Economic, taxes, and tariffs discussion

[Bernie Brewer]

They did....and they said very specifically said tariffs have already cost them $1BN. As did GM.

At this point, you have to be willfully blind to see that tariffs are not playing a role in these layoffs, whether they announce them specifically or not. And it's clear they didn't specifically say "tariffs" because, as I posted, they wanted to avoid confrontation with the Confronter-in-Chief. Sorry.

You're not going to win this argument, Chance.

Slow your roll big fella. I am not agreeing or disagreeing. I just added that Ford did the same thing. I do think the rariffs are unwise.

[chancellor]

They did....and they said very specifically said tariffs have already cost them $1BN. As did GM.

At this point, you have to be willfully blind to see that tariffs are not playing a role in these layoffs, whether they announce them specifically or not. And it's clear they didn't specifically say "tariffs" because, as I posted, they wanted to avoid confrontation with the Confronter-in-Chief. Sorry Chance.

Since GM did not specifically say that tariffs were to blame, we can only see informed opinions as to if they played a factor:

Opinion 1
"It's hardly the whole story, but Trumpian tariffs were a factor in the GM decision that will leave some families, communities and unions in despair. By raising taxes on imports, Trump raised prices GM had to pay for steel and a wide variety of other products needed to manufacture cars.

The timing was especially bad. The public had lately grown less interested in buying some of those cars, the small ones. When costs go up and income goes down, something has to give."

https://journalstar.com/opinion/columnists/jay-ambrose-gm-layoffs-show-folly-of-tariffs/article_2b309f2a-4c9f-5629-a4b3-b0ef411ae29b.html

Opinion 2, from Fox Business News:
"General Motors announced on Monday it will be laying off 14,700 workers, closing five factories, and discontinuing several car models. This has caused some soul-searching in the midst of a boom economy. There are three main lessons for policymakers and the public.

One, GM is being too shy about the reasons for the layoffs. President Trump’s tariffs have already cost the company a billion dollars. GM is skirting the topic, possibly to avoid political blowback—a strategy that is already not working."

https://www.foxbusiness.com/markets/lessons-from-the-gm-layoffs-end-the-tariffs-and-the-subsidies

Opinion 3
"Though GM did not cite Trump’s tariffs in its announcement Monday, the president’s continued insistence that everything will be fine and that those affected just need to be patient was a theme of the backlash to the company’s plans to restructure. “I implore [sic] President Trump to keep his word when he came to the Mahoning Valley last year and promised jobs were ‘all coming back. They’re all coming back. Don’t move. Don’t sell your house,'” said Rep. Tim Ryan (D-OH) in response to the layoffs in Lordstown. Ryan added that Trump has “been asleep at the switch and owes this community an explanation.”

https://www.rollingstone.com/politics/politics-news/gm-layoffs-trump-tariffs-760003/

Opinion 4
"Although neither party is blaming tariffs, some free-market advocates have suggested that they likely had an impact.

“While officials with General Motors did not reference tariffs in their restructuring announcement, it cannot be far from their minds nor the company’s bottom line,” Michael LaFaive, senior director of fiscal policy at the Michigan-based, free-market Mackinac Center told Watchdog.org. “Indeed, in past work officials have referenced the cost of new tariffs on the firm and the possible negative impact on jobs in the U.S. and elsewhere.”

The company announced earlier this year that it lost $1 billion due to tariffs."

https://www.watchdog.org/michigan/gm-says-massive-layoffs-not-caused-by-tariffs-others-skeptical/article_02a46224-f2a0-11e8-9fc0-a3ea7074b9cb.html

Opinion 5
"In June, Barra warned that new tariffs could hurt business and lead to mass layoffs. In comments submitted to the Commerce Department, GM said that another round of tariffs would cost the company $1 billion and hurt car prices. On a Monday call, Barra did not blame tariffs directly but said they were one of the headwinds that drove the company to downsize and refocus on electric and autonomous vehicles."

https://www.newsweek.com/donald-trump-general-motors-tariffs-jobs-1232267

You're not going to win this argument, Chance.

