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GM Channel Stuffing Second Highest Ever In January | Zero Hedge

GM Channel Stuffing Second Highest Ever In January | Zero Hedge.

We touched upon the disappointing GM car sales number reported earlier, which were promptly blamed on snow in the winter in some part of the country, which supposedly also meant that California’s ravenous car buyers didn’t purchase vehicles due to drought or something. Either way, one thing is clear: there was a big drop in auto demand which was to be expected from an overextended consumer whose plight we have been following for years. However, where GM did surprise, is that despite its apparent realization of climatic conditions, the company decided to plough through with abnormal production levels and flooded its dealer network with inventory. So much inventory, in fact, that in January, GM’s channel stuffing pipeline rose by another 42K cars (a quarter of total sales in January), increasing the stock of cars parked at dealer lots and collecting dust to 780K from 748K in December, the second highest ever!


Shown otherwise, post-reorg GM had a record 114 days supply in inventory, compared to “only” 81 at the end of the year.

How Cronyism And Corruption Brought Down Detroit | Zero Hedge

How Cronyism And Corruption Brought Down Detroit | Zero Hedge.

Detroit U.S.A.: Once the most prosperous city in America. With a booming manufacturing sector and cultural magnetism, the city had bright horizons after World War II. But as the 1960?s rolled in, the marriage of Big Business and Big Government overtook Detroit. The central planners in government needed the powerful corporations, and the powerful corporations came to depend on the bureaucracy, too. The marriage worked well for the politicians and for their corporate cronies, but Detroit itself entered a decades-long decline. America watched as Detroit slowly bled people, jobs and revenue. Politicians tried spending money. They tried raising taxes. The more they taxed and spent, the faster the city declined.

 

Detroit still had its “Big Three” auto manufacturers, until two of its crown jewels, General Motors and Chrysler, imploded in 2008 under the weight of reckless and subsidized mismanagement.

Instead of allowing market forces to rebuild Detroit and the auto industry, the United States handed billions of dollars to General Motors and Chrysler.

Five years later, the city of Detroit is bankrupt and almost $20 billion dollars in debt. Meanwhile, General Motors has a cash balance of over $20 billion, still owes the taxpayers over $10 billion dollars that outgoing CEO Dan Akerson said will not be paid, and the company continues to benefit from an unprecedented $18 billion tax gift from the bankruptcy.

Why is General Motors walking away with billions while Detroit dies?

How did so much money change hands between the world’s most powerful corporate leaders and government officials while delivering on so little of the promise sold to America by central planners? Bankrupt: How Cronyism & Corruption Took Down Detroit answers this question, and many others.

Complete with the candid analysis of pundits, journalists, analysts and government officials, sourcing of historical news and government archives, and on-scene interviews with everyday Detroiters, Bankrupt sheds light on what happened to Detroit, and who is to blame.

 

And most importantly, it asks “What is next for the Motor City?”

Canada’s deficit ticks higher to $13.2B – Business – CBC News

Canada’s deficit ticks higher to $13.2B – Business – CBC News.

The devastating Alberta floods this summer made a significant dent in the federal government's finances this year.The devastating Alberta floods this summer made a significant dent in the federal government’s finances this year. (The Canadian Press)

The Canadian government has spent $13.2 billion more than it has taken in so far this year, a slightly larger deficit than the one for the same period in 2012.

The Department of Finance said Monday the federal deficit was $13.2 billion for the fiscal year up to October. That’s ahead of the $11.9 billion during the same period in 2012.

But that data is skewed by two major one-time events that impacted Ottawa’s finances: The Alberta floods of last summer, and the government’s sale of $700 million worth of GM shares in September.

Excluding the two events, the annual deficit would have been slightly smaller, at $11.1 billion.

For the fiscal year as a whole, Ottawa has taken in $144.9 billion and spent $158.2 billion so far. On a monthly basis, October’s deficit was $2.5 billion, the same as the one from the same month last year.

“The Government remains on track to balance the budget in 2015,” the department said in a release.

 

Unease among Brazil’s farmers as Congress votes on GM terminator seeds | Global development | theguardian.com

Unease among Brazil’s farmers as Congress votes on GM terminator seeds | Global development | theguardian.com.

