Tag: finance

by Keith Weiner

 

In Part I, we discussed the concept of arbitrage. We showed why defining it as a risk-free investment that earns more than the risk-free rate of interest is invalid. There is no such thing as a risk-free investment, and in any case economics must be focused on the acting man rather than theoretical constructs. We validated that arbitrage arises because the market is constantly offering incentives to the acting man in the form of spreads. Arbitrage is the act of straddling a spread. Arbitrage will tend to compress a spread. The spread will narrow, though not to zero because no one has any incentive to make it zero.

In Part II, we looked at the question of whether gold is a currency. The answer cannot be provided by the symbol naming committee at Bloomberg. Gold is indisputably money, and it may be used in the occasional transaction today. The reason for considering it as a currency was to look at contango and backwardation simply as states of gold having an interest rate that is lower or higher, respectively, than the dollar. However, as we concluded in Part II, there is no proper interest rate in gold. The gold lease rate is closer to being a discount rate than an interest rate.

In this final Part III, we look at the fact that gold is a tangible commodity. While the question of whether gold is a currency is important, and it’s good to think about philosophical concepts such as arbitrage, let’s not forget that gold is a material good. It can be held in the hand, it can be bought and sold, and it can be warehoused.

Warehousing is an important innovation. Did you ever wonder how people coordinate their actions over many months between wheat harvests? How is it possible that farmers, bakers, financiers, and consumers could somehow work out a mechanism in the free market to store grain at the time of the harvest and release it throughout the year? The fact that this occurred is amazing. Wheat is not only available out of season, but its price does not gyrate radically (at least no more than every other price these days, as the failing dollar goes off the rails). It does not crash when the grain is harvested and it does not skyrocket as the grain stocks are consumed later in the year.

Obviously, a warehouse suitable for storing grain is necessary. However, without another innovation the warehouse won’t be able to solve the problem. It is necessary but not sufficient. The innovation of the futures market is also necessary.[1]

Today, we think of futures market as a venue to speculate on the price of something, such as wheat. If we expect the price to rise, we go long a futures contract. To bet on a falling price, we could go short. Speculators indeed play an important role in the market. They drive prices up, when they expect goods to be scarce, which prevents overconsumption and running out. They also drive prices down, when they expect a glut, which encourages consumption before stockpiles overflow.

The futures market evolved to fulfill the needs of two other actors. The producer of a good—the farmer in the case of wheat—wants to lock in a price at which he can make a profit. If, in March when he is making his decision of what crop to plant, the price of wheat is $6 per bushel, he can sell wheat futures and lock in a price of around $6 immediately. This removes the risk of an adverse price move. It may also help him obtain financing to produce the wheat.

On the other side of the trade, there is a bakery that wants to secure access to wheat and to hedge the risk that the price could rise. The bakery can buy wheat futures.

The speculator is not able to deliver, or take delivery of, any goods. By contrast, the producer and consumer intend to exchange wheat and cash. The farmer intends to deliver wheat when he harvests it. The bakery intends to take delivery when he needs it to bake bread.

One other actor is necessary to make this market work. The warehouseman arbitrages the spread between wheat in the cash market and wheat in the futures market. Suppose that cash wheat is selling for $5 during the harvest season, but January future wheat is selling for $6. The warehouseman can simultaneously buy spot and sell January, pocketing $1. He stores the wheat until delivery in January.

The warehouseman has no exposure to the wheat price.

This is a really important idea. He is a specialist in knowing when to store wheat, not in speculating on the price. If the warehouseman were forced to take price exposure, there would either not be warehousing, or the cost of warehousing would have to rise dramatically to cover the price swings.

If the warehouseman has no exposure to price, what does he have exposure to? On what does he make his money? He has exposure to the spread between the cash or spot market, and the futures market—called the basis. In our example, this was $1.

If the price of wheat in the futures market is greater than the price in the spot market, this is called contango. In a contango market, if the warehouseman has space for more wheat, he will add wheat to his warehouse. Putting wheat into the warehouse for delivery under contract later is called carrying it.

This works in the other direction, too. If the price in the spot market is higher than in the futures—called backwardation—then the warehouseman will sell wheat in the spot market and buy back the futures he shorted. Selling wheat and buying back the futures contract is called decarrying.

If there is contango and the basis is rising, then we can be sure that more wheat is going into warehouses. If there is backwardation and the basis is falling, then we know that wheat is leaving the warehouses. This can continue until there is no more wheat in the warehouses.

