The Mystery Behind Strong Auto "Sales": Soaring Car Leases

When it comes to signs of a US “recovery” nothing has been hyped up more than US auto companies reporting improving, in fact soaring, monthly car sales. On the surface this would be great news: with an aging car fleet, US consumers are surely eager to get in the latest and greatest product offering by your favorite bailed out car maker (at least until the recall comes). The only missing link has been consumer disposable income. So with car sales through the roof, the US consumer must be alive and well, right? Wrong, because there is one problem: it is car “sales” not sales. As the chart below from Bank of America proves, virtually all the growth in the US automotive sector in recent years has been the result of a near record surge in car leasing (where as we know subprime rules, so one’s credit rating is no longer an issue) not outright buying.

From BofA:

Leasing soars: Household outlays on leasing are booming at a 20% yoy pace – a clear sign that demand for vehicles is alive and kicking. With average lease payments lower than typical monthly ownership costs and with a down-payment not typically required to enter into a lease, the surge in vehicle leasing is likely a sign that financial restraints are still holding back some would-be buyers. Thus, as the economy improves, bottled-up household demand for vehicles could translate to higher sales.

 

Chart 1: Households go for the low capital option: leasing soars 

(yoy growth rate, inflation-adjusted)

 

It could also translate into even higher leases, which in turn bottlenecks real, actual sales.

Of course, the problem is that leasing isn’t buying at all. It is renting, usually for a period of about 3 years. Which means that at the end of said period, an avalanche of cars is returned to the dealer and thus carmaker, who then has to dump it in the market at liquidation prices, which in turn skews the ROA calculation massively. However, what it does do is give the impression that there is a surge in activity here and now… all the expense of a massive inventory writedowns three years from now.

Which is precisely what will happen to all the carmakers as the leased cars come home to roost. But what CEOs know and investors prefer to forget, is that by then it will be some other management team’s problem. In the meantime, enjoy the ZIRP buying, pardon leasing, frenzy.




via Zero Hedge http://ift.tt/1zUlvmL Tyler Durden

The Mystery Behind Strong Auto “Sales”: Soaring Car Leases

When it comes to signs of a US “recovery” nothing has been hyped up more than US auto companies reporting improving, in fact soaring, monthly car sales. On the surface this would be great news: with an aging car fleet, US consumers are surely eager to get in the latest and greatest product offering by your favorite bailed out car maker (at least until the recall comes). The only missing link has been consumer disposable income. So with car sales through the roof, the US consumer must be alive and well, right? Wrong, because there is one problem: it is car “sales” not sales. As the chart below from Bank of America proves, virtually all the growth in the US automotive sector in recent years has been the result of a near record surge in car leasing (where as we know subprime rules, so one’s credit rating is no longer an issue) not outright buying.

From BofA:

Leasing soars: Household outlays on leasing are booming at a 20% yoy pace – a clear sign that demand for vehicles is alive and kicking. With average lease payments lower than typical monthly ownership costs and with a down-payment not typically required to enter into a lease, the surge in vehicle leasing is likely a sign that financial restraints are still holding back some would-be buyers. Thus, as the economy improves, bottled-up household demand for vehicles could translate to higher sales.

 

Chart 1: Households go for the low capital option: leasing soars 

(yoy growth rate, inflation-adjusted)

 

It could also translate into even higher leases, which in turn bottlenecks real, actual sales.

Of course, the problem is that leasing isn’t buying at all. It is renting, usually for a period of about 3 years. Which means that at the end of said period, an avalanche of cars is returned to the dealer and thus carmaker, who then has to dump it in the market at liquidation prices, which in turn skews the ROA calculation massively. However, what it does do is give the impression that there is a surge in activity here and now… all the expense of a massive inventory writedowns three years from now.

Which is precisely what will happen to all the carmakers as the leased cars come home to roost. But what CEOs know and investors prefer to forget, is that by then it will be some other management team’s problem. In the meantime, enjoy the ZIRP buying, pardon leasing, frenzy.




via Zero Hedge http://ift.tt/1zUlvmL Tyler Durden

Why the I.R.S. Should Receive No Deference from the Federal Courts

When the U.S. Court of Appeals for the 4th Circuit
voted
last month to uphold the legality of an I.R.S. rule which
provides tax credits to individuals who purchased health care under
the Affordable Care Act from federally run health care exchanges,
it did so on the grounds of judicial deference. “We cannot discern
whether Congress intended one way or another to make the tax
credits available on HHS-facilitated Exchanges. The relevant
statutory sections appear to conflict with one another, yielding
different possible interpretations,” the 4th Circuit held in the
Obamacare case King
v. Burwell
. “Confronted with the Act’s ambiguity, the IRS
crafted a rule ensuring the credits’ broad availability and
furthering the goals of the law. In the face of this permissible
construction, we must defer to the IRS Rule.”

