Juggling Dynamite

Fine wine prices have tumbled back to the pandemic lows of 2020 due to falling consumption, globally.

Fine wine prices are decreasing sharply amid rising inventories and low demand for some of the most expensive wine #MacroEdge pic.twitter.com/qzuVSh3ixd

— MacroEdge (@MacroEdgeRes) September 3, 2024

Are consumers struggling financially or realizing that alcohol is toxic for their brains?

At the same time, slumping demand for luxury goods is causing Swiss watchmakers to seek state aid:

Swiss watchmakers are suffering from a sharp decline in demand, especially in China, following an unprecedented boom during the post-pandemic era when consumers rushed to buy pricey timepieces. After three straight years of record exports, wholesale watch exports have fallen by 2.4% in value in the first seven months of the year as consumers refrain from splashing out on expensive watches.

The drop in consumer demand has hit brands making slightly less expensive watches the hardest, while top-selling brands such as Rolex and Patek Philippe have been more resilient.

The slowdown has also affected Richemont, the group behind Vacheron Constantin and IWC, and Omega owner Swatch Group AG, which have both seen sales dive in China.

The earnings of art dealers are sporting similar trends, see Sotheby’s earnings plunge as art market catches a chill:

Sotheby’s has reported an 88 percent plunge in its core earnings and a 25 percent decline in auction sales, as a chill in the art market hits one of the industry’s most famous brokers.

The first-half figures at Sotheby’s main auction business reveal the extent of the financial pressure the group came under before it struck an investment deal with Abu Dhabi this month.

Weaker luxury spending in China is among the factors weighing on demand for fine art and affecting both Sotheby’s and historic rival Christie’s.

This morning, the US 2-year Treasury yield fell to 3.796%, the lowest level since May 2023. In the process, the US 2 and 10-year yield curve (below since 2019) turned briefly positive (short yield lower than long) after a record 796 days of inversion (2-year yielding more than the 10-year) since July 8, 2022.

The July 2024-Sept 2024 curve inversion is now the longest since 1927/29 and exceeds other record inversion periods that preceded the brutal 1973/74 and 2007/08 recessions and bear markets. It was when the curve finally un-inverted that all hell broke loose.

There are some important warnings here for those able and prepared to see. Sadly, most financial ‘experts’ are paid to look the other way and keep customers long-always the riskiest investment products.

Over the last year, more than 200 real estate developments in Canada became insolvent. Andrew Chang explains why, at a time of high demand for housing, a growing number of projects are falling through. Here is a direct video link.

One after another, consumer-driven sectors are warning of tumbling demand amid still inflated prices and the highest real interest rates in 17 years. Although mortgage rates have fallen year-to-date, auto and home sales have continued to slump, with buying conditions the worst in decades (U of Michigan Home buying conditions below since 2000, courtesy of The Daily Shot). Typically, people prioritize auto payments where possible. The spike in prime and subprime loans now 60 days delinquent is the worst since 2008 (below since 2006).

Dollar General shares fell 30% this week as the company joined a long line of retailers warning that consumers are in retreat. Sales of seasonal, home and apparel fell in the quarter, and although traffic rose, shoppers spent less per trip.

Companies are relying more on promotions and price cuts, hurting profits. As shown below since 1995, the outsized gap between elevated profit margins and plunging sales growth typically resolves with profit margins joining down to sales trends during recessions.

Meanwhile, the savings of households are the most risk-exposed in decades with record concentration in heinously over-valued equity funds and products. This is going to leave a mark for years to come.

Markets pricing in rate cuts for this year — DiMartino Booth and Charles Payne of FBN break it down. Here is a direct video link.

Happy Labour Day Weekend!!