It is worth mentioning what one must have in order to take these arbitrages. To carry wheat, one must have money. With current credit conditions, this is not much of a constraint. One must also have extra warehouse capacity. To decarry it, one must have wheat. This makes for a
lopsided set of risks to the basis.

The basis isn’t going to rise much above the cost of credit plus storage costs, because in normal circumstances warehousemen have access to credit and warehouse space (in some commodities, space can be a problem such as crude or natural gas).

Consider the other direction. Suppose you drove a truck up to a grain elevator town two days before the harvest. Workers have the equipment partially disassembled and they’re cleaning it, getting ready for the trucks that will soon be coming off the farm fields. You hop out and go over to a group of elevator operators chatting on the edge of the parking lot. You ask them how much to fill up your truck with wheat, right now?

They begin to laugh, so you take out a wad of $100 bills. They stop laughing and stare at you and eventually one of them says $20 a bushel. He reminds you that if you can sign a contract to take delivery in a month, the price is $7.

Clearly, just days before the harvest, no one has any extra wheat. If you pay that $20, he will make a phone call and a truck halfway to some bakery in another county will turn around. That bakery will end up getting paid more money to be idle for a week than it would have made by selling bread.

This is a case of extreme backwardation (exaggerated to make a clear point). Think of backwardation as being synonymous with shortage. This is a pretty strong statement, so let’s look at the proof.

If there was no shortage of wheat, then why isn’t someone decarrying it? The markets do not normally offer you a risk-free profit that grows day by day. If, for example, IBM shares traded in NY for $99 and for $101 in London, then someone would buy in NY and sell in London and keep doing it until the prices were brought together. Arbitrage acts to compress the very spread from which it derives its profit.

In our example, no one is taking the wheat decry arbitrage because no one has any wheat left over.

While, as we saw above, there is a limit to how high the basis can go, there is no limit to how low. The scarcer the good, the lower the basis could fall.

One other thing is worth noting before we proceed. With the advent of the futures market, the price of a good that’s produced seasonally but consumed all year need not fluctuate much due the time of year. Price fluctuation would harm producers or consumers.

What can fluctuate harmlessly is the basis spread.

What does this have to do with gold? Virtually every ounce of gold ever mined in thousands of years of human history is still held in human possession. The stocks to flows ratio—inventories divided by annual production—is measured in decades for gold, but months for wheat and other regular commodities.

This means that there is no such thing as a glut in gold, and no such thing as scarcity. Gold is not produced seasonally, and it is not consumed. There should not be a futures market in gold. It exists as a perverse byproduct of the regime of irredeemable paper money. It would not exist in a free market, which would have a robust global market for gold lending.

Right before the harvest, the wheat market can go into backwardation because no one has any wheat to decarry. It is truly scarce. In gold, backwardation should not be possible. There is always enough gold in existence, to decarry and eliminate any backwardation.

And yet, there has been an intermittent gold backwardation since December of 2008. It has become typical for each futures contract to go into backwardation as it headed into expiration, and I have coined the term temporary backwardation.[2]

Gold backwardation is incredible. Like a unicorn, it should never be seen! All of this gold just sitting around, and the owners stare at their screens and don’t take the bait. It’s a risk free profit, according to the conventional view. And yet gold is becoming scarcer, at least to the market. All of those gold owners are choosing to let their gold sit idle, not earning anything at all, rather than trade away their bars for futures contracts.

It’s not possible to understand this phenomenon with mathematical models. Sure, you can measure the basis and use it to model all sorts of things, but to understand the big picture you have to take a step back. You have to see the forest and that means backing away from that tree for a minute.

Perhaps one of the biggest news items pertaining to gold as I write this is the ongoing situation regarding Germany’s gold. Germany asked for the Federal Reserve to give back a quantity of their gold over a period of 7 years. And by the end of 2013, the Fed had delivered too little, and was falling behind even that leisurely pace. I won’t speculate on what’s happening, but I do want to point out what the Germans are thinking.

They don’t trust the Fed.

They didn’t trust the Fed in the first place, which is why they pressured the Bundesbank to ask for the gold to be shipped to Germany. The Fed’s apparent failure to deliver only deepens their convictions that they were right not to trust the Fed, and of course increases the distrust of many observers around the world too.

Many in the online gold community want to see Germany get their gold, but are concerned that they won’t. They have themselves taken possession of their own gold. They urge everyone to take his own gold in the form of coins or bars out of the banking system, and hold it at home or someplace that’s safe and secure.

