Looking Backwards…
LB #1 A Friday night dirtie got done after the markets closed when Moody’s downgraded the US outlook to negative from stable. They didn’t go so far as to downgrade our debt which is still triple Aaa but it is the last straw before it does.
“While the statement by Moody’s maintains the United States’ Aaa rating, we disagree with the shift to a negative outlook. The American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset,” said Deputy Secretary of the Treasury Wally Adeyemo, in a statement.
I hate to tell you Wally, but when your deep and liquid markets are still bouncing around 20 basis points in a day, the market doesn’t believe you. We mentioned last week that Janet Yellen had to sell more Treasury bills because there is not faith in the long term future of US debt. Moody’s and the market confirmed that outlook in the last week. When she did that, it wasn’t a positive, it was a negative. It was yet another warning shot across the bow that we should pay attention, that Congress needs to stop spending money, and we need to reduce the budget deficits. I was waiting to see if there was any response and I being naïve heard nothing but crickets.
Another awful 30 year Treasury auction
LB#2
Another Friday night dirtie got done on Friday 11/3. Iowa Trust and Savings Bank of Emmetsburg, Iowa assumes all deposits of Citizens Bank of Sac City, Iowa after the bank was closed by the FDIC. $66 million in total assets and $59 million in total deposits. The cost to the FDIC will be $14.8 million. Citizens Bank is the fifth bank to fail this year. A couple other airquotes got bought out. I’m going to speculate wildly and say that the number of bank failures next year will be over 100. From 2009-2011 there were over 400.
LB#3-
Ben Ritz had a nice article in the Wall Street Journal about why Democrats should care about the national debt. He writes that the new Speaker of the House Mike Johnson said one of his first priorities was establishing a commission to tackle the national debt. What a blowhard! We all know what the problems are, but no one wants to fix it and Ritz made several good points but three stood out to me. Debt service crowds out progressive priorities. This is the heart of the Democratic platform- they want to continue giving free shit to people in exchange for votes. Student loan forgiveness, EV tax credits, needles for addicts pick a program and the Democrats need their votes. Democrats understand that these elections are a popularity contest and if their ability to give people free stuff goes away then their entire platform is built on shaky ground. Second, Democrats must challenge Republicans to accept higher tax increases. Democrats love to raise taxes because it gives them more money to give away see point one. However, the Republicans have a popularity card in they own the lower taxes for longer card. They will try to get the Republicans to break from this and they can because the Republicans like to give free money away as well, they just do it to richer people that count for less votes. If Americans think that higher taxes aren’t coming to offset this debt then they are crazy, these politicians will do just about anything to stay in control and shrug their shoulders and say taxes are going up is one thing that they won’t lose sleep over. Lastly, Social Security and Medicare must be cut. This scares the shit out of both parties. Touching Social Security is called the third rail in American politics. That is cute, but it must be done. The areas that we often talk about are a drop in the budgetary bucket. Social Security, Medicare, Defense and now interest expense. That is all that will be left. Defense- we are fighting two wars right now so probably out of the question, interest expense- we have beaten this dead horse enough for a bit- you can print and have stagflation or worse or you default, both are undesirable options. So you have to reform these awful inefficient monoliths of drag on the economy called Social Security and Medicare..
Even Dems know this fiscal path is unsustainable
Looking Forwards…
LF#1
You can’t spell giveaway without the EV. How mad must people that bought an EV be? What suckers! All you had to do was wait and now they will pay you to drive one. Of course it still takes forever to fill up, doesn’t work in the cold, and makes Subarus look like toys for boys. EV trucks, which are for people that don’t really need trucks, get a $7,500 tax credit and now a $7,500 cash rebate because everyone that actually uses a truck knows that an electric truck is a joke. EV trucks are for driving from your garage in the city to your job at your office making bank directing blue collar workers on how to use actual work trucks. You know, that haul things, that tow things, that can’t stop and charge for 45 minutes during the workday. Sean McLain writes in the Journal “On average, customers got a roughly $2,000 discount on an EV in September, compared with a year prior when they paid a $1,500 premium, according to car shopping website Edmunds. “I think there was a miscalculation about demand and how much EVs would be coveted,” said Joseph Yoon, an Edmunds analyst.
Electric vehicles are now some of the slowest sellers on dealership lots. In September, it took retailers over two months to sell an EV, compared with around a month for gas-powered vehicles and only three weeks for a gas-electric hybrid, according to data from Edmunds.” I’ve been saying this for awhile now, everyone that wants one has one. The only way that they gain significant market share is for the government to mandate it. They are by the way. If you want more detail head on over to the Gold, Goats, and Guns podcast where Tom Luongo and Eric Peters discuss the war on cars through the lens of disappearing models and motors that customers want to meet regulatory hurdles. Very insightful and eye opening stuff.
LF#2
There was an interesting article on MSN this week discussing the rapid depreciation of electric cars.
The calculations from Fintana Knight, head of the analytical firm Automotive Equity Management, reveal that the depreciation rate for a used electric car against its combustion counterpart ranges between 10 and 12 percentage points, unfavorably, for the electric car.
There are no subsidies for the used cars and unlike internal combustion engines the batteries are not lasting as long as previously believed. There is some element of unknown with these used cars and this could be another reason why there simply isn’t enough demand to justify this new industry. There will be a lot of EV capacity for sale as the bankrupt EV car companies realize that they can’t continue on raising money any longer and eventually will have to show a profit.
LF#3
Neumann…Raise money, lie, hope traffic, pay yourself millions and walk away from the fire. We need to discuss executives in this country as we watch the wealth divide between the haves and have nots continue to grow. We go to the Journal and Alexander Gladstone’s profile on Wework, the company we have talked about that was valued at almost $50 billion and they are now officially bankrupt. Their CEO was Adam Neumann made about $770 million from the SPAC process in 2021 and is still worth over a billion dollars. Wework is now in court trying to amend hundreds of leases that Wework and Adam locked them into before the sandcastle of shaky foundations started washing out to sea. SoftBank holds over 50% of the shares currently, buying a lot of them when they bought out Neumann. In the words of Candy from Two and a Half Men, “Is that what they mean when the market has gone soft?” No Candy, just the brains of the bankers at SoftBank. SoftBank’s shares are off 50% since their 2021 high and just posted a $6.2 billion loss last quarter. I’d keep that WeWork bankruptcy lawyer’s number handy.
Adam Neumann is a scam artist artist
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