I already have. None of these opinion pieces refute the raw data - GM is selling more vehicles, and by a notable margin, than last year. Despite the increases, cars are selling less, and light trucks and SUVs are selling a lot more. I’m no GM fan, but this is no more than a correction to an overbuilt market in sedans.

If tariffs were really affecting vehicle sales, you might have an argument. But they’re not. GM did the same thing about 20 years ago when they shut the Janesville plant ( and others) when the market swung away from SUVs.

[revo]

I already have. None of these opinion pieces refute the raw data - GM is selling more vehicles, and by a notable margin, than last year. Despite the increases, cars are selling less, and light trucks and SUVs are selling a lot more. I’m no GM fan, but this is no more than a correction to an overbuilt market in sedans.

If tariffs were really affecting vehicle sales, you might have an argument. But they’re not. GM did the same thing about 20 years ago when they shut the Janesville plant ( and others) when the market swung away from SUVs.

The data you provided was wrong. The WSJ article you posted was 8 months old my friend. GM sales are down 11% YoY.

[chancellor]

You’re wrong, and the data you provided was wrong. The WSJ article you posted was 8 months old my friend. GM sales are down almost 12% YoY.

Nope, you’re looking at Q3 only from ‘18 to ‘17. At the end of Q3, sales for the year in terms of numbers of vehicles was down slightly, but October results have already caught that up for a yearly net positive.

I attach GMs own data for reference: http://gmauthority.com/blog/2018/10/...ted-states-q3/

Again, to quote y’all financial guys, the trend is your friend. Car sales are significantly down, light trucks and SUVs up a lot. And they have been for a while.

Reading the chart, it becomes pretty obvious why GM is making this move. And it’s not tariffs.

Edit to add: and GM has a pretty cogent explanation why this Q3 is down compared to 2017 Q3, and it’s not tariffs.

[revo]

Nope, you’re looking at Q3 only from ‘18 to ‘17. At the end of Q3, sales for the year in terms of numbers of vehicles was down slightly, but October results have already caught that up for a yearly net positive.

I attach GMs own data for reference: http://gmauthority.com/blog/2018/10/...ted-states-q3/

Again, to quote y’all financial guys, the trend is your friend. Car sales are significantly down, light trucks and SUVs up a lot. And they have been for a while.

Reading the chart, it becomes pretty obvious why GM is making this move. And it’s not tariffs.

Edit to add: and GM has a pretty cogent explanation why this Q3 is down compared to 2017 Q3, and it’s not tariffs.

Where are you seeing October results? GM only reports by the quarter, not by the month.

According to the chart you provided, car sales for the entire year are down not only for Q3 YoY, but for YTD 2018 vs. YTD 2017.

Look, Ford provided the reasons why they eliminated lines -- and they were the same lines as well -- and if you want to believe a different story told by GM, which again was likely told to avoid the wrath of Trump, that's your prerogative. But cutting all these lines will now certainly result in a major decrease in the number of cars sold, and the average price is rising (which was another thing I correctly predicted many many moons ago).

Tariffs = loss of profit and/or higher prices passed to the consumer
Loss of Profit = lines being cut
Lines being cut = less cars sold
Less cars sold = jobs lost

It's common sense. I'll make another prediction -- if the Trade War continues, a few other car companies will also have "major restructurings" in the coming months.

[revo]

Whew -- Trump & Xi came to a truce and announced there will be no additional tariffs imposed after Jan 1.

Now that doesn't mean the existing tariffs will go away, but at least this is a start and the markets should stabilize.

[chancellor]

Where are you seeing October results? GM only reports by the quarter, not by the month.

According to the chart you provided, car sales for the entire year are down not only for Q3 YoY, but for YTD 2018 vs. YTD 2017.

Look, Ford provided the reasons why they eliminated lines -- and they were the same lines as well -- and if you want to believe a different story told by GM, which again was likely told to avoid the wrath of Trump, that's your prerogative. But cutting all these lines will now certainly result in a major decrease in the number of cars sold, and the average price is rising (which was another thing I correctly predicted many many moons ago).