This is the process of gold withdrawing from the market. It is an inexorable trend towards permanent backwardation.[3] One ignores this at one’s peril. It cannot be dismissed by the assertion that gold is a currency. Whether or not gold has a rate of interest, and whether this rate is above or below LIBOR has no bearing here.

Gold is a physical commodity. Its owners are removing it from the tradable markets, squirreling it away in nooks and crannies where they feel it’s safe. This is not merely a phenomenon of differing interest rates. Real metal is being moved in the real world, and everyone would do well to understand why, and what it means.

Trust is collapsing, and for good reason. The foundation of the global financial system is the US Treasury bond. It is backed by nothing more nor less than the full faith and credit of a government with exponentially rising debt, and which has neither the means nor intent to repay. If you don’t trust that the US government can pay, then you can’t trust a bank deposit because the bank uses the Treasury as their asset. If you can’t trust a bank, then you can’t trust a gold futures contract.

It is in this light that one must view gold backwardation. In wheat or any other ordinary commodity, there is sometimes a state of shortage. When that occurs, anyone with the commodity can make a risk-free profit by decarrying it. However, there is no such thing as a shortage of gold. There is a shortage developing—a shortage of trust. Decarrying gold does incur a risk. One may be giving up good metal for bad paper, and never be able to reverse the swap.

Unfortunately, with the collapse of trust comes the collapse of coordination of economic activity. The disappearance of gold from the monetary system will have momentous consequences. This is why I founded the Gold Standard Institute USA to promote the gold standard, and reverse this trend before it reaches the end.

 

via Zero Hedge http://ift.tt/1g7MwH7 Monetary Metals

Yesterday’s late bounce and this morning’s opening follow-thrugh were heralded by many talking-heads this morning as the end of the sell-off and a great buying opportunity. Well, on the bright side, those stocks are now at least 3% cheaper having plunged from the opening highs – even as the broader indices hold in. The Momos, also considered to have seen the worst, are re-collapsing…

 

The Nasdaq and Russell are now red YTD once again

 

This is the 8th day in a row of early strength collapsing into weakness…

 

and the momos are giving all the early gains back…

 

so much for that “rotation”

via Zero Hedge http://ift.tt/1g7MwGZ Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The 1950s/60s were not "normal"–they were a one-off, extraordinary anomaly.

If there is one thing that unites trade unionists, Keynesian Cargo Cultists, free-market fans and believers in American exceptionalism, it's a misty-eyed nostalgia for the Golden Era of the 1950s and 60s, when one wage-earner earned enough to buy all the goodies of a middle-class lifestyle because everything was cheap. Food was cheap, land was cheap, houses were cheap, college was cheap and most importantly, oil was cheap.

The entire political spectrum looks back at this Golden Age with longing because it was an era of "the rising tide raises all ships:" essentially full employment, a strong U.S. dollar and overseas demand for U.S. goods combined to raise wages while keeping inflation low.

The nostalgic punditry quite naturally think of this full-employment golden age of their youth as the default setting, i.e. the economy of the 1950s/60s was "normal." But it wasn't normal–it was a one-off anomaly, never to be repeated. Consider the backdrop of this Golden Era:

1. Our industrial competitors had been flattened and/or bled dry in World War II, leaving the U.S. with the largest pool of capital and intact industrial base. Very little was imported from other nations.

2. The pent-up consumer demand after 15 years of Depression and rationing during 1942-45 drove strong demand for virtually everything, boosting employment and wages.

3. The Federal government had put tens of millions of people to work (12 million in the military alone) during the war, and with few consumer items to spend money on, these wages piled up into a mountain of savings/capital.

4. These conditions created a massive pool of qualified borrowers for mortgages, auto loans, etc.

5. The Federal government guaranteed low-interest mortgages and college education for the 12 million veterans.

6. The U.S. dollar was institutionalized as the reserve currency, backed by gold at a fixed price.

7. Oil was cheap–incredibly cheap.

All those conditions went away as global competition heated up and the demand for dollars outstripped supply. I won't rehash Triffin's Paradox again, but please read The Big-Picture Economy, Part 1: Labor, Imports and the Dollar (September 23, 2013).

In essence, the industrial nations flattened during World War II needed dollars to fund their own rebuilding. Printing their own currencies simply weakened those currencies, so they needed hard money, i.e. dollars. The U.S. funded the initial spurt of rebuilding with Marshall Plan loans, but these were relatively modest in size.

