I would also throw in there the question of how much inventory in the form of used vehicles exists? This has been mentioned many times here before wrt to forward sales being cannibalized. (And as an existing homes analogy.)
Somehow I doubt a reliable data set exists for used cars though.
I can not think of a worse description for what a bank does than this from PNC
PNC Bank, N.A., and PNC Bank, Delaware, are members of The PNC Financial Services Group, Inc. ( http://www.pnc.com), which is one of the nation's largest diversified financial services organizations providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.
Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!) - CR
This calculation is more subtle than it may appear. If you look at the long term trend over 30-40 years the turn went from 10 years to 15 years at the same time vehicles per person was increasing as seen in the first chart. The other is VMT which is way off. Miles travelled is probably the single most important factor in keeping older vehicles on the road. Additionally I think it is clear that in 06-07 sales were brought forward stealing sales from 08-09. Here's what the BTS says: The median age of the automobile fleet in the United States increased, by 19 percent, from 7.5 years in 1994 to 8.9 years in 2004.
While 24 year fleet turns are indeed unsustainable in the very long term it isn't a useful predictor of new vehicle sales trends for the next several years.
this is real,
Re-read the first three paragraphs of that article; stop for a moment {sip some Beefeaters} and consider the definition of the terms "feudalism" and "lord".
Median age of cars in the US is 9.2 years in 2007. That would very roughly correspond to a average turnover around 1/18 years (I'm too lazy to do a mortality analysis). Every 15 years is probably optimistic and I think we could see rates similar to current rates for years if there were a general trend to accepting older cars.
I find it hard to believe that the driver/car ratio is similar to the 90's. There are so many cars around! Fair Economist | Homepage | 01.20.09 - 8:46 pm | #
Abolition of property in land and application of all rents of land to public purposes.
A heavy progressive or graduated income tax.
Abolition of all right of inheritance.
Confiscation of the property of all emigrants and rebels.
Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
Centralisation of the means of communication and transport in the hands of the State.
Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equal distribution of the population over the country.
Free education for all children in public schools. Abolition of childrenÂ’s factory labour in its present form. Combination of education with industrial production.
K.Marx
I remember seeing comparable data for Canada. When the US rate was 1.01, the Canadian rate was .7. In other words the rate could easily fall well below 1.0 as the third car is one of the easiest (and most cost effective) thing to ditch when cash is short.
Well, I suppose if you wanted a clear test of "how stupid the American consumer" is, a measure based on how many cars will be bought during a period of time when consumers are being deafened by every warning bell screaming "you have been swindled and are about to be really screwed"; the number of automobiles bought by Joe6pack would be a good test. Not that such a test is useful or proves chit....
I think the American consumer will need a different kind of test very quickly. Instead of asking are you ready to buy this shiny new thing, we need to develope tests asking "will you still trust us ?"
Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!) - CR
Doing a quickie discreet approximation and assuming a constant destruction rate, a 24 year turnover matches a median car age of 16 years, not 24. The average is still 24, but that's created by a few very long-surviving vehicles.
While 24 year fleet turns are indeed unsustainable in the very long term it isn't a useful predictor of new vehicle sales trends for the next several years.
Correct. If miles driven goes down, fleet age goes up.
Popeye writes:
I think the American consumer will need a different kind of test very quickly. Instead of asking are you ready to buy this shiny new thing, we need to develope tests asking "will you still trust us ?"
Oh..... that's why President Obama won the election - eh ?
In answer to your question from last thread, I'm working on some of the issues that you mentioned. I'll just make two points.
"Big Tent" is apropos- lots of competing interests
No one fully grasps the situation. It's easy to spot errors; it's harder to recognize successes; and it's suicidal to actually make recommendations that are more than just patches.
The most nebulous to me is the Registered Vehicles per Licensed Drivers.
Many changes have occurred over that span.
Age of licensed drivers - old and young less likely to have their own car
• Cars per household - With the one income family, 2 cars were not necessary to commute to work
• Urban vs Rural (vs Suburban) - Majority of growth happened in denser cities. At the extreme, most New Yorkers don't have cars.
• Corporate fleets - Have they increased or decreased as a % of registered vehicles. Rental car industry has gone from growth to contraction
• What are not registered vehicles - Scooters for one, but what about state and federal (eg military trucks)
• Has the % of unlicensed drivers changed - Illegal immigration as one example, cross border traffic as another
The most meaningful metric to me is taking taking the Labor Force, truck and auto sales, and from there solving for the implied lifetime of a vehicle.
Instead of using licensed drivers, it does a better job to consider changes like the 2 income household, the growth of elderly or young populations, the migration to urban centres, etc
With a labor force of 150 million (less than, but in normal econonmy mode), 12 million annual sales of trucks and autos would imply a vehicle lifetime of 12.5 years. [I will leave you to muddle through how many make it to 20 years old and how many are ruined prematurely in accidents]
Under this approach the drop to 10 million annual sales was foreseeable given the added negative impacts of financing and personal incomes.
Relying on the registered vehicles mostly overestimates the true vehicle fleet in my opinion, because over and above the factors I already mentioned which might imply it too small, it includes ones like collector cars, or the 4x4 that only goes out to tow the boat in the summer, or any of a laundry list of possibilities
Thoughts or criticisms are welcome, I will make sure to check for them later.
quick note as I have a dinner reservation:
I'm back, it is the real me. I've had the chance to read through some old CR posts. It's nice to know I was remembered by some.
More factors. Not only are cars lasting longer but TCO had been dropping until the last few years but are still lower than even a decade previous (inflation adj).
To speak of cars as "lasting longer" is to speak of an asset which has been the subject of TWENTY FIVE YEARS of engineering it to fail within a specific time, and then to say - oh my, it's lasting longer.
(Angry Saver)BTW, I penned a response to your "bout of inflation" thought on the last post. The inflation path seems straight forward, but is fraught with danger.