Unease among Brazil’s farmers as Congress votes on GM terminator seeds

Environmentalists warn approval could shatter global agreement not to use technology, with devastating repercussions
Brazil national congress

Brazil’s national Congress is under pressure from landowning groups to green light GM ‘terminator’ seeds. Photograph: Ruy Barbosa Pinto/Getty Images/Flickr RF

Brazil is set to break a global moratorium on genetically-modified “terminator” seeds, which are said to threaten the livelihoods of millions of small farmers around the world.

The sterile or “suicide” seeds are produced by means of genetic use restriction technology, which makes crops die off after one harvest without producing offspring. As a result, farmers have to buy new seeds for each planting, which reduces their self-sufficiency and makes them dependent on major seed and chemical companies.

Environmentalists fear that any such move by Brazil – one of the biggest agricultural producers on the planet – could produce a domino effect that would result in the worldwide adoption of the controversial technology.

Major seed and chemical companies, which together own more than 60% of the global seed market, all have patents on terminator seed technologies. However, in the 1990s they agreed not to employ the technique after a global outcry by small farmers, indigenous groups and civil society groups.

In 2000, 193 countries signed up to the UN Convention on Biological Diversity, which recommended a de facto moratorium on this technology.

The moratorium is under growing pressure in Brazil, where powerful landowning groups have been pushing Congress to allow the technology to be used for the controlled propogation of certain plants used for medicines and eucalyptus trees, which provide pulp for paper mills.

The landowning groups want to plant large areas with fast growing GMtrees and other non-food GM crops that could theoretically spread seeds over wide areas. The technology, they argue, would be a safeguard, ensuring that no second generation pollution of GM traits takes place. They insist that terminator seeds would only be used for non-food crops.

Their efforts to force a bill to this effect through Congress, ongoing since 2007, have been slowed due to resistance from environmentalists.

The proposed measure has been approved by the legislature’s agricultural commission, rejected by the environmental commission, and now sits in the justice and citizenship commission. It is likely to go to a full Congressional vote, where it could be passed as early as next Tuesday, or soon after the Christmas recess.

Environment groups say there would be global consequences. “Brazil is the frontline. If the agro-industry breaks the moratorium here, they’ll break it everywhere,” said Maria José Guazzelli, of Centro Ecológico, which represents a coalition of Brazilian NGOs.

This week they presented a protest letter signed by 34,000 people to thwart the latest effort to move the proposed legislation forward. “If this bill goes through, it would be a disaster. Farmers would no longer be able to produce their own seeds. That’s the ultimate aim of the agro-industry,” she said.

The international technology watchdog ETC, which was among the earliest proponents of a ban on terminator technology in the 1990s, fears this is part of a strategy to crack the international consensus.

“If the bill is passed, [we expect] the Brazilian government to take a series of steps that will orchestrate the collapse of the 193-country consensus moratorium when the UN Convention on Biological Diversity meets for its biennial conference in Korea in October 2014,” said executive director Pat Mooney.

But Eduardo Sciarra, Social Democratic party leader in the Brazilian Congress, said the proposed measure did not threaten farmers because it was intended only to set controlled guidelines for the research and development of “bioreactor” plants for medicine.

“Gene use restriction technology has its benefits. This bill allows the use of this technology only where it is good for humanity,” he said.

The technology was developed by the US Department of Agriculture and the world’s largest seed and agrochemical firms. Syngenta, Bayer, BASF, Dow, Monsanto and DuPont together control more than 60% of the global commercial seed market and 76% of the agrochemical market. All are believed to hold patents on the technology, but none are thought to have developed the seeds for commercial use.

Massive protests in the 1990s by Indian, Latin American and south-east Asian peasant farmers, indigenous groups and their supporters put the companies on the back foot, and they were reluctantly forced to shelve the technology after the UN called for a de-facto moratorium in 2000.

Now, while denying that they intend to use terminator seeds, the companies argue that the urgent need to combat climate change makes it imperative to use the technology. In addition, they say that the technology could protect conventional and organic farmers by stopping GM plants spreading their genes to wild relatives – an increasing problem in the US, Argentina and other countries where GM crops are grown on a large scale.

A Monsanto spokesman in Brazil said the company was unaware of the developments and stood by a commitment made in 1999 not to pursue terminator technology. “I’m not aware of so-called terminator seeds having been developed by any organisation, and Monsanto stands firmly by our commitment and has no plans or research relating to this,” said Tom Helscher.

On its website, however, the company’s commitment only appears to relate to “food crops”, which does not encompass the tree and medicinal products under consideration in Brazil.