As an authority for this deferential posture, the 4th Circuit
cited the U.S. Supreme Court’s 1984 precedent in
Chevron U.S.A., Inc. v. Natural Resources Defense
Council
, which says that when the federal courts are faced
with an ambiguous” statute, the courts should bow to the
interpretative judgment of the government agency tasked with
enforcing that statute. Thus the 4th Circuit bowed to the I.R.S.
rule governing access to Obamacare’s tax credits.

Writing at the Library of Law & Liberty, historian
Richard Samuelson says that
it’s time to ask
“whether the Chevron Doctrine itself is
mistaken. I would argue that it has deeply troubling implications
for republican self-government.” According to Samuelson, it’s one
thing for the courts to defer to the wishes of Congress, whose
members are at least accountable to the electorate. But “a like
deference emphatically is not owed to the federal bureaucracy.”
Here’s the heart of his case:

It may be that it is necessary, in 21st century America, for
unelected bureaucrats to write much of our legal code. But if we
are to sustain the separation of powers in general, and if we are
to continue to have our laws written by the people’s
Representatives and Senators, we need to proceed with caution. The
very logic that suggests that courts should defer to Congress cuts
the other way when bureaucratic rule-making is concerned. Tenured
civil servants are not the people’s representatives. The
Constitution, for that reason, does not give them the authority to
write our legal code.

For more on the role that Chevron deference is playing
in the latest Obamacare legal battles,
see here.

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Mom Arrested for Letting Kid Play in Lego Store While She Shopped

LegosDo you remember going to the store as a kid? It
was time on your own. It was a thrill.

Now, it’s a crime.

Yesterday afternoon, a mom in Long Island, New
York, was
arrested for leaving her 7-year-old at the Roosevelt Field Mall
LEGO Store
 for an hour and 20 minutes while she shopped
elsewhere in the mall. According to Patch.com:

A store manger at the Lego Store became concerned for
the well being of the unsupervised child and contacted mall
security, who then called 911, police said.

The child was left unattended in the store for about an
hour and 20 minutes, police said. When Patricia Juarez returned to
the store, she arrested without incident at about 5:30 p.m., police
said.

The story mentions that the the mother, Patricia Juarez, was
also charged with petty larceny stemming from a previous warrant.
Larceny is a real crime, of course. Letting your kid play by
himself in the LEGO Store is not. I would really love the police to
explain how endangered this child actually was, in a public place,
surrounded by employees, shoppers, and security (and LEGO
superheroes
!).

free-range-kidsNonetheless, in a
country that arrests parents for taking their eyes off their kids
anytime before they’re legally old enough to join the Army, Juarez
is now considered a criminal.

Her child was released to a relative, which makes me wonder
whether the mom is in jail or simply not allowed contact with her
son, since she is obviously a depraved monster who left her kid in
an alligator swamp with meatballs in his pockets (or the suburban
equivalent).

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Despite Marijuana Legalization, Traffic Fatalities in Colorado Continue to Fall

Last month I
noted
that marijuana legalization in Colorado does not seem to
have interfered with a downward trend in traffic fatalities, which
have been falling there since 2004. That period includes the
commercialization of medical marijuana (which started to take off
in 2009) and the legalization of recreational use (which took
effect at the end of 2012). My former
Reason colleague Radley Balko, who blogs about civil
liberties and criminal justice at The Washington Post,

points out
 that the downward trend in deadly crashes has
continued since the beginning of this year, when state-licensed pot
stores began serving recreational customers. According to data from
the Colorado Department of Transportation, the total number of
fatal crashes in the first seven months of this year was 258, down
from 263 during the same period last year. Here are the
monthly totals
for 2014, compared to the
same months
in 2013:

The trend in Colorado is broadly similar to the national trend
during the last decade. Balko notes that Colorado’s drop since 2004
looks more dramatic when compared to miles traveled, which have
continued to rise in Colorado while falling nationwide.