Yes, inflation has messy effects. It's pretty much an unadulterated good for fixed rate borrowers, but mostly bad for adjustable borrowers. (Changes are generally bad for the economy as a whole). Insofar as toxic debt is on fixed rates lending, it will "save" the toxic derivatives. I wasn't really recommending that though, so much as pointing out that even things that are pretty much worthless now could possibly be saved by certain macroeconomic choices in the future (even if those choices are overall bad.)
IMO the debts will have to be written down. If the government continues to refuse to allow bankruptcy/cramdowns/debt to equity/etc. for the financial system I think inflation will be inevitable regardless of whether it's a good thing or not.
RobDawg was doubting, but I called it perfectly, I told you we couldn't be anything but positive in the markets this week. Any questions... \t GiezCubed | 01.20.09 - 9:18 pm | #
Question; the week ends on a Tuesday now? P.S. Those Treasury auctions are getting real close.
At some point soon, someone will wake up and realize that Iceland is dying. They'll use airplanes first in order to get immediate aid there. mp | 01.20.09 - 9:13 pm | # ----- There were no Conjures or mps running around Iceland?
I recognize that Iceland is one of the places--sans the Sahara--that agriculture would be unreliable to say the least, but didn't at least some people up there think of hoarding beans & rice for the possibility that their little party would end. Also, what is keeping in the gov't in place? The rioters don't have enough organization to just overthrow the few PTB left on that island?
On a related note, what exactly is keeping the Icelandic police/security force loyal? Are they the few people getting paid in Euros or having food provided to them?
Relocating the entire population of Iceland would only backfill the last 20 years of population losses in Detroit City. Urban renewal, milder climate. Win-win.
RD, No, but if it's going to continue like this, here's to hoping it does. The market picked a significant day to make a stunning statement, I imagine the downturn was muted because of the upbeat tone of the day.
If we need cars, but we have a hard time getting credit - what kind of cars will we buy? Glorified skateboards? Electric Golf Carts with sides on them?
It amazes me that my primary car is a 20 year old Toyota Tercel (a glorified skateboard) and as near as I can tell it's more reliable than most cars that are more than 5 years old.
Still gets 37 mpg too.
I see a lot of people shifting to cheap small cars.
Evil Henry Paulson...you were much missed. Welcome back.
yagij,
Blood. Seriously. With 300k citizens, most are related to one another. Family histories are preserved in the national library...and many can trace their ancestry back a thousand years.
Urban vs Rural (vs Suburban) - Majority of growth happened in denser cities. At the extreme, most New Yorkers don't have cars. EvilHenryPaulson | 01.20.09 - 9:08 pm | #
Urbanizaton is VERY real as public transport and "smart" growth take hold. Develpers have recently discoverd that higher density, mixed use properties pay outstanding profits.
I understand why people who trade the market care about rallies and such. For me, it is like hearing the French or German HQ just announced the gain or loss of a 100 years at Verdun.
“The concern is that banks around the world are short of capital,” said Philip Schwartz, who directly manages $800 million of international equities at ING Investment Management in New York. “As we increasingly come to that realization, stocks are just getting hammered.”
The Nikkei declined 196.73, or 2.4 percent, to 7,869.06 as of 9:42 a.m. in Tokyo, set for the lowest close since Dec. 2. The broader Topix index fell 17.17, or 2.1 percent, to 787.86, with four stocks falling for each that rose.
The Nikkei lost a record 42 percent last year as global financial companies posted more than $1 trillion in writedowns and credit losses and the world’s biggest economies slipped into recession. Japan’s slump will be “very severe” and may last for three years, Hiroshi Yoshikawa, head of the government committee that charts the economic cycle, said in an interview this week. That would mark the country’s longest downturn in the postwar era.
I noticed a spike in the fleet turnover at the end of each recession...it was a surprising correlation in each case except for 2001/2 -- then I remembered the whole "Buy A Car, Show the Terr'ists" patriot marketing campaign...
Relocating the entire population of Iceland would... Rob Dawg | Homepage | 01.20.09 - 9:30 pm | # ----- In a really tacky, inhumane sort of question, would it be better to ship in food to Iceland or ship out Icelanders to the food?
One way seems like the "bailout" manner and the other seems more solution oriented. What do you do with a dying, isolated country? Eastern Island?
Jan. 20 (Bloomberg) -- Christopher Cox stepped down as U.S. Securities and Exchange Commission chairman, leaving behind a demoralized agency that failed to spot Bernard MadoffÂ’s alleged fraud and had its role diminished by the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc.
His resignation took effect at noon today in Washington...
Blood. Seriously. With 300k citizens, most are related to one another. Family histories are preserved in the national library...and many can trace their ancestry back a thousand years. fried | 01.20.09 - 9:34 pm | # ----- Once your "brother" rapes your "sister" and steals your home and savings, how deep is that "blood"?
Don't mean to be tongue-in-cheek, but what do you do when a select few sold you out? It isn't like there are any jobs to start a new life...
RD, No, but if it's going to continue like this, here's to hoping it does. The market picked a significant day to make a stunning statement, I imagine the downturn was muted because of the upbeat tone of the day.
I'm willing to see a rally late this week... GiezCubed | 01.20.09 - 9:33 pm | #
MGIC (MTG) was a $70 stock exactly 2 years ago. Today it fell 24% Mon-Tues to $2.13. Point being, the companies that are in trouble have already fallen so far they cannot do much more damage to the indicies. It'll take another shock different from financial company sector problems to start the next leg down. Remeber also ±300pts is the new ±30pts.
