Raphael Stevens

Wholesale used vehicle prices reached their lowest level of the year in May, as sales fell amid high interest rates and inflated retail prices.
Cox Automotive reported Wednesday a 2.7% decline from April to May in its Manheim Used Vehicle Value Index, which tracks vehicles sold at its U.S. wholesale dealership auctions.
Used retail sales are estimated to have been down 11% year over year in May, Cox reports.

A sign reads ‘We Buy Used Cars!!’ at an auto dealership on February 15, 2023 in Glendale, California.
Mario Tama | Getty Images

DETROIT – Wholesale used vehicle prices reached their lowest level of the year in May, as sales fell amid high interest rates and inflated retail prices.
Cox Automotive reported Wednesday a 2.7% decline from April to May in its Manheim Used Vehicle Value Index to 224.5. It marks the second consecutive monthly decline and the index’s lowest level since 219.3 in December.

The index, which tracks vehicles sold at its U.S. wholesale dealership auctions, remains elevated from historical levels but is expected to continue to decline this year amid improving new vehicle inventory levels and high interest rates that appear to be scaring off consumers.
“Taking a longer view, May’s year-over-year decline accelerated from April and March; however, the rate of decline might slow over the next several months as we encounter the lower prices seen at auction from May through November last year,” said Chris Frey, Cox senior manager of economic and industry insights, in a release.
Used retail sales are estimated to have been down 11% year over year in May, Cox reports. The notable decline comes as many Americans, especially those with lower credit ratings, are being priced out of the market and repairing their vehicles instead of replacing them.
The declines in sales and wholesale prices signal the used vehicle market is weakening, according to Cox. That’s not good for U.S. auto dealers but a win for the Federal Reserve’s battle to taper inflation by ratcheting up interest rates.
Used vehicle prices have increasingly become a barometer for inflation since early last year when the Biden administration blamed the market for rising inflation rates.

Used vehicle prices have been elevated since the early days of the coronavirus pandemic, as the global health crisis combined with supply chain issues caused production of new vehicles to sporadically idle. That led to a low supply of new vehicles and record-high prices amid resilient demand. The costs and scarcity of inventory led consumers to the used vehicle market, boosting those prices as well.
Continued declines could help bring used vehicle pricing down for consumers, since retail prices traditionally follow changes in wholesale prices. However, that has not been the case thus far, as the average retail listing price for a used vehicle moved 0.8% higher over the last four weeks, Cox reports. More

The Screen Actors Guild and American Federation of Television and Radio Artists begin contract talks with the Alliance of Motion Picture and Television Producers on Wednesday.
Hollywood’s talent wants to create guardrails for the use of artificial intelligence in future television and film productions.
Hollywood is already contending with 11,500 writers refusing to work, which has led to dozens of production and writers room shutdowns.

People picket outside of FOX Studios on the first day of the Hollywood writers strike on May 2, 2023 in Los Angeles.
David Mcnew | Getty Images

Hollywood is gearing up for another labor fight, and once again worries about artificial intelligence are front and center.
The Alliance of Motion Picture and Television Producers has three weeks and two days starting Wednesday to seal a deal with the Screen Actors Guild and American Federation of Television and Radio Artists – or see swarms of picketers outside studio gates.

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Hollywood’s talent wants to create guardrails for the use of artificial intelligence in future television and film productions.
A recent series of viral deep fake trailers featuring the visages of Bill Murray, Scarlett Johansson, Tilda Swinton and Timothee Chalamet as Wes Anderson-style versions of Star Wars and Lord of the Rings characters only exacerbated worries that actors could be replaced in film and television shows without proper permissions or payment.
“Certain unauthorized AI uses may effectively devalue some of our members’ performances, but the concerns go far beyond that,” Duncan Crabtree-Ireland, national executive director and chief negotiator for SAG-AFTRA, told CNBC in an emailed statement.
“Our members have the right to know what projects they are working in, what dialogue they are saying, what cause their character is advocating for, what actions their body will be tasked with doing,” he said. “Our members are human beings, not puppets, and it is a violation to use AI technology to make them do or say something without their informed consent.”
Read more: A.I. poses a new threat to newsrooms, and they’re taking action