Does the continuing decline in fatal crashes mean that
legalization is
reducing fatalities
by encouraging the substitution of
marijuana for alcohol (which has a more dramatic impact on driving
ability)? Not necessarily. In fact, from January through July the
total number of alcohol-related fatalities was 91, exactly the same
as the total for the first seven months of 2013:

Still, these numbers clearly are not consistent
with warnings
from prohibitionist groups such as Project SAM, which predicted
that legalizing marijuana would mean more blood on the highways.
Perhaps that grim prophecy will be realized one day, but so far it
looks wrong. 

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John Stossel on Border Patrol Agents Without Borders

Even
as the federal government fails to control the southern border, it
sends the Border Patrol farther into the interior, where Americans
complain that agents harass people who are already U.S. citizens.
And it’s all perfectly legal. The Supreme Court ruled that the
Border Patrol can set up “inland” checkpoints anywhere up to 100
miles from an external border of the United States. That’s what
government now considers a “reasonable distance” from the
border.

John Stossel talked to American Civil Liberties Union lawyer
James Lyall, who argues that “interior checkpoints fundamentally
fly in the face of what it means to live in a free society, where
you don’t have to answer to federal agents when you’re going about
your daily business.” Stossel also talked to Americans —such as
Pastor Steven Anderson, who was tased after refusing to let
officers search his car, and Air Force pilot Rick Rynearson—about
their experiences with border patrol harassment and
abuse. 

View this article.

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Traveling to Thailand? Don't Bring '1984'

An in-flight magazine for travelers to Thailand
offers some friendly advice on how to win friends and influence
people in a country led by military junta.

“Despite being under miliary control, Thailand is very safe for
tourists,” chirps the magazine copy, shared by Twitter user

@joe_black317
 this week. But for “good measure” you might
want to take a few minor precautions, such as avoiding the color
red, refraining from taking selfies with soldiers sans their
consent, and for godssakes ditching your dystopian novels on the
plane. 

“Don’t carry George Orwell’s dystopian novel 1984,” the
Philippine
Airlines magazine
warns in tip number four. “You don’t want to
be mistaken for an ‘anti-coup protestor.'” (But
The Hunger Games is okay, right
?)

Read the whole list below. With other tips including “If you
must have that selfie with a soldier, be polite and ask his
permission first,” it’s hard to tell if this was meant in jest or
in earnest. I’m hoping for bizarre sincerity, though. Otherwise
this magazine thinks military coup d’etat and a people’s oppression
are all in good fun, or at least nothing to let rain on a good
vacation. 

Next up from Philippine Airlines: 5 fashion tips for
visiting the Gaza Shore!


h/t Dazed 

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Traveling to Thailand? Don’t Bring ‘1984’

An in-flight magazine for travelers to Thailand
offers some friendly advice on how to win friends and influence
people in a country led by military junta.

“Despite being under miliary control, Thailand is very safe for
tourists,” chirps the magazine copy, shared by Twitter user

@joe_black317
 this week. But for “good measure” you might
want to take a few minor precautions, such as avoiding the color
red, refraining from taking selfies with soldiers sans their
consent, and for godssakes ditching your dystopian novels on the
plane. 

“Don’t carry George Orwell’s dystopian novel 1984,” the
Philippine
Airlines magazine
warns in tip number four. “You don’t want to
be mistaken for an ‘anti-coup protestor.'” (But
The Hunger Games is okay, right
?)

Read the whole list below. With other tips including “If you
must have that selfie with a soldier, be polite and ask his
permission first,” it’s hard to tell if this was meant in jest or
in earnest. I’m hoping for bizarre sincerity, though. Otherwise
this magazine thinks military coup d’etat and a people’s oppression
are all in good fun, or at least nothing to let rain on a good
vacation. 

Next up from Philippine Airlines: 5 fashion tips for
visiting the Gaza Shore!


h/t Dazed 

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White House Wants to Redact the Hell Out of Torture Report. Will a Leaker Save Us?