• Additional research by Anna Kaiser

Background to a controversy

Ever since GM companies were found to be patenting “gene-use restriction” or “terminator” technologies in the 1990s, they have been accused of threatening biodiversity and seeking to make farmers dependent on big industry for their livelihoods.

In many developing countries, where up to 80% of farmers each year choose their best plants and save their own seed, terminator technology is a byword for all genetic modification, raising fears that sterile GM strains could contaminate wild plants and regular crops – with devastating consequences.

The GM companies, which claimed in the 1990s that they wanted to introduce the seeds only to stop farmers stealing their products, were forced to shelve the technology in the face of massive protests in India, Latin Amercia and south-east Asia.

In the face of growing international alarm, the 193 countries signed up to the UN Convention on Biological Diversity unanimously agreed in 2000 that there should be a de facto international moratorium. This was strengthened at the Conference of the Parties in 2006, under the presidency of Brazil.

Since then, the moratorium has held firm. But the GM companies have shifted their arguments, saying that gene-use restriction technologies now allow seeds to reproduce, but could “switch off” the GM traits. This, they argue, would reduce the possibility of the seeds spreading sterility. In addition, they say the technology could protect organic and conventional farmers from the spread of transgenes to wild relatives and weeds, which plagues GM farmers in the US and elsewhere.

The fear now is that the global moratorium could quickly unravel if Brazil, one of the most important agricultural countries in the world, overturns its national law to ban terminator technology. Other countries, pressed strongly by the powerful GM lobby, would probably follow, leading inevitably to more protests.

 

Kyle Bass Warns When “Everyone Is ‘Beggaring Thy Neighbor’… There Will Be Consequences” | Zero Hedge

Kyle Bass Warns When “Everyone Is ‘Beggaring Thy Neighbor’… There Will Be Consequences” | Zero Hedge.

There are going to be consequences to central bank balance sheet expansion all over the world,” Kyle Bass tells Steven Drobny in his new book, The New House of Money, adding “It’s a beggar-thy-neighbor policy, but everyone is beggaring thy neighbor.” The Texan remains concerned at QE’s effects on wealth inequality and worries that “at some point this is going to ignite and set cost pressures off.” While Gold-in-JPY is his recommended trade for non-clients, his hugely convex trades on Japan’s eventual collapse remain as he explains the endgame for his thesis, “won’t buy back until JPY is at 350,” and fears “the logical conclusion is war.

Excerpted from Steven Drobny’s The New House Of Money,

Drobny: You’re on the tape saying that dollar/yen is going to 200.

Bass: If I’m right, it will go much further than that. I don’t think it will hit 500, but in crises, currencies swing too far. They can start discounting 15% or 20% rates out ad infinitum because they are in a full bond crisis. But once they flush the debt and have a reset, you’re not going to have 20% rates ad infinitum. We’ve committed more capital to the currency market, but all of the convexity is in the bond market.

Drobny: Recently we’ve seen the yen move your way and everyone is getting excited about “The Japan Trade” – is this the big move you’ve been looking for?

Bass: No, this is just the beginning. It’s not the real move. The real move happens when it runs away from the authorities and they lose control.

Drobny: At what point do you go the other way and buy Japan?

Bass: When the yen is 350 and they’ve wiped out their debts.

Drobny: Let’s play out your Japan scenario. If the yen goes to 350 and Japanese government bond yields go to 20% and they can no longer finance themselves such that it becomes a financial disaster, what are the implications for the rest of the world?

Bass: Well, policymakers have been changing the rules, which is challenging for macro hedge funds. But that’s the beauty of this situation.

Drobny: What if they decide to just knock a few zeros off the debt?

Bass: In the end, they may be forced to do so.

Drobny: What if they bought the whole debt stock at 1% yield?

Bass: That’s the St. Louis Fed’s school of thought, which contends that countries that have their own central banks can print their own currency and will never fall. For the world’s sake, I wish that were true. For the last 2000 years, it hasn’t been true, and I don’t believe it to be true. If it is true, I’ll lose 150 basis points a year and move on. Our core portfolio will be fine. Still, if it were true, then why even have fiscal policy? We don’t need a fiscal policy if that’s the case – we could just spend the money however we want. Policymakers don’t believe there are consequences to their actions, but the consequences will come. Economic gravity will actually set in.