AI has been a major concern for all of Hollywood’s guilds, who see their jobs as especially vulnerable to this new technology. For its part, the AMPTP has said AI tech “raises hard, important creative and legal questions for everybody.”
The Directors Guild of America was able to secure a preliminary deal with producers over the weekend that would guarantee wage hikes starting at 5% the first year, an increase in residuals from streaming and a guarantee that artificial intelligence could not replace the duties performed by members. The DGA’s board unanimously approved the agreement, paving the way for members to vote on it.
Both the Writers Guild of America and SAG-AFTRA are seeking protections against AI use in their negotiations, in addition to increases in compensation for streamed content.
SAG-AFTRA has acknowledged that AI technology can have its benefits in the industry, but it wants to ensure that any use of AI to replicate an actor or create a new performance is done with the actor’s consent and payment. The guild has similar rules already in place when it comes to computer-generated image capture.
“Generative AI tools should be deployed to assist and augment human beings, rather than to replace them,” said Crabtree-Ireland. “Our members fundamentally want to ensure a human-centered approach to the implementation of AI in our industry, where the AI serves humans, not the other way around.”
Already, some performers, such as James Earl Jones, have agreed to have their voices cloned for use after their deaths. Jones, 92, famously voiced Darth Vader in the Star Wars franchise and sought to wind down from the role. Jones was compensated and the technology was used to bring Vader’s iconic voice to Disney+’s “Obi-Wan Kenobi.”
Actors have varying comfort levels with how AI is used, which is why SAG-AFTRA is looking to advocate for informed consent when it sits down with the AMPTP. Essentially, the guild wants to ensure that if and when an actor agrees to having their image or voice used for a specified project it is only used for that intended purpose and that actors are properly compensated.
The fear is that studios could try to cut costs and boost revenue by using AI to pump out new content by feeding it existing material, like how the Anderson parodies were created.

A brave new world of A.I. gods and monsters

Jaap Arriens | Nurphoto | Getty Images

Over the past year, generative AI has exploded in use and development — especially since the fall of 2022, when OpenAI released its AI chatbot, ChatGPT.
A few months and 100 million monthly active users later, the tool set records for the fastest-growing app in history. Overall, the sector’s growth has generated billions of dollars in deals. And the phenomenon didn’t stop at text-based generative AI: models for generating images and video went viral, too. Five weeks after OpenAI released image-generation model DALL-E 2, more than 3 million people reportedly used it to generate over 4 million images daily.
Comparable image-generation tools like Stable Diffusion and Midjourney quickly picked up steam, and tech giants like Meta, Google and Amazon – which has its own film studio – released AI models for generating video content.
“AI concerns are similar in certain ways to concerns about the ethical use of CGI, but are much more wide-ranging due to the immense flexibility available in the use of generative AI along with the modest technological requirements to achieve surprisingly believable results,” said SAG-AFTRA’s Crabtree-Ireland. “The combination of these elements make generative AI a much more capable and much more dangerous technological development, and one that merits our attention and our efforts.”
Hollywood’s concerns about AI aren’t going away anytime soon, either. On Monday, SAG-AFTRA members gave its negotiators the ability to authorize a strike should negotiations stall. If actors leave the bargaining table without a deal, 160,000 performers will walk off film and TV sets, leading to a massive shutdown of production.
The industry is already contending with 11,500 writers refusing to work, which has led to dozens of production and writers room shutdowns.
Already Netflix has postponed the production start of the fifth and final season of “Stranger Things,” Warner Bros. Discovery’s “Game of Thrones” prequel “A Knight of the Seven Kingdoms: The Hedge Knight” shuttered its writers room, and Disney and Marvel’s “Thunderbolts” and “Blade” have paused production.
Some productions have been able to continue in the wake of the writers strike, as scripts were already completed. However, if SAG-AFTRA strikes, those shows and films will immediately stop shooting – and the debate over AI in movies will rage on.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal is a member of the Alliance of Motion Picture and Television Producers. More

Millionaire Survey

Millionaire investors are adding to their mountains of cash, betting on higher interest rates and weak stock markets in 2023, according to the CNBC Millionaire Survey.
Millionaires are more bearish on the overall economy, however.
Inflation and higher interest rates are starting to affect the spending of the wealthy, although the changes are still small.

