by Calculated Risk on 9/12/2011 11:22:00 PM

From the LA Times: Europe fears Greece is heading inexorably toward default

European politicians, who denied for months that bankruptcy was an option as Greece struggled to bring down an enormous budget deficit, are now beginning to acknowledge the possibility.

Nervous investors appear to increasingly believe default is just around the corner. They have withdrawn billions of dollars from Europe's stock markets over the last few weeks.
...
Banks in France and Germany scrambled to assure investors that they could survive their exposure to sovereign debt

And a discussion of the German views from Der Spiegel: Germany Plans for Possible Greek Default

The tougher talk is much more than show. The rest of Europe is losing patience with Athens. ...

The disappointment runs particularly deep in Berlin, where the government's crisis-management policy has clearly been going around in circles. In the beginning, the chancellor said that the Greeks ought to help themselves out of their own crisis. Then came the first and subsequently the second aid package. The new approach, the government said, was to rescue Greece so that the other debtor nations would be spared.

Now the Germans have come full circle, and the prevailing emotion is fear of a never-ending debacle in Athens. "Enough is enough," says one senior government official ... With a mixture of resignation and fatalism, Merkel and Schäuble are facing up to the inevitable and thinking the previously unthinkable: Greece is going bankrupt, and not even its withdrawal from the monetary union can be ruled out anymore.
...
The planning for the day of reckoning is already underway, in departments at the Finance Ministry in Berlin as well as in task forces at the EU in Brussels. German Finance Ministry officials hope that a Greek bankruptcy would be manageable, as long as European politicians keep their cool and the bailout funds are increased as planned.

by Calculated Risk on 9/12/2011 07:37:00 PM

Note: I checked the BEA data (table Table 2.4.5U. Personal Consumption Expenditures by Type of Product), and the BEA shows U.S. consumers spent $377 billion in 2008 on "Gasoline and other motor fuel", and are on pace to spend $393 billion this year. So the headline number might be too high - also, as a percent of GDP, gasoline expenditures will be lower this year than in 2008.

From Ronald White at the LA Times: U.S. motorists may spend a record $491 billion for gasoline this year

Fuel prices have been high this year because of expensive oil and increased exports of gasoline and diesel to other countries. Gasoline prices may decline for a few weeks after the switch to winter blends, which are less costly to produce than summer blends. But gas price woes won't go away, experts said.

"The 30 days between now and mid-October will be the most hospitable days in the country for dropping prices," said Tom Kloza, chief oil analyst for the Oil Price Information Service. "But then the drumbeats will start about fears of a second Arab Spring [of political unrest]. Demand outside of Europe and the U.S. continues to rise. By spring, Americans will be wrestling with $4 gasoline in a lot of markets."
...
Both the U.S. and California averages were well short of the all-time highs set in 2008 of $4.114 and $4.588, respectively. But overall, drivers have shelled out more for fuel this year than in 2008 because prices rose faster this time and have stayed high longer.

The 2008 average U.S. price was about $3.25 a gallon, said Kloza, who came up with the estimate of $491 billion in gasoline costs for 2011. This year, Kloza said, the average price is about $3.66 a gallon.

by Calculated Risk on 9/12/2011 04:16:00 PM

Europe was the focus again today with no U.S. economic releases. This will be a busy week for economic data, especially later in the week:
• Schedule for Week of Sept 11th


Click on graph for larger image in new window.

The first graph shows the S&P 500 since 1990 (this excludes dividends).

The dashed line is the closing price today. The S&P 500 was first at this level in July 1998; over 13 years ago.

The second graph (click on graph for larger image) from Doug Short shows the wild market swings over the last few weeks.

by Calculated Risk on 9/12/2011 12:00:00 PM

Back in early 2009, I wrote a couple of posts arguing there would be an increase in auto sales - Vehicle Sales (Jan 2009) and Looking for the Sun (Feb 2009). Here is an update to the U.S. fleet turnover graph.

This graph shows the total number of registered vehicles in the U.S. divided by the sales rate through August 2011 - and gives a turnover ratio for the U.S. fleet (this doesn't tell you the age or the composition of the fleet, registered vehicles estimated).

The wild swings in 2009 were due to the "cash for clunkers" program, and the increase in the ratio this summer was due to the supply chain issues related to the tsunami in Japan.

Click on graph for larger image in graph gallery.

The estimated ratio for August was just over 20 years - still very high, but well below the peak of 26 years.

The turnover ratio will probably decline to 15 or so eventually.

The second graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is current estimated sales rate.

The current sales rate is still near the bottom of the '90/'91 recession - when there were fewer registered drivers and a smaller population.

Light vehicle sales were at a 12.12 million seasonally adjusted annual rate (SAAR) in August. To bring the turnover ratio down to more normal levels, unit sales will have to rise to 14 or 15 million SAAR.

Of course cars are lasting longer - note the general uptrend in the first graph - so the turnover ratio probably will not decline to the previous level. Also this says nothing about the composition of the fleet (perhaps smaller cars). But I do expect vehicle sales to continue to increase over the next few years.

by Calculated Risk on 9/12/2011 08:42:00 AM

The Greek 2 year yield is at 64.3%. The Greek 1 year yield is at 112%. Ouch.

The Portuguese 2 year yield is up to 16.2% (after falling below 12% in August). Also the Irish 2 year yield is at 9.5%.

The European markets are down with the DAX off almost 4%, and the FTSE 100 off close to 3%.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year