Though all sorts of alternative global currency schemes had been discussed in academic circles (the bancor, etc.), the reality on the ground was the dollar functioned as a reserve currency that everyone knew and trusted.

But to fund our Allies' continued growth (recall the U.S. was in a political, military, cultural, economic and propaganda Cold War with the Soviet Union), the U.S. had to provide them with more dollars–a lot more dollars.

Federally issued Marshall Plan loans provided only a small percentage of the capital needed. As Triffin pointed out, the "normal" mechanism to provide capital overseas is to import goods and export dollars, which is precisely what the U.S. did.

This trend increased as industrial competitors' products improved in quality and their price remained low in an era of the strong dollar.

Long story short: you can't issue a reserve currency, export that currency in size and peg it to gold. As the U.S. shifted (by necessity, as noted above) from an exporter to an importer, a percentage of those holding dollars overseas chose to trade their dollars for gold. That cycle of exporting dollars/importing goods to provide capital to the world would lead to all the U.S. gold being transferred overseas, so the dollar was unpegged from gold in 1971.

Since then, the U.S. has attempted to square the circle: continue to issue the reserve currency, i.e. export dollars to the world by running trade deficits, but also compete in the global market for goods and services, which requires weakening the dollar to be competitive.

In a global marketplace for goods and services, all sorts of things become tradable, including labor. The misty-eyed folks who are nostalgic for the 1950s/60s want a contradictory set of goodies: they want a gold-backed currency that is still the reserve currency, and they want trade surpluses, i.e. they want to export goods and import others' currencies. They want full employment, protectionist walls that enable high wages in the U.S. and they want to be free to export U.S. goods and services abroad with no restrictions.

All those goodies are contradictory. You can't have high wages protected by steep tariffs and also have the privilege of exporting your surplus goods to other markets. That's only possible in an Imperial colonialist model where the Imperial center can coerce its colonial periphery into buying its exports in trade for the colonies' raw commodities.

And very importantly, oil is no longer cheap. The primary fuel for industrial and consumerist economies is no longer cheap. That reality sets all sorts of constraints on growth that central states and banks have tried to get around by blowing credit bubbles. That works for a while and then ends very badly.

The 1950s/60s were not "normal"–they were a one-off, extraordinary anomaly. Pining for an impossible set of contradictory conditions is not helpful. We have to deal with the "real normal," which is a global economy in which no one can square the circle for long.

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

Once upon a time, Tesla’s Model S was supposedly the world’s safest car. Then a few of them spontaneously combusted either in the comfort of their own garage, or while doing the unthinkable, i.e., driving over pieces of debris on the road, and questions emerged just how much money was used to bribe the NHTSA which had rushed to proclaim the Model S the safest car it has ever tested without apparently doing any actual testing. Today questions of NHTSA bribes re-emerged louder than ever after NHTSA reported earlier it had “closed an investigation into fires involving electric sports car maker Tesla Motors Inc’s popular Model S sedans after finding no “defect trend.” Obviously a forced recall by Tesla would have promptly shifted the spontaneous combustion from merely its cars to its all important for marketing purposes stock price.

Yet there was one person who did not quite agree with NHTSA’s assessment: Tesla boss Elon Musk.

Elon Musk, chief executive and founder of Tesla, announced on Friday that all Model S cars – the company’s top model – manufactured from this month will be fitted with a triple underbody shield.

Because, you see, the “world’s safest car” needs what is effectively a bomb blast shield planted in the floor. Just in case.

In a blog post on Medium , Mr Musk said the company decided to fit the shield to reduce the risk further. It follows an “over-the-air” software update to increase the ground clearance of the Model S at highway speeds to reduce the odds of a severe underbody impact.

What risk? Isn’t the Model S the world’s safest car… at least in those times when it is not burning uncontrollably of course.

Mr Musk said Tesla would also retrofit the shields, free of charge, to existing cars upon request or as part of a normally scheduled service.

 

Although he noted there have been no casualties as a result of the fires, Mr Musk wrote: “We felt it was important to bring this risk down to virtually zero to give Model S owners complete peace of mind.”

 

During the course of 152 vehicle level tests the company found the shields prevented any damage that could cause a fire or penetrate the plate that already protects the battery pack.

 

“We have tried every worst-case debris impact we can think of, including hardened steel structures set in the ideal position for a piking event, essentially equivalent to driving a car at highway speed into a steel spear braced on the tarmac,” Mr Musk wrote.

