Podcast Summary
Consumer credit sees increase, but delinquencies rise due to interest rates: Consumer credit grew in November, but delinquencies are increasing, especially in credit card and auto debt, due to rising interest rates. Economists expect a moderate rise in delinquencies as the economy slows down.
The state of lending is a significant theme in this week's economic news. Consumer credit saw a 6% increase in November, largely due to a rise in credit card debt. However, there are signs that delinquency rates are increasing, particularly in the areas of auto and credit card debt. Economists attribute this to rising interest rates. Delinquencies usually rise when interest rates do, and lenders have been preparing for an uptick. Despite some concerns, factors such as low unemployment and cheap mortgages are keeping delinquencies in check. Economists predict that delinquencies will likely rise this year as the economy slows down but are not expecting a drastic increase. The major indices finished in the green despite a rough session for Boeing. Inflation is another concern, with uncertainty about where it will stand a year from now.
Consumers expect inflation to rise, leading to potential buying behavior shift: Consumers are feeling more optimistic about inflation, expecting a 3% increase in a year. This shift in sentiment could lead to earlier purchasing to avoid price hikes and ease inflationary pressures.
Despite the current 3.1% consumer price index, consumers are starting to feel more optimistic about inflation, with expectations for a 3% increase in a year, according to the New York Fed's survey. This shift in sentiment could lead to a self-fulfilling prophecy, as consumers may buy goods earlier to avoid higher prices in the future. Used vehicle prices, which have seen a significant decrease in the past year, have also played a role in this trend, with many of these vehicles reaching dealerships through wholesale auctions that have increasingly moved online. Overall, this shift in consumer expectations and behavior could help ease inflationary pressures, but it remains to be seen whether this optimism will continue.
The rise of online auctions in the used car industry: Online auctions allow dealers to access a larger market, save time and resources, but they also lack the physical presence and industry conversations of traditional auctions.
The used car industry has undergone significant changes due to the shift towards online auctions. This was highlighted in the discussion about Scott Palit's experiences at physical auctions and the transformation at Manheim Auctions during the pandemic. Palit's trips to various auctions allowed him to take advantage of regional price variations, but they also came with the risk of wasted days without making a purchase. With the rise of online auctions, dealers can now access a larger market and save time and resources. However, the physical presence and industry conversations at auctions are still valuable, even if they are now taking place virtually. For instance, dealers can still gain insights into market trends and consumer demand. Overall, the shift towards online auctions represents a major shift in the used car industry, offering both opportunities and challenges for dealers.
Digital marketplace for cars and oil prices: The digital marketplace makes finding car bargains harder due to price equality, while oil prices remain volatile and require constant monitoring for traders and investors.
The digital marketplace for buying cars has made it easier for consumers to access a wealth of information, leading to fewer regional price variations. However, this can make finding bargains in certain areas more challenging. Meanwhile, in the world of business and economics, keeping an eye on oil prices is crucial. While prices are expected to be lower than last year due to increased US oil production, events such as geopolitical conflicts or extreme weather can cause sudden price spikes. It's important for traders and investors to keep abreast of these developments and the perceived impact on the market. In summary, the ease of access to information in the digital marketplace and the volatile nature of oil prices are key takeaways to keep in mind.
Mixed Results for Financial Institutions and Challenges for Boeing: Some financial institutions reported minimal losses, but Boeing faced significant stock drops due to a malfunctioning plane. Homelessness increased by over 12% since 2022, with challenges in Houston despite success stories.
The economy is experiencing mixed results, with some financial institutions reporting minimal losses while others face significant challenges. JPMorgan Chase, Wells Fargo, and Citibank reported losses of 0.1%, 0%, and 0.6%, respectively. Meanwhile, investors are reacting negatively to the malfunction of a Boeing 737 Max 9 plane, causing Boeing and Spirit AeroSystems to experience significant stock drops. On a different note, the annual homelessness survey revealed a record-breaking increase of over 12% since 2022, with more than 650,000 people experiencing homelessness. Houston, which has been praised for its successful housing first approach, is facing challenges due to increasing affordability issues and the drying up of federal funding. Despite these challenges, stories like Derek Escobedo's, who found permanent housing through Houston's network of homelessness advocacy groups, highlight the importance of continued support and investment in addressing homelessness.
Housing affordability challenges for Houston's homeless population and essential workers: The cost of housing in Houston is rising faster than income growth, making it harder for homeless and essential workers to find and maintain affordable housing. Expired COVID-19 funds and unpredictable weather patterns add to the challenges.
The cost of housing is increasing faster than income growth in Houston, making it increasingly difficult for those experiencing homelessness to find and maintain affordable housing. The expiration of COVID-19 related funds and the resulting loss of incentives for landlords to hold aside units for this population is exacerbating the issue. Additionally, the rising cost of living is impacting the staff of homelessness programs, leading to high turnover and challenges in keeping up with the demand. Meanwhile, unpredictable weather patterns are affecting small ski resorts, making it difficult for them to operate and providing fewer affordable options for skiing. These challenges highlight the need for sustainable solutions to address housing affordability and economic instability for both homeless populations and essential workers.
Climate change impacts on ski industry: Unpredictable snow conditions and reliance on snowmaking: Climate change causes financial struggles for ski resorts due to unpredictable snow conditions, leading to investments in expensive snowmaking equipment to stay afloat, but this dependence on snowmaking raises skepticism among vacationers and negatively impacts related businesses in ski towns.
Climate change is significantly impacting the ski industry, leading to unpredictable snow conditions and a reliance on artificial snowmaking. This is causing financial struggles for ski resorts and the wider community, with some, like White Pine, considering investing in expensive snowmaking equipment to stay afloat. For instance, Alan Blackburn, the owner of White Pine, is considering this investment to open early and sell lift tickets, as the resort has been struggling with late openings due to unpredictable snow. Snowmaking isn't cheap, with the initial investment for one acre ranging from $60,000 to $500,000. The ski industry's dependence on snowmaking is a response to the effects of climate change, which is causing skepticism among potential vacationers, leading to a ripple effect of lost revenue for outdoor shops, restaurants, and hotels in ski towns. This is a significant challenge for the industry, and it highlights the broader issue of climate change and its impact on various sectors and communities.