"Sales won't increase right away (look at the depressed sales during the early '80s), but this does suggest that auto sales are closer to the bottom than the top, and that auto sales will increase significantly in the future"
Obviously we are closer to the bottom than the top..we are down 42% and we are not headed to zero, HOWEVER, by saying sales will increas "significantly"...not likely, we could stay in the 10-13 million range for 2-4 years
My 22 yo truck didn't pass smog and needs a new engine. I was looking for a good 10 yo truck (Ranger, Toyota, etc) with 80K miles on it...they're damn hard to find. Everything I kept coming across had over 100,000 or a bad title (no way I'll touch a salvage title).
I ended up buying a new Toyota truck. I plan to drive the truck for the next 15 years.
If each of the G-7 members were a football player, the owner of the Washington Redskins would sign every single one of them. That way he could assemble the "All Pro" team. As usual it would be all pro for 1937
ItÂ’s a crucial point as 2009 unfolds and the old leadership framework loses more teeth, if thatÂ’s even possible. The G-7 -- Canada, France, Germany, Italy, Japan, the U.K. and the U.S. -- has been completely useless over the last two years as markets crashed and economies plunged.
CR: a year over year rate of change graph on the data from graph #2 with recession bars looks like it might be very interesting. Appears to dip durring recessions, but hard to tell how big the effect is, if it leads, lags or is coincident.
"MGIC (MTG) was a $70 stock exactly 2 years ago. Today it fell 24% Mon-Tues to $2.13. Point being, the companies that are in trouble have already fallen so far they cannot do much more damage to the indicies. It'll take another shock different from financial company sector problems to start the next leg down. Remeber also ±300pts is the new ±30pts.
Rob Dawg | Homepage | 01.20.09 - 9:40 pm | #
Ahh but consider this. Since the Dow is a price weighted average all C, AXP, JPM et al have to do is reverse split say 1 for 10 and their influence will once again be meaningful, at least in the context of the Dow. For a market cap weighted index like the S&P not a difference...
Rob - Fremont Savings (now belly up) is suing Crisp, et al (CPA, appraisers, brokers, etc..) for $4.3 millon plus legal fees, plus int, plus... crispy&cole | Homepage | 01.20.09 - 9:41 pm | #
plus... the name of the 18 year old high school student? [ducks]
It occurred to me that my grandkids will look at the UK and think of them as just another Greece. Only important for their past and tourism. Otherwise? Just another broke has been without good food - unless you like Indian.
My one owner 1990 Integra is now worth far more to me than anyone else (viz "The Market for Lemons"), but I still see it only lasting another three years or so.
I am at the stage where I'm torn between loving that it's depreciation free and still cheap to operate, and worrying that it won't die before these amazing car deals go away.
For those of you crapping on domestic car (and Fiat) reliability, remember that it is variable across models (some models are FAR more reliable than many Japanese models) and across time (quality really was Job 1 at Ford's for a while, until it wasn't, and appears to be improving again). Also, quality is a mountain which every global automaker has been climbing; any whose quality hadn't improved since the 1980s would have been out of business long ago.
That said, I find it bizarre that there are consumers out there so ill-informed that they'll buy the models which have proven unreliable and expensive to own for years.
there is a flaw in the reasoning that sales must increase soon.
Although on average cars cannot last 24 years, almost every car on the road can last 2 more years and the majority can last 5+ more years.
With the background of belt-tightening, less discretionary travel, "staycations" and unemployment it is not inconceivable that sales can continue to remain depressed for as many years as it takes the larger economy to recover.
Such a lower than average replacement rate does little to increase the average age of the US fleet if it lasts for even three years, let alone just one year. The peaked graph can rise higher, and/or go sideways, without anything remarkable happening to the US fleet other than fewer 2009 thru 2011 models on the roads.
@RobDawg- Dead on that most companies can no longer do too much damage to the indices. I commented on the financials in the Dow already. Combined, they are barely 1/2 of the weight contribution of IBM.
Thursday is when things could get really dicey as a whole slew of financials report earnings: BK, BBT, COF, FITB, MTB, PBCT, STI & SNV.
Don't oversell Iceland. They can feed themselves, just not in the style to which they've become accustomed. They'll have to eat fish, mutton, and yogurt and skip the fruit and Cheerios. They also have lots of geothermal energy and high population density in inhabited area so they can ditch the SUVs for electric busses.
The current brouhaha is mostly over the IMF proposal to "lend" Iceland about 6 billion Euro (to give to foreign depositors), which is about 28,000 per Icelander - a whopping debt. That's equivalent to about 8 trillion (with a "t") for the US. Given that the debt will be almost completely foreign, Iceland could never repay it (those ratios make Argentina look good) and thus all the pot-banging by people who don't want to be reduced to a 3rd world standard of living.
Sales won't increase right away (look at the depressed sales during the early '80s), but this does suggest that auto sales are closer to the bottom than the top, and that auto sales will increase significantly in the future.
-CR
Yes it does. Good work. What this implies is that propping up our auto industry is well worth it. Let it collapse and take out a huge hunk of the economy, drag us down, and give all of our foreign competition the spoils... DUH.
It occurred to me that my grandkids will look at the UK and think of them as just another Greece. Only important for their past and tourism.
That's nothing new, that has been happening within U.S. boundaries for decades. Does anyone think Massachusetts is important? It used to be very important - in manufacturing, trade, politics. All of New York State (not just the city) used to be considered extremely important - industrially, politically and culturally; New York State was the BMOC of the north for most of the 19th century and much of the 20th.
People only think of New England as a quaint tourist or second-home destination these days, but it used to be the pulse and compass of the nation.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
If no cars are sold in 2009 the turnover rate would be infinite. But the average age would advance by only one year.
What this means is that we can easily stay at a low level of sales by keeping and repairing our cars. At least for a while.
Neel Kashkari, the official who administers the Troubled Asset Relief Program, wrote to Citigroup Inc., Bank of America Corp. and 18 others on Jan. 16 seeking figures on business and consumer loans. Treasury also wanted details on purchases of mortgage-backed and asset-backed securities, according to documents obtained by Bloomberg News. Kashkari will stay for a few months after President-elect Barack Obama is sworn in today.