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Millionaire investors are adding to their mountains of cash, betting on higher interest rates and weak stock markets in 2023, according to the CNBC Millionaire Survey.
More than a third of millionaire investors, 34%, report keeping more of their money in cash, according to the survey, which surveys households with $1 million or more in investible assets. They now have 24% of their portfolio in cash, up substantially from the 14% they held in cash a year ago, according to the survey.

Of the survey respondents, 28% said they have purchased more fixed income, as they expect interest rates to remain high.
The results echo a recent survey by Capgemini that found global high-net-worth investors had a record 34% of their portfolios in cash or cash equivalents, such as money markets, CDs and other vehicles.
“These investors are moving from growth to value, to protecting their assets,” said Elias Ghanem, global head of Capgemini Research Institute for Financial Services. “Right now, it’s better to be safe than sorry.”
Wealthy investors are still cautious on the stock market, but not as bearish as they were at the start of the year. While 38% of millionaire investors say the S&P 500 will end the year down, a slightly larger portion, 40%, say the market will end the year higher.
That market sentiment has brightened substantially since last year, when 69% of survey respondents expected to end 2023 down and only 22% expected markets to end higher.

“They’re becoming more comfortable with the market volatility and the fact that markets keep going up despite all the reasons it should be going down,” said George Walper, president of Spectrem Group, which conducts the Millionaire Survey with CNBC. “A lot of people are just confused as opposed to predicting further declines.”
Millionaires are more bearish on the overall economy, however. A majority, at 60%, expect the economy to be “weaker” or “much weaker” at the end of 2023.
One reason for their caution: inflation. Millionaire investors are still betting inflation will persist for years, potentially keeping interest rates higher for longer. More than half of millionaires say inflation will not fall to the Federal Reserve’s 2% target for at least two years, with 11% saying it will last at least five years.
There are wide disparities by generation, since an inflationary stock market and economy are new phenomena for younger investors. Three-quarters of millennial millionaires say inflation will come down to 2% within two years, with one in four saying it will hit the 2% target within a year. That compares with 59% of older investors who say it will take longer than two years.
“They haven’t experienced rate increases and inflation like this,” Walper said.
Inflation and higher interest rates are starting to affect the spending of the wealthy, although the changes are still small. More than a third of millionaire investors have cut back on restaurant spending over the past six months due to inflation, according to the survey, and 18% have delayed the purchase of a car. More than one in four millionaire investors say they have given less to charity because of inflation, suggesting higher prices could also affect giving.
If inflation persists, a growing number of millionaires, 18% of respondents, say they will cancel a trip or vacation, according to the survey. They’re also borrowing less, with a third saying they plan to borrow less this year due to higher rates.
One bright spot for millionaires is bank deposits. Despite the turmoil in the regional banking system, with the failures of Silicon Valley Bank, First Republic and Signature Bank, more than two-thirds of millionaires say they are not concerned or are “neutral” about the safety of their deposits at banks. Only 7% said they were “very concerned.”
Just 6% of millionaires surveyed moved cash deposits out of a bank because of the SVB collapse. Yet, two-thirds of millionaires support Congress raising the limit on cash deposits as regulated by the Federal Deposit Insurance Corporation.
“They saw the government take action quickly, so they were not as worried,” Walper said.
CNBC’s Millionaire Survey was conducted online in April. A total of 764 respondents, with $1 million or more of investable assets, qualified for the survey. Respondents had to be the financial decision-maker or share jointly in financial decision-making within the household. The survey is conducted twice per year, in the spring and the fall. More

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.81% from 6.91%.
Applications for a mortgage to purchase a home fell 2% for the week and were 27% lower than a year ago.

