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May 2015

What’s the Real Dedaline for Greece After Talks Failed on Sunday?

According to Bloomberg, a person familiar with the matter said that Greece’s hopes of sealing an accord with its creditors by the end of May dimmed on Sunday, as disagreements between the two sides on budget targets persisted.


The raid from Greece’s own reserve account at the IMF to make a recent payment to the fund suggests the Syriza-led government is running out of cash to pay its creditors and, in the absence of additional bailout funds, will be unable to make this payment its next payment to the IMF on June 5 for E312mln. However, this would not necessarily trigger an immediate default, but instead a grace period of one month according to an IMF document titled “Review of the Fund’s Strategy on Overdue Financial Obligations”. Below is a timetable of events:


***The IMF staff “immediately” send a cable urging the member to make the payment promptly; “this communication is followed up through the office of the concerned Executive Director. The member is not permitted any use of the Fund’s resources nor is any request for the use of Fund resources placed before the Executive Board until the arrears are cleared.”


***Two weeks: Management sends a communication to the Governor for the member stressing the seriousness of the failure to meet obligations and urging full and prompt settlement.


***One month: The Managing Director notifies the Executive Board that an obligation is overdue.


Therefore, it appears the real issues for Greece regarding default begins 1-month after non-payment when the IMF Managing Director notifies the Executive Board that an obligation is overdue and then the EFSF may also cancel as it “deems appropriate the whole or any part of the undisbursed amount.” According to the Master Financial Assistance Facility Agreement between the EFSF and the Hellenic Republic:


“In case the IMF cancels the IMF Arrangement, any other Financial Support Provider cancels in whole or in part any support facility entered into with, or in respect of, the Beneficiary Member State or EFSF cancels any of the facilities provided by EFSF…In this case the cancellation of a Facility shall be proportionate to (a) in the case of cancellation by the IMF, the proportion which the sum cancelled represents to the aggregate initial amount of such IMF Arrangement and (b) in the case of cancellation of any of the other facilities, the proportion which the cancelled amount represents to the aggregate of the initial amounts of this Agreement and each of the facilities provided by EFSF and each of the other Financial Support Providers.”


Note that several newspapers note that IMF policy allows Greece to bundle the four payments due in June and make them together at the end of the month, though the practice is rare. Nevertheless, IMF spokesman William Murray said that Greece hasn’t requested that bundling.

May US Auto Sales Should Rebound Significantly

Automakers will release May vehicle sales next Tuesday (June 2nd) and currently, analysts expect sales (Seasonally Adjusted at Annualized Rate) to rebound sharply from April. Because there was a full week of May after the Memorial Day weekend this year, shoppers had plenty of time to take advantage of the deals being widely communicated in dealer and automaker marketing messages.


Here are some forecasts from several specialists:


1/ Edmunds: Nearly 1.6 Million New Cars Sold in May Push Seasonally Adjusted Annual Rate (SAAR) to Impressive 17.4 Million, says, the premier destination for car shopping, forecasts that 1,591,221 new cars and trucks will be sold in the U.S. in May for an estimated Seasonally Adjusted Annual Rate (SAAR) of 17.4 million. The projected sales will be a 9.6 percent increase from April 2015, and a 0.9 percent decrease from May 2014.

“The industry continued on its upward trajectory, helped by the timing of Memorial Day,” stated Senior Analyst Jessica Caldwell. “Because there was a full week of May after the holiday weekend, shoppers had plenty of time to take advantage of the deals being widely communicated in dealer and automaker marketing messages.”


2/ JD Power-LMC Automotive: New-Vehicle Retail Sales SAAR in May to Hit 14.1M Units, Highest Level So Far in 2015


Total light-vehicle sales in May 2015 are projected to reach 1,591,100, a 3 percent increase on a selling day adjusted basis compared with May 2014.

The combination of strong sales and high transaction prices positions May to set a new record for the month for consumer spending on new vehicles at approximately $39.6 billion, according to the Power Information Network (PIN) from J.D. Power. It would become the third-highest level of new-vehicle consumer spending in a month following August 2014 ($40.3 billion) and July 2005 ($39.7 billion).


3/ Wards: Forecast: SAAR Could Reach 17.5 Million in May


A WardsAuto forecast calls for U.S. automakers to deliver 1.6 million light vehicles this month. The forecasted daily sales rate of 61,601 over 26 days represents a 3.9% improvement from like-2014 (27 days), while total volume for the month would be flat with year-ago. If deliveries meet or exceed WardsAuto’s forecast, May will be the 15th consecutive month to outpace prior-year comparisons.


4/ Kelley Blue Book: New-Car Sales to Reach 17.3 Million SAAR in May 2015


New-vehicle sales are expected to decline 1 percent year-over-year to a total of 1.59 million units in May 2015, resulting in an estimated 17.3 million seasonally adjusted annual rate (SAAR).

“May sales will reach the highest total year-to-date, and could remain the highest until December of this year,” said Alec Gutierrez, senior analyst for Kelley Blue Book. “While we expect an overall decline in volume versus last year, the difference is the result of one fewer sales day from May 2014, and total SAAR will reflect year-over-year improvement. May typically is a strong sales month, as consumers take advantage of warmer weather and advertised deals for the extended Memorial Day sales weekend.”


5/ TrueCar: TrueCar projects May retail auto sales to expand 2.4% following robust holiday weekend demand


“TrueCar, Inc. (NASDAQ: TRUE), the negotiation-free car buying and selling mobile marketplace, projects retail auto sales to consumers will rise 2.4% percent in May from a year ago, buoyed by strong Memorial Day weekend demand. Total volume may fall slightly on lower fleet deliveries, yet the retail uptick indicates sustained industry health.

New vehicle sales, including those to daily rental and commercial fleets, may dip 0.9 percent to 1,594,700 units this month from 1,608,693 a year ago. Deliveries may increase 2.9 percent on a daily selling rate (DSR) basis, adjusting for one less selling day compared to May 2014. Sales during the Memorial Day weekend, typically the peak buying period of the second quarter, were up 7 percent from a year ago, based on a TrueCar analysis. Automakers’ holiday promotions remain in effect through June 1, owing to an unusually early Memorial Day weekend this year.”