And yet one piece of stray metal allegedly managed to lead to this:

 

One thing is certain: if after the inclusion of what is effectively a mafia-style bomb blast shield Tesla’s continue to have occasional Car-B-Q moments, it will be far more difficult for the damage control brigade to come up with excuses. Which, of course, is all an enterprising arb, who buys the car and “hedges” with a few million in puts really needs for one of the best possible pair trade returns in 2014.

via Zero Hedge http://ift.tt/1dAuin1 Tyler Durden

UPDATE: *TURKEY’S DAVUTOGLU SAYS LEAK IS ‘DECLARATION OF WAR’: TURKIYE

As we noted here, Turkish Prime Minister Erdogan had blocked Twitter access to his nation ahead of what was rumored to be a “spectacular” leak before this weekend’s elections. Then this morning, amid a mad scramble, he reportedly (despite the nation’s court ruling the bans illegal) blocked YouTube access. However, by the magic of the interwebs, we have the ‘leaked’ clip and it is clear why he wanted it blocked/banned. As the rough translation explains, it purports to be a conversation between key Turkish military and political leaders discussing what appears to be a false flag attack to launch war with Syria.

 

 

Among the most damning sections:

Ahmet Davutolu: “Prime Minister said that in current conjuncture, this attack (on Suleiman Shah Tomb) must be seen as an opportunity for us.”

 

Hakan Fidan: “I’ll send 4 men from Syria, if that’s what it takes. I’ll make up a cause of war by ordering a missile attack on Turkey; we can also prepare an attack on Suleiman Shah Tomb if necessary.”

 

Feridun Sinirliolu: “Our national security has become a common, cheap domestic policy outfit.”

 

Ya?ar Güler: “It’s a direct cause of war. I mean, what’re going to do is a direct cause of war.”

 

…

 

Feridun Sinirolu: There are some serious shifts in global and regional geopolitics. It now can spread to other places. You said it yourself today, and others agreed… We’re headed to a different game now. We should be able to see those. That ISIL and all that jazz, all those organizations are extremely open to manipulation. Having a region made up of organizations of similar nature will constitute a vital security risk for us. And when we first went into Northern Iraq, there was always the risk of PKK blowing up the place. If we thoroughly consider the risks and substantiate… As the general just said…

 

Yaar Güler: Sir, when you were inside a moment ago, we were discussing just that. Openly. I mean, armed forces are a “tool” necessary for you in every turn.

 

Ahmet Davutolu: Of course. I always tell the Prime Minister, in your absence, the same thing in academic jargon, you can’t stay in those lands without hard power. Without hard power, there can be no soft power.

A full translation can be found here

And just in case you had faith that this was all made up and Erdogan is right to ban it… he just admitted it was true!

#Turkey‘s PM Erdogan live in Diyarbakir calls leaking of meeintg at Foreign Mins. “immoral.”

— Emre Peker (@wsjemre) March 27, 2014

To summarize: a recording confirming a NATO-member country planned a false-flag war with Syria (where have we seen that before?) and all the Prime Minister has to say is the leak was “immoral.”

 

Erdogan is not amused:

Turkish Prime Minister Tayyip Erdogan described the leaking on YouTube on Thursday of a recording of top security officials discussing possible military operations in Syria as “villainous” and the government blocked access to the video-sharing site.

 

…

 

“They even leaked a national security meeting. This is villainous, this is dishonesty…Who are you serving by doing audio surveillance of such an important meeting?” Erdogan declared before supporters at a rally ahead of March 30 local polls that will be a key test of his support amid a corruption scandal.

via Zero Hedge http://ift.tt/1loWZG9 Tyler Durden

You know it’s bad when… Italy’s new prime minister Matteo Renzi has decided that around 1,500 non-essential government official cars will be sold off (via eBay). As La Repubblica reports, the cars (among them dozens of BMWs, Alfa Romeos, Lancias, nine Maseratis and a couple of Jaguars) have come to be a symbol of wasteful government spending. Renzi noted, via Twitter, “Why should an under-secretary have an official car? The undersecretary should go by foot.”

 

 

 

 

The big question is… why sell all this non-essential crap when your yields are at record lows implying that everything is fucking awesome?!!!! (oh wait, what’s that red line)

 

Yeah, QE will really help eh?!

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

Submitted by Simon Black of Sovereign Man blog,

This week just happens to be the 160th anniversary of Britain and France’s declaration of war on Russia in what would eventually become known as the Crimean War. Part 1.

