capital hoarders are not putting their fortunes into the economy. This is nonsense talk to justify their wealth confiscation policies, since the affluent are saving and investing, not just stuffing their money under mattresses.

Negative rates, higher taxes, and inflation – the statists are employing every measure to gain access to the fruits of your labor.

A Life Sentence

If it isn’t expanding the money supply that eats away at your hard-earned savings, then the Leviathan will imbibe your accrued capital through negative rates. When you factor in the elite’s appetite for the evisceration of cash and the integration of a cashless society, then you are imprisoned by the globalist wardens who now have you under their thumb at all times. Your wealth, your livelihood, and your personal life are now under the purview of the state. If you don’t like it, then you are out of luck. You have nowhere to go. The globalists have declared war on mom and pop savers, pillaging bank accounts and conquering our lives. Is there a chance for victory? As long as the omnipotent and iniquitous institutions remain in charge, optimism over sound economics can only fade to black.