Drobny: But you don’t suffer the consequences if you are out of office. That’s the next person’s problem.

Bass: The point is that no one will make those difficult decisions unless they’re forced to make them. The politics of all these situations tell me how this is going to play out, and that’s through massive central bank balance sheet expansion and capital controls.

The Fed recently wrote a paper that actually endorsed capital controls if done concurrently with other nations. It’s hard for me to fathom that capital controls can ever be a great idea, but this is what you’re going to see.

We are in a period that will be characterized by enormous cross-border capital flows. How will it play out? Let’s assume that I’m right about Japan. What happens then? Nominal interest rates in the US and Germany go negative. The Pavlovian response is to fly to perceived safety; this is why we’re not betting against US rates. In fact, we’re receiving rates in Europe and Australia right now because some sort of stagflation will play out first, before you start to see the real problems in Japan. If you look at history and try to understand what has created despotic rulers and wiped out populations financially in the past, and what happens next, the logical conclusion is war.

Drobny: Who is the war going to be between?

Bass: I’m not exactly sure, but it seems to me that the aggressor in Asia is China and they don’t get along with Japan.

Post-World War II, Japan has been constitutionally limited, such that they cannot declare war. But current Prime Minister Abe is talking about rewriting the constitution so that they can actually declare war again. That’s not stabilizing for the region. Nationalism is rearing its head as we speak.

A third of the population in Japan is over the age of 60, and a quarter is over the age of 65. To put this into context, in the broader developed world only about 8% of the population is over 65. At a point when these people need the money the most, they could lose 30-40% of their savings, maybe more in terms of purchasing power. The social repercussions bother us more than the financial repercussions because the social fabric of Japan will either be stretched or most likely torn, and we don’t know what’s going to happen next.

Drobny: Besides Japan, what bothers you?

Bass: There are going to be consequences to central bank balance sheet expansion all over the world. Look at currency cross rates. If all central banks are expanding at the same rate, the cross rates aren’t moving, but your purchasing power, in terms of goods and services in the country where you live, is diminishing. You’re not focused on real returns, you’re preoccupied with the cross rates.It’s a beggar-thy-neighbor policy, but everyone is beggaring thy neighbor.

I really worry about the true cost of goods and services, but people are preoccupied by the dollar/euro exchange rate to gauge the relative strength of the European economy. You see this preconditioned response and even macro players say things like, “Oh, buy the Nikkei at week end.” They’re picking up a dime in front of a bulldozer. Japanese industry has been hollowed out. The exchange rate may stop the decline for a certain period of time but it’s a secular decline. The people that own Japanese equities right now are tourists. But this creates opportunities in the marketplace.

Bass On inflation,

When you look at what’s going on from an inflation perspective, central banks have printed about $10 trillion dollars since the beginning of the crisis. The first $4-5 trillion went into re-equitizing heavily leveraged structures and bringing down rates. The second $4-5 trillion is making its way into the monetary base, and even though the multiplier is not working, at some point this is going to ignite and set cost pressures off. Again, it won’t be demand-pull, which is technically a good kind of inflation. Rather, it would result from too much money in the system.

Bass On QE’s effects on wealth inequality,

It will show up in food in the early stages. Global QE is filtering its way into asset prices. Those closest to the proverbial spigot are enjoying the printing the most with most in the middle and lower class not feeling the love at all. All you have to do is look at the gap between median income and mean income growing ever wider. This means the rich are getting richer while the rest stay stagnant or even decline.

Drobny: If you could do only one trade for the next ten years – non-risk-managed…

Bass: Actually, the answer to this one is easy – I would buy gold in yen.

 

GM Channel Stuffing Surges To Second Highest Ever | Zero Hedge

GM Channel Stuffing Surges To Second Highest Ever | Zero Hedge.

Confused why the various US manufacturing indices have been on a tear in the past few months? Perhaps the fact that GM dealer lots are so full of cars they just couldn’t wait for even more deliveries has something to do with it. Which is also why in addition to reporting sales numbers for November that were largely in line with expectations, amounting to 212,060 (even if total Chevy Volts sold YTD of 20.7K were -0.6% less than in the same period in 2012), or 13.7% more than last year (estimated called for 13.% increase), of which a whopping 51,705 was in the form of “channel stuffed” units to be parked on dealer lots.

