Registered Investment Adviser Caleb Lawrence
Another volatile low volume day sent the major averages into the final hour about even despite disappointing data. New home sales plunged 11.4% in April to 569,000 units annualized. On a year ago basis sales are up just .5%. The median price slipped 3.2% to $306,200, month’s supply jumped to 5.7 a figure generally considered normal. On a regional basis sales fell sharply in the Midwest down 13.1% and the Northeast off 7.5%. Out West sales cratered dropping 26.3%. The Richmond Fed regional manufacturing index plunged 19 points in May to just 1 on a 26 point drop in new orders to zero, the average workweek slipped 11 points to -3. After the 2007-2009 financial crisis, all sorts of new rules and regulations were put in place to help insure that it didn’t happen again. One notable exclusion from this wave of regulation was car loans. Fast forward to the present and record levels of loans is starting to produce sharply rising default rates. We find out that one of the largest sub-prime auto lenders Santander USA only bothered to check 8% of its loan applicants in a billion Dollar ABS or Asset Backed Security it issued. The next largest lender did a lot better checking 64% of its loans but again a pathetically low figure. History may not repeat but in this case, it certainly rhymes. Now auto loans don’t pose anywhere near the systemic risk that mortgages did but it does show that once again the banksters just plain don’t care, it’s all about money and who or what gets hurt isn’t their problem. Why it is that the regulators allow this type of stuff to continue with what amounts to toothless enforcement and a lack of meaningful penalties is beyond me.