US consumer’s pullback hits global firms

Early Wednesday morning WPP the largest advertising agency in the world started the markets with their earnings.

The agency led by Martin Sorrell reported slowing growth in North American ad spending on consumer staples from larges companies including Procter & Gamble, Nestlé, Unilever and Anheuser-Busch.

“In volume terms these companies are flat or falling,”  Sorrell said in an interview. “When volumes fall in packaged-goods companies that’s a big wake-up call: It means you have less consumers and that’s the beginning of serious problems.”

This is the second quarter in a row that WPP has cited slow ad spending in America on staple products, which the consumer is pulling back on.

I have written extensively on the changing habits of the American consumer and this is but another nail in the coffin. 

The growing revenue of off-price brands at discount grocery centers like WalMart and Target, the use of credit cards for mid-week purchases and the rash of grocery store chain closings all point to a troubled economy outside the pockets of prosperity in this country.

The fact that this condition has worked its way all the through the supply chain to hit a London advertising conglomerate with offices globally is to say it’s more than a trend. It’s epidemic and I can’t see how the US economy can grow with so many not being able to afford basic necessities. 

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Why did the Treasury chief need to visit Fort Knox?

Treasury Secretary Steve Mnuchin paid a visit to Fort Knox on Monday to inspect our gold holdings at the US Mint’s gold bullion vault.

“I assume the gold is still there,” Mnuchin said in Louisville, Kentucky before traveling to the installation to view the $200 billion in holdings. 

Mnuchin is the first Treasury chief to visit the gold vault in over 70 years. My question is why?

Surely he could have an accounting of the holdings on his desk in minutes, without schlepping to Kentucky. Of course in some circles it has been intimated that there was only an IOU in the vault as the gold reserves were pledged to our debt obligations.

However, after the inspection Mnuchin “playfully” reassured Americans the treasure was still secure.

“Glad gold is safe!” he wrote in a post on Twitter.

It just seems that Mnuchin would have more on his mind these days than taking a tour of Fort Knox. The debt ceiling and tax cuts would be two areas that would keep him in Washington. 

And the fact he made light of the visit, by joking it would make a good movie if the gold was not there, all tell me there was a seriousness to this trip that belies the flippant nature of the remarks.

I will not even get into the brouhaha Mnuchin’s wife got into on social media over the trip.

Thar may be gold in the foothills of the Smokey Mountains, but I want to know who wanted the Treasury Secretary to go on the record and confirm it?

Stock answer is we don’t know about next 6 months

How can the equity markets trade looking six months out — as is the traditional metric — when it doesn’t know what the next six minutes will bring?

The Dow Jones traded down 274 Thursday on, pick your poison:

  1. Terrorist attack in Barcelona,
  2. White House finance chief Gary Cohen’s departure.
  3. Algos in control since its August
  4. All of the above

It has to be near impossible to be able to formulate an earnings picture looking out the next quarter, when a 140-character tweet can throw all the analysis into the trash bin.

Here’s a analyst’s note on Friday morning, explaining very succinctly what he is up against when figuring direction of the market:

“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,”
Deutsche Bank analyst Jim Reid.

So off of that note we have  stocks marginally down for the week. I say that’s not a bad performance even without mentioning the civil unrest in Virginia last weekend.

Used auto sales are getting the hook

Here’s one job that’s sure to be hiring, but you will not see it on the Bureau of Labor Statistics employment data for August.

It’s the Repo Man.

All those subprime auto loans for eight years, 0 percent down and no credit check, were not all that secure, but then again the car makers sold the vehicle and put the risk on someone’s’ books.

Much like the housing crisis, the finance companies making these risky loans securitized the loans and sold the bonds to investors, which are creating some cracks in the $1.2 trillion market for auto financing.

Investors starving for yield are grabbing these securities with two fists. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion exchanged hands, according to a Wells Fargo report.

However, the glut of vehicles arriving on the back of tow trucks onto lots has accelerated leading to a 4.1% price decline on used cars in August.

Also with so many cheaper cars on the lot that are only one or two years old, new car sales are hurting. July’s sales numbers were stunning when compares to the record number of 17.5 million cars sold in 2016.

General Motors reported a 15.4% sales decline in July compared to the same period a year ago, selling 226,107 cars and trucks. Ford Motor said sales slid 7.4% last month to 199,318 vehicles. Fiat Chrysler posted a 10% decline in July, selling 161,477 vehicles.

“So, what i can I do to put you in this beauty?”

“Not much obviously. Give me that one-page loan form, I’ll sign it and pick up the car tomorrow. Maybe I’ll be back in six months to pick up a different model.”

Does sound like another recipe for disaster.

JPMorgan’s Dimon may have a whale of a problem, again

JPMorgan’s CEO Jamie Dimon is out on his annual bus tour to meet with employees and business and political leaders that have relationships with the bank. The poster boy for banking since 2008 crises is talking about making America great again.

Dimon says he is a patriot first and a banker second. His point is if we do right by America, then his bank and the stock price will do just fine, thank you. Yet there seems to be a dark cloud following Dimon and it looks like a whale.

While Dimon moves across the country, a ghost of banking’s past is rearing its head again. The London Whale trade, which hit JPMorgan in 2012 and cost the bank more than $6B ultimately in trading losses. Congress used it as prima facie evidence for the Volcker Rule’s banning of banks with deposits running their own trading operations called proprietary trading desks.

Bruno Iskil, the JPMorgan European trader who was working with authorities on the case has come out publicly to state he was doing Dimon’s work. While the feds have their charges against two other European traders for lack of evidence of wrongdoing and allege difficulty in expediting them.

At first Iskil and the team were deemed “rogue traders” going out on their own to capture huge profits using the bank’s money. As time went by and the bank’s CIO Ina Drew stepped down, word began leaking out that this was a C-Suite authorized trading program, which before it blew up, brought in huge profits for the bank.

Drew was essentially running a hedge fund within the bank, using other trading desks data to take winning positions in outsized bets, according to Iskil’s newest writings. When news of these losses began to emerge, Dimon called them a”tempest in a teapot”.

Well that leak has now become a chorus as others JPMorgan traders have backed up Iskil’s assertions that Dimon & Co. created the teapot and put it on the boil.

So as Dimon’s latest tour is said to include visits with Congressional leaders over these next weeks, it’s unclear whether his push to scale back the Volcker Rule will have any merit.


EDITOR’S NOTE: The subreddit r/google has barred me from posting after I put this story on the Reddit. While getting over a 1,000 hits from Reddit, the moderator labeled this post spam.

This only confirms what Damore says about the echo chamber. Certainly it’s not spam, but it is not in keeping with the “truth” as Silicon Valley sees it.