- When the cat's away, the mice will play.
- Medieval Latin Proverb
Government Shutdown...
...is not new news, but life goes on. If one forgets the playbook of presidential administrations, it calls for the president to take a "trip" when bad news will hit the fan. President Trump left for Asia. He thinks that he is using the time to "play" the Chinese leader, Xi over trading and tariffs with rare earth minerals. Xi thinks he is "playing" Trump by forcing him into surrendering tariffs over rare earth access? Both leaders are seeking to offer their respective nations some good news to counter some poor economic reports. We can never for certain give an accurate picture of China. We do know that housing is central and the recent defaults are still reverberating. With that said, we can still give an accurate picture of our economy. It has been able to ride a bumpy road, but we see potholes and sinkholes ahead. Two big bumps in the road will be revealed today. The Supreme Court will decide the case of Trump's tariffs. We feel this issue is for Congress to decide. The other is the outcome from election day. Behind the scene is the real danger to everyone and the economy.
Cockroaches?
Do you recall our piece using the quote by Jamie Dimon, the CEO of JP Morgan Chase? He said, "When you see one, there are more." The cockroach that he referred to was Tricolor Holdings. The used auto dealer filed for bankruptcy in September. It was soon joined by First Brands. The market shrugged it off. Then, we entered into the government shutdown over the debt ceiling. Reports on our economy are not forthcoming. What is known is sketchy. However, we do get reports from firms and of course, legal situations. One of those corporate reports was from Fiserv (FI). It highlights more banking risks. It missed its earnings by a lot. The firm's loftly projections fell way short. The stock plunged by 44%. It still has not found a bottom. The firm lost $30 billion in stock cap.
Enter Subprime!
If you remember, the financial crisis of 2008 began when subprime lenders were exposed and defaulted. We learned that big banks lend to these lenders and if a problem surfaces, they will feel a bite. If enough piranha's eat, the bite can be death.
Subprime lenders deal with a large portion of our population with poor paying employment. Well, a large one, Primal Lend Capital Partners just filed for bankruotcy. Another report on auto loans reveals that there are $1.6 trillion in debt. That same report warned that auto delinquencies are rising to 6.43%. To put that in perspective, the failing to pay an auto loan has doubled since 2021 and it represents the highest percentage in decades. The repo man will be busy. You ask, "What's the worry?"
It is a slow burn, but it has a ripple effect. Not only in regions of our nation, but globally. As you know, our greedy producers have outsourced almost all our manufacturing. The supply chain has taken a hit with our tariffs. Now, with auto loans souring, lenders will tighten. This will mean less auto sales. This has a negative feeling to the industry. This relates to another report that says the average price for a new vehicle is $50,000. Since we import so much auto parts, these suppliers will feel the bite. They will do cost cutting or laying off help. At best, help everywhere will be less than full time. A bite to all economies. You throw in student loans. The bite to our economy grows. Now, throw in 42 million people who receive food stamps. They suffer as well as our grocery stores. Suddenly, our economy has an investation problem. The ripple is gaining force. It is becoming a wave. You say, "The government will reopen. The laid off federal workers and things like SNAP will be good again. Why worry?"
We Remind You...
...of another piece where a very conservative economist, Mark Zandi said, "Mass layoffs is the firewall between a recession and no recession." We add what we know... Amazon: laying off 14,000. Robots taking jobs. Target: cutting lose 1,000. Charter Communications: pink slip to 1,200. Paramount Skydance: good-bye to another 1,000. Novo Nordisk: a global medical concern will drop 9,000 - mostly Denmark and US. UPS: dropping 34,000 employees and another 14,000 corporate jobs that are going to robots.
Cargo
It moves by ships at sea and trains on land, however to reach warehouses and stores, it rolls by trucking. It is no secret that trucking is seeking drivers. There is a shortage of help as revealed by the aspect that there are 3.1 million more trucks sitting idle. You can get a lot of info from that sentence. Trucking firms have idle vehicles that they probably own with a loan. Big liability. We follow the results with the following trucking firms that extend from coast to coast. The following have all entered into bankruptcy. Best Choice Trucking LLC, Best Logistics Inc, C&C Freight Networks, ALA Transpotation Inc, Elite Carriers, Dolche Truckload Corp, Nortia Logistics Inc, CLB Trucking, and Daniel Trucking International. That is a lot of firms and lost jobs. The unemployment rate will be a lot higher.
We see...
...the unemployment percentage growing even with manipulation. We see our fellow consumers struggling to make ends meet. The stock market has lost its relationship to how our economy is doing. Individuals do not move the market. It is run by hedge firms and investment institutions. There is no longer a connection to the market and the economy. Our auto nation is driving over potholes and steering to avoid sinkholes as our phony political parties point fingers at each other. The only help wanted will be to be a repo man. Let's hope for a mild winter because running the heat also costs too much. Do the best that you can. Peace.