A sign is posted in front of a home for sale on May 11, 2023 in San Francisco, California.
Justin Sullivan | Getty Images

Mortgage rates fell back from their recent highs, but demand dropped for the fourth straight week.
Total mortgage application volume declined 1.4% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.81% from 6.91%, with points falling to 0.66 from 0.83 (including the origination fee) for loans with a 20% down payment. That was still, however, the second-highest weekly average rate of 2023 to date.
Applications to refinance a home loan fell 1% for the week and were 42% lower than the same week a year ago. The refinance share of mortgage activity increased to 27.3% of total applications from 26.7% the previous week.
Applications for a mortgage to purchase a home slipped 2% for the week and were 27% lower than a year ago.
“Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” said Joel Kan, MBA’s deputy chief economist. “There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time home buyers in the market.”
Mortgage rates have not moved much this week, as there has been little economic data to push them in either direction. Next week’s monthly inflation report from the government will likely be the next major read on the economy to influence mortgage rates. More

A viral TikTok challenge started in 2021 and spurred a rise in thefts of Hyundai and Kia cars.
New York accused the two companies of enabling “this spiraling epidemic” of car thefts.
Shares of South Korea’s largest automakers fell on Wednesday.
Hyundai Motors slid by more than 2% while Kia Corp dropped by more than 5%.

Hyundai Motor Co. vehicles are displayed at the company’s Motorstudio showroom in Goyang, South Korea, on Thursday, Oct. 22, 2020.
Bloomberg | Bloomberg | Getty Images

South Korean automakers Hyundai and Kia are being sued for causing a “public nuisance,” according to a complaint filed in Manhattan federal court.
New York City is accusing the two firms of failing to install devices that prevent cars from being stolen, after a social media challenge prompted young teens to steal vehicles off the street by hot wiring them using a USB cable.

A viral TikTok challenge started in 2021 and spurred a rise in thefts of Hyundai and Kia cars. Chicago saw a jump of 800% year-on-year in the theft of these cars for the month of August 2022, officials told CNBC at the time. Los Angeles officials also saw an 85% jump compared with the year before.
“In electing profits over safety and deviating from industry norms by not including engine immobilizers as a standard safety feature, Defendants created and maintained a public nuisance,” the city said in the filing made in the U.S. District Court in the Southern District of New York.
New York accused the two companies of enabling “this spiraling epidemic” of car thefts.
“This case is a clear example of what happens to public safety when car manufacturers choose not to include standard anti-theft technology in their cars,” the filing said. “Making sure cars are not easy to steal protects both property and the public by keeping dangerous drivers in stolen vehicles off the roads,” it said.
In response, Hyundai said it made immobilizers standard on all vehicles from November 2021 and had taken measures to reduce the threat of thefts. It also said it is communicating with the National Highway Traffic Safety Administration to assist its customers.

Kia added that the company is working with law enforcement to combat “car theft and the role social media has played in encouraging it,” and that it is “committed to supporting our customers and to vehicle security.” 

Highlighting the companies’ “failure” to install an anti-theft device, the complaint accused them of having “opened the floodgates to vehicle theft, crime sprees, reckless driving, and public harm.”
Shares of South Korea’s largest automakers fell on Wednesday. Hyundai Motors slid by more than 2% while Kia Corp dropped by more than 5%.
Hyundai and Kia last month agreed to a $200 million consumer class-action lawsuit settlement, according to Reuters, which covered approximately 9 million car owners and included up to $145 million for out-of-pocket losses for customers.

‘Virtual explosion’ of thefts

New York City in its filing said that the thefts are still continuing, and that it is seeking “compensation for the economic losses,” without specifying an exact figure.
“In 2023, in comparison to past years, there has been a virtual explosion of thefts of Kias and Hyundais,” it said. Around 977 Hyundai and Kia vehicles were reported stolen in the first four months of the year, according to the filing.
“This represents a roughly 660% increase in thefts of Kia and Hyundai vehicles as compared to those same months in 2022, when there were only 148 such thefts,” it said.

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New York City joins a number of cities that took similar measures against the two automakers, including Baltimore, St. Louis, Milwaukee, San Diego and Seattle.
In a release, Baltimore Mayor Brandon M. Scott said in May: “These cost-cutting measures employed by Hyundai and Kia at the expense of public safety are unacceptable.” More