ObamaÂ’s aides criticize outgoing Treasury Secretary Henry PaulsonÂ’s approach to rescues as lacking transparency and not doing enough to get credit flowing though the economy. While Paulson has defended the cash injections as having averted a collapse of the financial system, Obama had to pledge changes before lawmakers approved the release of the second $350 billion.
“Banks are becoming the whipping boy for the Treasury’s failed policies,” said Joseph Mason, a Louisiana State University professor in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency. “They’re going to continue to face this pressure.”
By requesting monthly status reports, Treasury officials aim to dampen such criticism. The department also plans a quarterly comparison of banks that received rescue money with banks that didnÂ’t, as report data becomes available. In the meantime, the monthly statements will track the activity of the banks receiving the most aid.
“The purpose of this snapshot is to provide insight” into how banks are behaving after receiving rescue funds, the Treasury said in its letter to the banks.
Obama’s team has asked some of Paulson’s staff to stay on for the first few months of the administration. One of those officials, Kashkari, said last week that markets and the economy are mired “at a point of low confidence” that’s slowing the flow of credit.
Confidence
“As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans,” he said in a Jan. 13 speech. “As confidence returns, Treasury expects to see more credit extended.”
yeah, it's a sign of how history is speeding up, that you could date California's peak to a single date maybe...
Massachusetts started to decline after the Civil War (but slowly) and New York State started to decline after WW2, or even before (again slowly, but faster). Maybe California's equivalent is the end of the Cold War.
Rob was that he day Arnold took over? Tim & the Tax Man | 01.20.09 - 10:13 pm | #
Yes but the "jump the shark moment" isn't specifically tied to him but that we successfully recalled a governor and proceeded to elect someone no better. Sadly, we had an opportunity to elect a candidate that campaigned on a platform of tough love and bitter fiscal medicine; McClintock.
Massachusetts started to decline after the Civil War (but slowly) and New York State started to decline after WW2, or even before (again slowly, but faster). Maybe California's equivalent is the end of the Cold War. mal | 01.20.09 - 10:14 pm | #
Nice to have you back, EHP. Always enjoyed reading your posts.
A question that is only tangentially on-topic: can anyone point me to a reference regarding the economics of vehicle replacement vs. maintaining an existing aging vehicle? i.e. when, if ever, does it become more economical to replace a vehicle vs. just replacing the parts as they wear out? Intuitively, I would think almost never - as there are only so many major components that can wear out (transmission, engine, etc). Many other parts are consumable (clutch, brakes, etc) which require replacement at roughly the same rate on either an old vehicle or a new one.
I would argue that vehicle replacement only makes sense when (1) when safety features on newer vehicles make the older one undesirable/risky, (2) parts and/or expertise on repair of the vehicle start to disappear, (3) reliability requirements change (e.g. no longer just driving around town, need new-car reliability for cross-country trips, or (4) vehicle size requirements change (e.g. growing family).
Otherwise, IMHO vehicle replacement is generally falls into the "I want it" category, as opposed to the most thrifty choice. Of course, a young coworker who just replaced his '95 Accord w/ a BMW disagrees.
Late to thread, but wanted to comment (in case others hadn't) that there's a significant possibility of a reduction in the number of licensed drivers, or at least of the licensed drivers who own a car. The high fuel prices last year seem to have kicked a number of people over into "green" mode. If that sticks, then mass transit, bicycles, and other forms of transportation (besides the privately owned vehicle) will cut into the pool of auto customers for some time...
Yes, the use of cargo planes would show poor planning, and that's the point.
There isn't any.
At some point soon, someone will wake up and realize that Iceland is dying. They'll use airplanes first in order to get immediate aid there.
Actually, I believe the use of cargo planes is a calculated move. Iceland is of great military significance, partially for its use as a harbor, but mostly due to its use as an airport. Airlifting the food in, even if it isn't the best way to do it, brings the point home; "If we weren't in an air treaty with the US..."
Dead on that most companies can no longer do too much damage to the indices. Mr. Sparkle | Homepage | 01.20.09 - 10:04 pm | #
Unless thier default/collapse would damage the broader economy. It is a good thing we used that TARP money to provide sustainable alternative to those potential faillures....
Sadly, we had an opportunity to elect a candidate that campaigned on a platform of tough love and bitter fiscal medicine; McClintock.
Rob Dawg | Homepage | 01.20.09 - 10:18 pm | #
Yeah, but he is not sufficiently versed in the power of crystals, or telepathic dolphin communication, to be realistically considered for governor of California.
Can't wait to see what's in their wallet. Mike in Long Island | 01.20.09 - 10:05 pm | #
Makes me think of that MAD magazine cartoonist that whenever he wanted to show that some one was poor would show them opening thier wallet and a moth flying out.
Ztexas, when the cost of a repair exceeds the value of the vehicle, you dump it. I.E. you need a new transmission or engine.
If you love the car, buy another one and use the dead one as a parts bin for the new (probably old actually) one.
If you really really love that model, buy other people's basket cases, pull all the good bit bits, and scrap them. If done properly you get the parts and cash for the wreck. Much easier on the available garage space when dealing with motorcycles though.
At this point, I'd like to recommend for your reading list, "Collapse," by Jared Diamond. Interesting chapter on ancient Greenland, and its collapse. Not a lot of currency issues involved, but worth reading. Also, great chapter on Easter Island, and one titled, "Why do some societies make disasterous decisions?" Bedtime reading. Set your Conjure clock.
In a move that surprised Beltway insiders, President Obama announced this evening the appointment of Sister Ominous from Our Lady of Perpetual Unhappiness as the new 'bad bank' Czar. 'It has come to the attention of my administration,' the newly elected president stated, 'that any bad bank that we may create might lack the appropriate sense of its own mistakes, its own badness. Through the efforts of Sister Ominous, this nation can rest assured that the bad bank will truly, deeply understand just how bad it is.'"
