Underwater Auto Loans
November 25 - Dow Jones (Christine Richard): "Large cash-back payments and other incentives have been driving auto sales in the U.S. in recent years, but besides shifting cars out of the showrooms, these deals are also creating riskier auto loans. That's because incentives aren't just being used to discount the price of vehicles. Often, they provide a way to bail customers out of old auto loans, freeing them up to finance new purchases. 'Dealers are very creative,' said Bob Kurilko, vice president of marketing at Edmunds.com, which provides research and information on buying vehicles. 'They do what they have to do to get the deal done.' Sometimes that means giving a hand to buyers who owe more on their current auto loan than the auto's trade-in value - otherwise known as being 'underwater' on a loan. It's a surprisingly common problem. According to the latest data from Edmunds, during August, 29% of all trade-ins in the U.S. were underwater, with the average shortfall between the loan amount and the trade-in value standing at $3,700. That's up from August 2002, when 26% of trade-ins were underwater by an average of $3,280... In California, Texas and Alabama, 40% of all trade-ins were underwater in August. In California, the average shortfall on trade-ins was $4,700, said Kurilko."

Vehicle Sales (quarterly)

Marriott International, Inc. (MAR)

Download file

Derivatives Trading Loss Hits Foreign Brokers
Their sluggishness is attributable to ``huge losses in financial derivatives trading,'' the Financial Supervisory Service (FSS) said on Thursday.

The Conference Board's Consumer Confidence Index rose 10 points to 91.70 in November, after a 4.7 point gain the prior month. With this latest data point, the index is now within 2 points of a natural retracement target derived from the all time high recorded in MAR 2000.

Georgia revolt carried mark of Soros

"It's generally accepted public opinion here that Mr. Soros is the person who planned Shevardnadze's overthrow," said Zaza Gachechiladze, editor-in-chief of The Georgian Messenger, an English-language daily based in the capital.

Can’t help but juxtapose the current (sudden) Mike Jackson media frenzy with that of Representative Gary Condit which pre-occupied America during the summer/early fall of 2001. It was Condit-all-the-time preceding 9/11 and, then, the story dropped completely off the radar. At the time, the Condit headlines served to mask the degrading global economic picture and the abysmal state of domestic security. One can only begin to enumerate the issues the current administration is trying to mask. Perhaps there is more to the timing of this JAKO media circus than meets the eye. Perhaps there is a much larger story developing which will become apparent shortly. One thing is for certain; the current administration’s ringleaders (Perle, Wolfowitz, Cheney, Rumsfeld, et al.) have studied Orwell very closely:

Orwell understood the difference between 'what the public is interested in' and 'the public interest'.

- Bernard Crick ('Big Brother belittled')

Yrs,

Dimitri Chalvatsiotis

The intermediate-term equity view remains unchanged: down.

The week of NOV 11 (43 week static cycle shared on NOV 11) managed to cap the rally which has confounded many since its momentum peaked early this past summer (JUN 6). This was also the exact time zone projected for a turn by the Green cycle illustrated below. As all previous projected turns, we will wait and observe the market's ability to counter this newfound downtrend which will provide us with additional information. The intraday count calls for a counter move higher over the next 2-3 sessions. This pause in the decline complements the macro structural and cyclic picture.

NOV 21 will prove to be another noteworthy inflection point. It is the third component of a static cycle which began on the low following SEP 11 2001 (SEP 21) and followed with a violent low on JUL 22 2002. Complementing this historically significant static cycle, is a TOP-TOP count originating from the low which wronged many on AUG 6.

9/21/2001>>7/22/2002>>11/21/2003
8/06/2003 + 107 = 11/21/2003

From an analog perspective, the SP500 continues to mimic the time aspect of the 1993-94 Nikkei. This analog was posted on OCT 28.

The Bear's Lair: No compass for money

Monetarists may take comfort in the thought that measurements of money supply are not affected by asset price movements. M3 money supply increased by 9 percent per annum through the 1990s, but we now know that much of this was needed to fund stock price inflation and housing price inflation; money velocity did not in fact unexpectedly diminish, but inflation, when measured on a true basis, increased.

Monetarists have now expressed concern that money supply, which had continued to increase by 9 to 10 percent per annum throughout the recession of 2000-2003, suddenly stopped increasing in July 2003, to the extent that both M2 and M3 on October 30 were below their levels of 3 months earlier. At first sight, this looks like a very severe contraction, which can only bode ill for the stock market, but Wall Street's optimists have pointed out that part of the contraction results from retail investors moving funds from money market funds back into the stock market, as the market's recovery from its March 2003 lows was appreciated by the public.

There's just one snag to this. If this was true in 2003, then it must also have been true in 1996-99; in other words the already excessively high money supply increase, as measured by M3, of 9-10 percent per annum, was in fact still higher, and substantially so if money market fund movements in 2003 can wipe out a whole quarter's growth. Still more then does it appear that the Fed's policy in the late 1990s was utterly irresponsible.

My own view, for what it's worth, is that the modest rise in long term interest rates since June, and the consequent sharp deceleration in mortgage re-financings, are about to have a sharp effect on consumer spending, and thus on the economy as a whole. Third quarter GDP growth was artificially high at 7.2 percent, boosted by mortgage re-financings to June and by the tax rebates in July and August. Going forward, we can expect consumer spending to drop. We can also expect more of the true 5 percent per annum inflation rate to show up in the official figures. This in turn will have a huge effect on the Treasury bond market, and on interest rates generally -- to get a real rate of return of 2 percent (the historic minimum), if inflation is 5 percent, nominal interest rates must rise to 7 percent from their current 4.34 percent on the 10 year bond. This would be very bad news indeed for the housing industry, for the banking industry (which will lose both on its bond investments and through an increase in loan losses) and for the economy as a whole.

Opportunity to short/sell intermediate treasury curve scheduled for DEC 19-30.
Complete report when time zone nears.

Wal-Mart misses 3Q target
"The consumer still seems to us to be very cautious and probably will remain so until we see improvement in employment," Scott told the pre-recorded call for investors. "I don't think consumer spending is slowing but I don't see the strength many of you in the investment community appear to see."

Mortgage demand dips to 15-month low
NEW YORK (Reuters) - Applications for U.S. home loans dropped last week to their lowest level in almost a year and a half, a trade group said Thursday, as rising rates cut into demand for homes and mortgage refinancing.

Jobless claims rise
NEW YORK (CNN/Money) - Jobless claims rose in the United States last week, the government said Thursday, as the labor market continued its slow recovery from a long slump.

McDonalds Corporation (MCD)

Download file

Comments dated OCT 28:

"2/25/02>>12/26/02>>10/29/03 LLH***In the short term, this cycle has the ability to lift prices sharply and preceed significant tops (MAR19 2002 & JAN 14 2003)."

"It is expected that this time window [10/27-11/4] will equate to some sort of top in prices and ignite downside volatility in its wake."

Cyclic Precedent

DaimlerChrysler AG (DCX)

Analysis

Goldman Sachs Software Index is within a few points of upside projection made in JUL 2003.

View image

BBY
Sell @58.89