Tariffs = loss of profit and/or higher prices passed to the consumer
Loss of Profit = lines being cut
Lines being cut = less cars sold
Less cars sold = jobs lost

It's common sense. I'll make another prediction -- if the Trade War continues, a few other car companies will also have "major restructurings" in the coming months.

My apologies on October, thought I’d embedded the link: https://media.chevrolet.com/media/us...%20Recent.html

And, no, there’s nothing in the data that says this is tariff related, or the truck and SUV growth wouldn’t be that great compared to last year.

Your point about profits may well be valid, but if sales were sound - as they are in the non-truck lines - there’s no way they’d be shutting the product lines.

[cardboardbox]

chancellor, thanks for the analysis. I dont have time/desire to post right now but still occasionally read and I look for your posts. And nots and BB's.

[chancellor]

CBB, thanks much. Though revo and I disagree about the scope of the impact, his stuff is good too in this thread.

[Bernie Brewer]

CBB, thanks much. Though revo and I disagree about the scope of the impact, his stuff is good too in this thread.

I agree. While I don’t always agree with the hyperbolic posts of many, an am guilty of the same, this is filled with good info.

[revo]

The yeld curve inverted today on the 3yr and 5yr T-Notes for the first time since 2007, and is usually a leading indicator of a recession. The 2yr & 10yr curve also flattened. It would have been worse if it was the 2yr & 10yr notes, but this still was not good news nonetheless.

[revo]

The market drops 600+ points on the inverted yield curve and the Keystone Kop-ish trade news: Trump boasts about one thing, China says (or doesn't say) another, Larry Kudlow gets the date wrong, the WH issues something else entirely.....no one knows what the F is going on there and oh, now there's a clock running.

[onejayhawk]

Here's the story. https://www.bloomberg.com/opinion/ar...ed-that-s-huge

While it is not good news, it is a long-term indicator. The first inversion before the 2007 recession was in 2005, 28 months ahead. It's also not infallible. The makeup of the Federal Reserve Board is always a factor and this Board is inflation wary. Still, it's a good reason to pay close attention to other indicators. The next 18 months look good, but after that things are cloudy.

J

[revo]

Here's the story. https://www.bloomberg.com/opinion/ar...ed-that-s-huge

While it is not good news, it is a long-term indicator. The first inversion before the 2007 recession was in 2005, 28 months ahead. It's also not infallible. The makeup of the Federal Reserve Board is always a factor and this Board is inflation wary. Still, it's a good reason to pay close attention to other indicators. The next 18 months look good, but after that things are cloudy.

J

The general rule of thumb is an inverted yield curve indicates a recession in about a year. No idea where you're getting 18 months from, or why you believe the next 18 months "look good."

[chancellor]

The general rule of thumb is an inverted yield curve indicates a recession in about a year. No idea where you're getting 18 months from, or why you believe the next 18 months "look good."

In fairness to OneJ, the author of the article holds to the belief that inverted yield curves are not as significant as in times past due to the high influx of money into the market. The author does acknowledge in a linked article:

The significance of the flattening depends on whom you ask. The survey responses were mixed regarding whether the yield curve remains a reliable recession indicator after years of monetary stimulus.

If you’re in the “yes” camp, that means positioning for a recession in coming years as higher rates choke off economic growth. For those who lean toward “no,” inversion doesn’t carry greater meaning beyond betting against short-dated Treasuries and favoring long bonds.

As for the next 18 months being good, the Congressional Budget Office estimates a 4.8% growth rate for 2019 and a 4.4% growth rate for 2020. Link: https://www.statista.com/statistics/...estic-product/

I've seen corporate earnings growth projections ranging from 1.8 to 3.9% for 2019, with the consensus being 2.7-3.3%. You may have more data on that than I do, but at least what I'm reading indicates there's still upside for earnings growth.

That's a couple of indicators that do merit that the next 18 months could certainly be good. Doesn't mean it will - you've posted some valid contrary data - but I don't think OneJ is wacked on this claim.