At the time, Russia was a rising power. By the 1850s, Tsar Nicholas I had expanded Russia’s domain into Ukraine and Crimea seeking warm water ports on the Black Sea, and it scared the bejeezus out of the rest of Europe.

Other nations in the region– particularly France and the Ottoman Empire, were in obvious decline. By 1854, the Ottoman Empire was only a few years away from outright default, and France was desperate to regain some of its geopolitical glory from the previous century.

All of this should sound familiar. As Mark Twain said, history might not necessarily repeat, but it certainly rhymes.

Today there is conflict once again in Crimea. And just as before, it has nothing to do with Crimea, but with several other powers trying to keep a rising power in check.

Let’s be honest– most human beings don’t get terribly excited when they get surpassed by someone else. Nations are no different.

And just as in the 1850s when France, Britain, and the Ottoman Empire ganged up to contain Russia’s growth, most has-been, bankrupt Western nations are doing the same thing today.

The hypocrisy is unbelievable. US Secretary of State John Kerry stated in an interview that “you just don’t, in the 21st century, behave in a 19th century fashion by invading another country on a completely trumped-up pretext.”

Apparently Mr. Kerry slept through the War on Terror and invasion of Iraq.

I have serious doubts that this will actually come to blows, however. Perhaps gentlemanly fisticuffs at most. The West is simply too broke.

Putin is the guy who blew $50 billion just to stage the Olympics. And that’s probably just a fraction of his own personal fortune, let alone how much money Russia has at its disposal.

It would be nothing for the Russian government to fund a war in Crimea. The Russians can write a check for it.

The West, meanwhile, has to beg, borrow, and print just to get a warship to the Black Sea.

In fact, just to demonstrate how broke they are, the West’s best move was suspending Russia from the G8, a toothless gang of bankrupt nations.

I mean– the combined debts of just five of the G8 members– the US, UK, Italy, Japan, and France is so prodigious it constitutes nearly 50% of the entire world’s GDP. It’s insane.

Successful negotiations always start from a position of strength. And the West has absolutely none. No teeth. No funding. No leverage.

This became quite clear just a few months ago when Mr. Putin chased everyone out of Syria.

By dropping Russia, even temporarily, from the G8, all they are doing is shining a spotlight on their own weakness… and rather embarrassingly.

They’re proving beyond a doubt that the G8 has no power… and practically shoving Russia into bed with China.

This is a classic example of how formerly great powers accelerate their own decline. And Mr. Obama and his colleagues seem to be following this playbook to a T.

via Zero Hedge http://ift.tt/1piG7zX Tyler Durden

And the hits just keep on coming for new CEO Mary Barra. By now she must be suspecting Dan Akerson threw her under the bus as he left the sinking ship. On the heels of all-time record high inventories (over-built amid a frenzy of mal-investment last year), massive recalls (amid ignition switch problems linked to 12 deaths), and potential bankruptcy fraud, GM announced today that it has instructed dealers to stop selling 2013 and 2014 Chevrolet Cruzes but gave no reason for the halt.

 

Reuters confirms,

“I can just confirm that we put a stop-sale in last night,” GM spokesman Alan Adler said.

 

He said he did not have any details on why the action was being taken, but said stop-sale orders can happen for various reasons. He said stop-sale orders mean the dealers need to do something to the vehicle before it can be sold.

Via WSJ,

Chevrolet dealers received a stop-delivery via email Thursday advising them to halt sales of Cruze models with 1.4-turbo engines, according to a copy of the notice viewed by The Wall Street Journal. A reason for the notice wasn’t provided.

 

“This is something we don’t see every day,” said one dealer who asked not to be identified since he shared the internal document. “To not be given a reason must mean GM has spotted an issue and is still trying to get its arms around it.”

 

A GM spokesman confirmed a notice was sent late Thursday but declined to provide details. Automotive News reported the stop-delivery order earlier Friday. The notice affects only 1.4 Liter turbo charge Cruze.

 

The number of vehicles impacted could be relatively small since the notice only covers 60 days worth of production.

If we build it (and stack them high on dealer lots) they won’t come if they fear spontaneous combustion…

 

GM Chief Executive Mary Barra is scheduled to testify to both chambers of Congress next week as members of the House and Senate seek to learn how the problem did not result in a recall earlier despite being first noted within the company in 2001.

Bring your popcorn…

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Submitted by Lance Roberts of STA Wealth Management,

 

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