Comrade Yossarian: Diamond's "Collapse" is unfortunately not his best work. (His "Guns, Germs and Steel" however is rather brilliant; I think it is the seminal modern work on the development of civiliations...)
Joseph Tainter's "The Collapse of Complex Societies" is really more worth your while; he produces a much more comprehensive theory of collapse which encompasses Diamond's theories and goes much farther.
CR, your conclusions have a fundamental assumption that the USA continues to maintain its standard of living.
I reckon that the standard of living is going to decline ( and we should be educating the nextgen to lower their sights(materialwise)) - some of the characteristics of a lower standard of living are exactly the ratios you've discussed:
vehicles/licensed drivers ratio will drop from 1.1; for reference the UK ratio is 0.79 - about where the US was in 1960 - will the US return to a 1960 standard of living ? perhaps.
people hold on to their vehicles longer and longer and when it falls apart don't replace it - altering the vehicles/licensed driver ratio.
From that perspective, sales won't rise to anything like the level you envision.
At this point, I'd like to recommend for your reading list, "Collapse," by Jared Diamond. Interesting chapter on ancient Greenland, and its collapse. Not a lot of currency issues involved, but worth reading. Also, great chapter on Easter Island, and one titled, "Why do some societies make disasterous decisions?" Bedtime reading. Set your Conjure clock.
Re: Collapse and Iceland/Greenland. The main factoid I remember from the book is how the colonists from Iceland who went to Greenland (and who lived there for about 500 years) did not eat fish. Diamond's theory was that there was some sort of taboo that forbid fish eating and that was a big problem once Greenland could no longer support cattle farming. (The colony died out).
I wonder what our big taboo is and what we should be doing now that we won't even consider.
vehicles/licensed drivers ratio will drop from 1.1; for reference the UK ratio is 0.79 - about where the US was in 1960 - will the US return to a 1960 standard of living ? perhaps.
For the standard of living (in this limited sense) to equal 1960's with its level of car ownership, household size and population density would have to regress, too. Smaller households living farther from downtown (or, ahem, anywhere) with the same car/driver ratio implies a lower standard of living -- think waiting forever for a bus, hitchhiking, Shank's mare.
What will the US automotive industry look like in five years. Well Chrysler will be a sales arm of Fiat; GM and Ford will have vanished; Toyota and Honda will be still building some cars and probably most imports will come from China or India and they might be starting to set up factories here.
What is this "profitability" you speak of in mixed-use projects?
As an assembler/option holder prior to LDP, maybe. However, without brownfield monies and/or other state/muni- sponsored "guarantees", these deals are hard to translate from excel-world to real-world profit unless the capital structure is inverted from status quo.
Planners (public and private)- love'em. Bankers- gettin' nervous. Developers- along for the ride.
Consumers/end users- "this ain't like the brouchure"
The profit was stripped out prior to groundbreaking (per usual).
I can feel Rob's ire building...
Note: I'm not anti mixed use. Every town is an organic mixed use project.
I'd just prefer that we let Nature take it's course and design mixed use projects in an incremental (sustainable) way rather than trying to cram a density and design in 5 years that Glod would have preferred happen over 50.
I'd just prefer that we let Nature take it's course and design mixed use projects in an incremental (sustainable) way rather than trying to cram a density and design in 5 years that Glod would have preferred happen over 50. hong konger | 01.20.09 - 10:56 pm | #
THe Domain and whatever they turned the Airport into have been considered fairly successful mixed use areas in Austin, TX but Eason mall in Columbus OH was my fist exposure to the phenomena and has held it's value very well over many years.
blackhalo-
Like I said, w/o state-muni (or FED) help, these deals really don't work.
The govy guarantees and kickbacks help to smooth out the losses on uneven absorptions and give the banks some breathing room.
In any case, outside of posi spin in the trades and biz press, these projects are very hard to make work in any traditional development (accounting) sense.
I would characterize the problem in a similar light as that which plagues the FED: too many competing mandates.
I heard from a president of a large interstate trucking company that during previous recessions companies just parked trucks, but this time they were selling them overseas. (trucking is a leading indicator - the industry's been down for 2+ years.) He expected semi fleet size to contract significantly, overcorrecting for excess capacity in the last five years.
What event today do you think caused the clock to strike midnight? Basel Too | 01.20.09 - 10:51 pm | #
I'm not qualified to venture a guess. I suppose Fiat making a move on Chrystler, followed by a renewed crash of financial sector equities combined with what now appears to be the inevitable nationalization of UK banks and what appears to be a move to do the same in the US... oh, and layoffs, layoffs, layoffs... made it feel a lot like capitulation time to me.
Note: I'm not anti mixed use. Every town is an organic mixed use project. hong konger | 01.20.09 - 10:56 pm | #
Not so much "ire" as frustration. I'm not anti-mixed use either and excellent point about towns. My beef is the sales job. Mixed use just cannot perform as advertised. Give an honest description an let the public judge. Ain't gonna happen so I'm gonna keep filling in the parts they don't tell you. It's a hobby.
I've been pushing for a gas tax adjustment for a long time. We are about 6¢ short of sustainable best practices, 9¢ behind catch up funding for poor management, 11¢ short of taking care of our roads and providing enough juice to get the cities and transit advocates to shut the hell up. I'd prefer 2/3rds stay with the State but this is the new age of the shining symbol.
Fair Economist writes:
Don't oversell Iceland. They can feed themselves, just not in the style to which they've become accustomed. They'll have to eat fish, mutton, and yogurt and skip the fruit and Cheerios. They also have lots of geothermal energy and high population density in inhabited area so they can ditch the SUVs for electric busses.
Their geothermals are great for all of their greenhouses so Icelanders will continue to eat healthy. Fish is brain food, though it didn't help them recognize their impending financial doom. Maybe it was mercury.