In fact, as the chart below shows, in the past three months, GM channel stuffing has exploded and soared by 150K units (the most ever for a 3 month period) from 628.6K to 779.5K. This represents the second highest amount of channel stuffing and is lower only compared to the 788.2K units “stuffed” exactly one year ago.

And while the topic of channel stuffing is not new here, as we have been covering it closely for the past three years, it is of note that even “serious” media such as Bloomberg pointed out yesterday that across the entire US car industry, and not just GM, channel stuffing is now the highest it has been since 2005. Surely all this pent up demand is there for a reason: after all, as in every centrally-planned economy, if you build it they will surely come…

 

Auto Makers’ Channel Stuffing Highest Since 2005 | Zero Hedge

Auto Makers’ Channel Stuffing Highest Since 2005 | Zero Hedge.

While the abundance of commercials for cars across all media this time of year is nothing new, the manufacturers (and even more so the dealers) are likely getting more desperate. As Bloomberg reports,inventory climbed to almost 3.4 million cars and light trucks entering November – at 76 days of supply, that was the highest for the month since 2005. This should come as no surprise as we previously noted GM’s post-crisis highs in channel stuffing as hope remains high that the recent slowdown in sales does not continue. The question, of course, is, “will manufacturers be responsible and curb production to keep inventory in check, or are some going to resort to old, bad habits and churn it out and then throw incentives on them.” We suspect we know the margin-crushing answer.

 

Via Wards Auto,

the levels harken back to early in last decade when steep price discounting was used to prop volumes,…

 

Excluding 2008 when the industry was heading into recession, LV inventory totaled 3.397 million at the end of October, highest for the month since 3.803 million in 2004. October’s 76-day supply, was the highest for the month since 77 in 2005.

 

By comparison, sales in 2013 mostly have run at highs dating to 2007, suggesting inventory is getting ahead of the curve.

GM just saw the biggest two month jump in inventory in the restructured company’s history.

 

 

Via Bloomberg,

Carmakers have boosted production to meet demand that has left the industry on pace for the best sales year since 2007. Swelling supply raises the stakes for sales in November after deliveries missed estimates in October and slipped in September for the first time in 27 months. If buyers don’t absorb enough inventory, more automakers, including Toyota Motor Corp. (7203) and Honda Motor Co., may need to follow Ford Motor Co.’s lead by trimming production to avoid margin-slicing discounts.

 

“Inventory has been so tightly managed, and it has been because demand has been there and production hasn’t been able to keep up,” Jeff Schuster, an analyst with researcher LMC Automotive, said in a telephone interview. “If you change that scenario around, the question is, does the discipline that we’ve seen the industry operate with lately stick around?”

 

 

“As the market begins to slow down and begins to peak, it’s going to get tougher for everybody,” Joe Langley, the head of North American vehicle production analysis for IHS Automotive, said by telephone. “Are manufacturers going to be responsible and curb production and keep inventory in check, or are some going to resort to old, bad habits and churn it out and then throw incentives on them? That’s what’s going to be interesting, to see how that plays out.”

 

 

Wesley Lutz, a Chrysler dealer in Jackson, Michigan, said his store has about 120 days supply of vehicles in stock, roughly double what he usually likes to carry. Lutz cited his anticipation of strong winter and spring selling seasons and his ability to borrow at less than 2 percent to finance the inventory on his lot.

 

“I’m probably not managing my inventory as well as I do at 8 percent, but I’m willing to roll the dice and stock some inventory in December and January, because I think we’re going to have a great market in February,” Lutz said by telephone. “We’re borrowing money so cheaply.”

 

 

“If it’s an underwhelming month, we’ll need to look to see if there are any decisions to start to ratchet back” production this month or in January, LMC’s Schuster said. “It could end up being the first real test that the industry’s faced since the restructuring.”

Sadly, there it is – due to intervention-driven low rates, mal-investment occurs from the bottom-up – and now we have the most inventory in 8 years… car makers and dealers (perhaps more so) will be hoping hard this season… the ‘field of dreams’ economy continues

 

‘Detroit is basically broke’: cuts, cuts and cuts to follow bankruptcy filing | World news | The Guardian

‘Detroit is basically broke’: cuts, cuts and cuts to follow bankruptcy filing | World news | The Guardian.

 

Owen Paterson: UK must become global leader on GM crops | Environment | The Guardian

Owen Paterson: UK must become global leader on GM crops | Environment | The Guardian.

 

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