Except for the people who did it, apparently.The most transparent
administration ever has managed to infuriate the left’s top
national security state defender, Sen. Dianne Feinstein (D-Calif.),
even further. The CIA already drew her ire in a way even
libertarians can appreciate (and yet still laugh at) when they

snooped on staffers
from the Senate Intelligence Committee as
they put together a massive report analyzing the CIA’s use of
torture under President George W. Bush. The CIA ended up
apologizing to her, and now there are calls to
dump CIA Director John Brennan
after he initially scoffed at
Feinstein’s complaints.

Now, as the government considers unclassified just a small
portion of the full torture report, the 480 page “executive
summary,” she’s battling the White House and the CIA again over how
much of the report they want to take a black pen to. As a result,
we probably won’t be seeing the report anytime soon. Officials
defending the move say they’ve only redacted 15 percent of the
content. But that 15 percent matters. From
The Washington Post
:

U.S. officials familiar with the redacted document said the
administration stripped out material that showed that pieces of
information long attributed to detainees — and that led to the
disruption of terrorism plots or the capture of additional suspects
— had actually come from other intelligence sources such as
intercepted communications.

“The redactions obscure or prevent the report from sharing other
forms of information that contributed to counterterrorism
successes,” said a U.S. official involved in discussions over the
document.

The committee used CIA-provided pseudonyms to protect the
identities of agency personnel, but the agency removed references
to those false identities. The CIA also objected to other details
that it said could enable readers to identify its officers as well
as countries that cooperated in the detention program.

An official familiar with the redactions said the amount of
detail associated with the pseudonyms could jeopardize CIA
officers’ safety. “A pseudonym itself is little protection from
exposure when a host of other information about that officer is
made available to the public and will likely be seen by adversaries
and foreign intelligence services,” the official said.

Maybe we’ll just have to wait for another whistleblower to leak
an unredacted copy to find out what’s really happening. We’ve drawn
attention to a
couple
of
big scoops
over at The Intercept about the contents of
the federal government’s terrorist watch list guidelines. The
information did not originate from Edward Snowden, and now the feds
have realized they may have another leaker on their hands. CNN
notes
:

The article cites documents prepared by the National
Counterterrorism Center dated August 2013, which is after Snowden
left the United States to avoid criminal charges.

[Glenn] Greenwald has suggested there was another leaker. In
July, he said on Twitter “it seems clear at this point” that there
was another.

Government officials have been investigating to find out that
identity.

No doubt, they intend to thank him for all his or her good work
at making sure America remains a free and open country.

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In New Polls, Americans Give Pretty Much All Elected Officials in Government Thumbs Down

Several new polls this week report that Americans
are in a remarkably sour mood leading up to the election this
November.

Basically, Americans aren’t pleased with the economy, with the
president, with America’s direction or place in the world, with
Congress, or even with their own elected leaders. The
gist of America’s reaction to basically everything about the
government and the economy right now
is, 
Ugh.  

Some highlights from the
latest NBC/Wall Street Journal

poll
:

Majorities are not satisfied with how things are going on
multiple measures. 64 percent are dissatisfied with the state of
the economy, compared to just 35 percent who are satisfied. That’s
the worst result since 2008.  62 percent are not satisfied
with America’s role in the world. And 79 percent aren’t satisfied
with the country’s political system

Overall, 71 percent say the country is headed “off on the wrong
track.” Another 60 percent say America is “in a state of
decline.”

Americans are especially unsatisfied with President Obama. His
disapproval rating is now at 54 percent, as high as it has ever
been, and his approval rating just hit 40, down a point from the
previous month.

The public isn’t too fond of Republicans either. Only 19 percent
had positive feelings toward the congressional GOP, compared with
54 percent who were negative. Democrats in Congress were also
upside down on approval, with 31 percent expressing positive
feelings and 46 percent coming in negative. Congress as a whole
gets a 79 percent disapproval rating.

Really, the public isn’t fond of anyone in Congress these days,
including their own representatives. A different poll by The
Washington Post
and ABC News
found
this week that more than half—51 percent—of Americans
disapprove of their own congress critter. That’s a record.

This obviously isn’t great news for anyone in Congress, but my
sense is that it’s worst for Democrats, who are linked, whether
they like it or not, to President Obama and the public’s feelings
about the direction of the nation as a whole. And the WSJ/NBC poll
seems to suggest that things are tilting, slightly, in the GOP’s
direction, with 44 percent saying they’d prefer a generically
Republican controlled Congress and 43 percent saying they would
prefer Democrats in charge.

November is going to be pretty interesting.

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