Also, welcome back EHP! We've missed your commentary.
Interesting data. But we do not want an increase of auto sales, do we? This data elaboration is based on the assumption that there is no change in the buyers attitude.
Read A NEW CAR? NO, THANKS!
Post the source of your data on your graphs!!!!!!!!
If it is raw data obtained from another source, you need to post the source. If it is information calculated from raw data from another source, you need to post the source.
I keep hearing that Ford will fail. But I must be missing something. They did not need a bail out. Their new models -especially the new fusion which looks better and has better gas mileage then it's competitors. (reliability on the old fusion has been good). Same story with the new Taurus. I think Ford is being sold short and Ford will be just fine. If you look at Ford in Europe it's a respected brand. In fact they are bringing over the Ford Fiesta to America.
"This graph shows the total number of registered vehicles in the U.S. divided by the sales rate"
Wait a minute, CR, if the fleet age is relatively young (due to extreme turnover due to the past easy financing, people buying a new car every 2 years, etc.), it could be some time (several years) before the 15 million a year number is "needed" in order to replace aging vehicles.
Also, I would guess that some of the "fleet" are second and third cars that are great to have during a boom, but not necessarily needed (or even wanted) during a bust.
In other words, it still may be quite some time (years?) before sales hit 15M again. No one really knows.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
If no cars are sold in 2009 the turnover rate would be infinite. But the average age would advance by only one year.
What this means is that we can easily stay at a low level of sales by keeping and repairing our cars. At least for a while. Zephyr | Homepage | 01.20.09 - 10:07 pm | #
Zephyr wins the prize...
Couple with this:
Ztexas, when the cost of a repair exceeds the value of the vehicle, you dump it. I.E. you need a new transmission or engine. \t EEngineer | \t \t \t \t01.20.09 - 10:34 pm | #
Not 100% true in a RECESSION... but generally true in a healthy economy. In a recession the question becomes 'What can I afford TODAY?'... If you don't have a lot of cash, a very old & near worthless vehicle and a breakdown occurs... the question is which [fix or buy] will take the least amount of cash today? Which ever one is lowest [buy or fix] will be the one most people will do even if fixing may cost more than what the vehicle fixed could sell for... the person isn't trying to maximize their asset values, they are trying to minimize the cost or immediate ownership. If we find ourselves in a long drawn out recession - that will be the 'new calculus'.
That is why low interest rates & easy credit terms are so critical to automakers... the only way buying a car is 'less expensive' from an immediate cash out of pocket perspective is if we have zero down, zero rate financing & 'zero income verification'... otherwise it is almost always less expensive to fix even if th efixed vehicle is 'worthless'.
I don'tagree with this assessment. It doesn't pass the sniff test. What I mean is yeah, you can probably conclude what you did from the charts but......it doesn't really make sense. just MHO.
I find it interesting that we have omitted car sharing from this discussion. From my intercity location (Chicago), I see a brisk business in Igo and Zip car rentals which rent cars by the hour. Also, public transportation is free for seniors. If this "free ride" lasts, car ownership will continue to decline for urban residents here.
I'm headed to a VW dealer today to buy my wife a Diesel Jetta wagon.
My own '02 diesel Jetta sedan has 125,000 miles on it and I have had only minor problems with it.
I do wish Ford or GM had someone with enough brains to have introduced a diesel that was worth buying, in a car profile, but I must go for what is available with a price I can handle in a cash-buy transaction.
1.2 vehicles per licensed driver.....is a bit misleading. The bottom 75% of this country probably has a much lower ratio....and the top 1/4 has a much higher ratio.
My parents (top 1/4) up till last year had four cars for the two of them and they still have 3.
As the "middle" and "upper middle" class gets demolished economically those ratios will drop signifigantly IMO and the ratio should move closer to the ratio that exists currently towards the lower income quintiles.
Also as the country ages demographically that ratio should drop. My grandparents had one car and now they have zero as they are in a assisted living home.
And financing rates have no where to go but up over the next half a decade and beyond which will make new cars that much more expensive.
If you are concerned about green being the future I don't see it for a long time. Lots of new gas power and mileage coming especially in GM and Ford. Long term Gas diesels under development from GM and MBZ. I am impressed with this design idea. On the short term look for smaller engines with Direct cylinder fuel injection, Electrically driven turbo chargers, They will every bit of the same power output with better gas mileage. If the Big3 can get the legacy's cost off their back and the funds can go back to R&D and final price competitiveness they will be excellent.
Cars are a declining asset in value but an increase in low cost transportation but as the more miles produced the cost per mile goes down. New car sales are generally emotional for many. My view is no matter what a car is worth it is more about how much to operate for value. New car payment of $400 mo needs to overcome repairs of $4800 a year to consider replacement. New car drops 20% the minute you drive it off the lot, tax and insurance increases need to be considered. Who cares how many cars a family has you can only drive one at a time.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
Well theoreticaly it CAN, but it's unlikely. If people torch their new cars for the insurance and continue to drive the old junker that they hadn't gotten rid of.... I'm sure that there will be isolated cases like this, but it's not likely to be statistically significant.
CR's chart shows that unlike housing, there hasn't been a spike in the actual supply. The growth in vehicles per driver has been slow and steady. So cars will gradually get older, but net ditching of vehicles is not likely to be significant.
CR, I totally agree with your point here. The thing I keep noticing here in San Diego is that the 'fleet' is quite new. SO many of us used HELOC $ to either pay off or buy new car/suv/truck. But most of these models are not built or designed to last longer than 5-7 years without major work. There is a tradition here of keeping old clunkers running, but only among the poor. Most Californians want - and need - new cars. Sales will have to pick up unless we're all going to breaking down everywhere. The question then is, what do we buy? I am not alone in holding out for a plug-in electric.
CR, you wrote: Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!), and the ratio will probably decline over the next few years. This could happen with vehicles being removed from the fleet, but more likely because of a sales increase.
