Like houses, many people are locked-in to low auto loan rates.
However, homes last much longer than cars do.
As people sell cars bought over the last ~4 years, they are entering a much higher rate environment.
Follow us @KobeissiLetter for real time analysis as this develops.
— The Kobeissi Letter (@KobeissiLetter) September 3, 2023
The era of free money, cheap debt & growth at any cost is over. The general public doesn't realize it yet, but they will very soon.
1st market peak:
Sep 2 (1929) + 4 months = Jan 2 (2022)
— Financelot (@FinanceLancelot) September 3, 2023
Postcards from the Death of the American Dream..
(warning, these are not comfortable viewing)
Since 1965 (everyones working memory) wages have not risen in real terms. Its an endless hamster wheel of despair… pic.twitter.com/TFFXgHkVgx
— Raoul Pal (@RaoulGMI) September 3, 2023
In July, US inflation measured by Core PCE Deflator rose to 4.2% YoY, and headline PCE reached 3.3% YoY, the highest since June 2022. Services inflation remained elevated, while Goods saw substantial deflation. Spending rose for the second month, but Personal Income growth slowed. Wage growth declined for both private and government workers. Adjusted for inflation, ‘real’ personal spending increased by 3.0% YoY. Real disposable income dropped by 0.2% MoM, the largest decline since June 2022. It appears the American consumer is completely tapped out – consumer credit has flatlined (maxx’d out) and now savings are plunging again.
“Unprecedented given the economy” is a critical observation.
Deficit/GDP usually goes down with low unemployment & above-trend GDP growth, not up.
US is in fiscal dominance. Caveat emptor, TLT buyers. t.co/HIUFi8IcXu
— Luke Gromen (@LukeGromen) September 3, 2023
Despite slight relief in inflation, 61% of adults are still living paycheck to paycheck as of July, an increase from last year. Federal Reserve Chair Jerome Powell expressed concern over persistent high inflation and hinted at more interest rate hikes. Central bank officials have already raised rates 11 times, impacting consumers’ spending habits. Lower-income workers, hit hardest by rising prices, are struggling to make ends meet. Around 70% of Americans are stressed about finances due to inflation, rising interest rates, and lack of savings. Only 45% have an emergency fund, with 26% having less than $5,000 saved.