You mention that the ratio can decline through a removal of existing vehicles as well as an increase of sales. You then make a case why sales are expected to increase. I would, however, pause a little longer and reflect more about the possibility of larger effect caused by removals of vehicles.
This would come in several ways: 1) a marginal car owner sees the final break down of his single old car and decides not to replace it - voluntarily or involuntarily; 2) the same car owner replaces the broken car with another used car, a car that is sold to him by a household that had three cars and no will go on with just two.
The second scenario (including variations) appears to me much more likely and potentially extensive in its scope.
If we take into account fully the meltdown of suburbia in the outer fringes of exurbia (Riverside in Los Angeles, Stafford County & Prince Willams County near Washington, DC), will see a significant number of housefolds that can be expected to reduce their cars.
If the prediction is true, that American settlement is moving away from outer Suburbia to inner Suburbia and particularly into downtowns and small towns and middle towns, there will much less households with more cars than adults and also - explosively - more housefolds with just one car.
Reductions of cars per households due to future settlement patterns - and also due to distressed finances for marginal car buyers (two very distinct groups) and hence reduction of overall cars (non-replacements of cars in current multi-car households) could be underestimated.
That would mean the ratio of 1.2 is a testament of the finale of exurbia of 2003-2007.
Since CR is always early in sensing these things, like Doppler Radar, maybe we should all invest in car companies, as there may be a 40% increase in sales. Thanks CR, by the way, crysler or AMC as your top pick?
But this doesn't include the Honda factor. I drive my Honda's 200,000+ miles (if I don't wreck them first). I would never do that with a Big Three. My family's safety means too much to me.
spiderman
Well done, well done Popeye
I guess I shouldn't have tried to show off.
I thought it was very gentlemanly and sporting Nemo.
It was a matter of luck, I assure you.
My pappy always says, "Better to be lucky than good."
if this thesis is true, buy Toyota shares sometime later this year.
Thanks CR for that info.
Re: 24 years
Good point; I myself plan to replace my '97 Civic sometime within the next 10 years or so.
"This graph shows the total number of registered vehicles in the U.S. divided by the sales rate"
You could do a similar graph for TV sets. If people return to sharing, sales could die for years and years.
Do not forget houseplants. Ours are older than my interns at work.
My pappy always said, "Luck does not fall out of the first line of catchers mitts very often."
The only problem with his conclusion is you need money to buy cars, especially new cars. Got burros?
23.9 years? Wow! We may catch up with Cuba.
I would also throw in there the question of how much inventory in the form of used vehicles exists? This has been mentioned many times here before wrt to forward sales being cannibalized. (And as an existing homes analogy.)
Somehow I doubt a reliable data set exists for used cars though.
We're actually looking for a truck sometime this year. Used, of course, either a small Toyota, or a Ranger.
The '91 4-runner is getting creaky. We're in no hurry though, and I'm hoping to wait for budget (and layoff) announcements before writing any checks.
So my household will be helping in a microscopic way...
"but this does suggest that auto sales are closer to the bottom than the top,"
But how much does that matter in an "L" economy?
By then we will all be riding the magic trains that are going to be built.
To bad only Ford will be the only US maker left.
Nemo writes:
Good point; I myself plan to replace my '97 Civic sometime within the next 10 years or so.
A '91 Miata with another 5-10 years to (nimbly) cruise the quiet country roads at midnight (top down) under a canopy of stars...
Bottom! All in on gm and ford. I'll just use a cc advance to fund it. What could go wrong?
You have no vision Nova. Flying cars and we'll go home to robot butlers cooking/cleaning.
Plus gas powered autos will be so 20th century.
OT - but I figure this will get lost on the other thread.
nova writes:
this is real, folks
I thought that was SunTrust
Bad Request 7D
Suppose to happen this year?
The other sell was a 5% money market account. Better return then I was getting in my IRA.
Any expert thoughts? At this point, should we really just stick it all in the gun cabinet?
Just look at Cuban car market... /snark
this is real,
your link fails
You have no vision Nova...
Yes I do and Yes I can.
I see our cities burning
children weeping
Pockets of calm
Before the final turning
I see monsters walking
with smiles of men
embraces fatal
as painful cries replace talking
apologizes:
MarketWatch.com
I find it hard to believe that the driver/car ratio is similar to the 90's. There are so many cars around!
I can not think of a worse description for what a bank does than this from PNC
PNC Bank, N.A., and PNC Bank, Delaware, are members of The PNC Financial Services Group, Inc. ( http://www.pnc.com), which is one of the nation's largest diversified financial services organizations providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.
Article link that fleshes out Dryfly's earlier comments about platform companies.
The Myth of the Platform Company - Robert Blumen - Mises Institute
I love the term "automobile fleet." It makes the American consumer populace sound so heroic.
"Hardy, I do believe they have done it at last... my backbone is shot through."
Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!) - CR
This calculation is more subtle than it may appear. If you look at the long term trend over 30-40 years the turn went from 10 years to 15 years at the same time vehicles per person was increasing as seen in the first chart. The other is VMT which is way off. Miles travelled is probably the single most important factor in keeping older vehicles on the road. Additionally I think it is clear that in 06-07 sales were brought forward stealing sales from 08-09. Here's what the BTS says: The median age of the automobile fleet in the United States increased, by 19 percent, from 7.5 years in 1994 to 8.9 years in 2004.
While 24 year fleet turns are indeed unsustainable in the very long term it isn't a useful predictor of new vehicle sales trends for the next several years.
this is real, folks writes:
Bad Request 7D
Any expert thoughts?
this is real,
Re-read the first three paragraphs of that article; stop for a moment {sip some Beefeaters} and consider the definition of the terms "feudalism" and "lord".
ova - point well noted. That statement screams exposure!
Personally, I like the thought of a local credit union.
Median age of cars in the US is 9.2 years in 2007. That would very roughly correspond to a average turnover around 1/18 years (I'm too lazy to do a mortality analysis). Every 15 years is probably optimistic and I think we could see rates similar to current rates for years if there were a general trend to accepting older cars.
I find it hard to believe that the driver/car ratio is similar to the 90's. There are so many cars around!
Fair Economist | Homepage | 01.20.09 - 8:46 pm | #
Demographics of the United States - Wikipedia, the free encyclopedia
1980 - 226
1990 - 248
2000 - 281 million
2008 ~ +300 millio
but what about peak oil CR?
that is going to crush te sales rate.
For Detroit "Peak Tacky and Easily Broken" have already crippled them.
I'll take one Chrysleriat if that will help the situation.
K.Marx
but what about peak oil CR?
Crispy Bait | 01.20.09 - 8:52 pm | #
Thank you for voting with your wallet. How many $200 delivery contracts will you be purchasing from me?
Joanna,
Stick with Toyota.
rd,rd,rd...you know price has nothing to do with supply in a socialistic fiat regime....shame on you
The rate of 1.2 is "extreme".
I remember seeing comparable data for Canada. When the US rate was 1.01, the Canadian rate was .7. In other words the rate could easily fall well below 1.0 as the third car is one of the easiest (and most cost effective) thing to ditch when cash is short.
Well, I suppose if you wanted a clear test of "how stupid the American consumer" is, a measure based on how many cars will be bought during a period of time when consumers are being deafened by every warning bell screaming "you have been swindled and are about to be really screwed"; the number of automobiles bought by Joe6pack would be a good test. Not that such a test is useful or proves chit....
when cars/trucks are buy one get one free....do it, and take only one at half off...cash.
much like houses, condos however should always be buy 1 get the whole floor free.
Automotive sales have to decline. Young MC Bust a Move covered this, and had a funky beat too..,
Girls are fakin' goodness sakin'
They want the man who brings home the bacon
Got no money and you got no car
Then you got no woman and there you are
YouTube - Young MC - Bust A Move
I think the American consumer will need a different kind of test very quickly. Instead of asking are you ready to buy this shiny new thing, we need to develope tests asking "will you still trust us ?"
Aren't there a lot of 1950's Chevys still driving around Cuba? Who's to say we can't hit 50+ yrs for the average vehicle age?
Fiat deal could give Chrysler small-car technology
oy vey...
fiat and chrysler are going to try to outdo te civic?
were not trying to get better, were getting worse, progressively
Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!) - CR
Doing a quickie discreet approximation and assuming a constant destruction rate, a 24 year turnover matches a median car age of 16 years, not 24. The average is still 24, but that's created by a few very long-surviving vehicles.
When we bought the pony & cart, we joked that this might be our next car, depending on the economy and peak oil.
Maybe when it's time to replace my Outback, I'll start scoping Haflingers with a sweet little wagonette for hauling my produce to market....
While 24 year fleet turns are indeed unsustainable in the very long term it isn't a useful predictor of new vehicle sales trends for the next several years.
Correct. If miles driven goes down, fleet age goes up.
I'd feel better about your sales predictions CR, if the data went back to the Depression and included buggy sales
Popeye writes:
I think the American consumer will need a different kind of test very quickly. Instead of asking are you ready to buy this shiny new thing, we need to develope tests asking "will you still trust us ?"
Oh..... that's why President Obama won the election - eh ?
Fair economist-
In answer to your question from last thread, I'm working on some of the issues that you mentioned. I'll just make two points.
Very interesting set of graphs
The most nebulous to me is the Registered Vehicles per Licensed Drivers.
Many changes have occurred over that span.
Age of licensed drivers - old and young less likely to have their own car
• Cars per household - With the one income family, 2 cars were not necessary to commute to work
• Urban vs Rural (vs Suburban) - Majority of growth happened in denser cities. At the extreme, most New Yorkers don't have cars.
• Corporate fleets - Have they increased or decreased as a % of registered vehicles. Rental car industry has gone from growth to contraction
• What are not registered vehicles - Scooters for one, but what about state and federal (eg military trucks)
• Has the % of unlicensed drivers changed - Illegal immigration as one example, cross border traffic as another
The most meaningful metric to me is taking taking the Labor Force, truck and auto sales, and from there solving for the implied lifetime of a vehicle.
Instead of using licensed drivers, it does a better job to consider changes like the 2 income household, the growth of elderly or young populations, the migration to urban centres, etc
With a labor force of 150 million (less than, but in normal econonmy mode), 12 million annual sales of trucks and autos would imply a vehicle lifetime of 12.5 years. [I will leave you to muddle through how many make it to 20 years old and how many are ruined prematurely in accidents]
Under this approach the drop to 10 million annual sales was foreseeable given the added negative impacts of financing and personal incomes.
Relying on the registered vehicles mostly overestimates the true vehicle fleet in my opinion, because over and above the factors I already mentioned which might imply it too small, it includes ones like collector cars, or the 4x4 that only goes out to tow the boat in the summer, or any of a laundry list of possibilities
Thoughts or criticisms are welcome, I will make sure to check for them later.
quick note as I have a dinner reservation:
I'm back, it is the real me. I've had the chance to read through some old CR posts. It's nice to know I was remembered by some.
evilP is dead... long live geitner
Mr. Market is loving the first after-hours of the Obama administration....
GIMME A 'NINE'.............................
we need to start demolishing our cars.
that will stimulate me. now, where's my baseball bat?
Eric writes:
Mr. Market is loving the first after-hours of the Obama administration....
GIMME A 'NINE'.............................
Tigger ?? I see no tigger.
More factors. Not only are cars lasting longer but TCO had been dropping until the last few years but are still lower than even a decade previous (inflation adj).
From the previous thread
Plantagenet- "Ships can carry way more food than airplanes."
I knew someone would say that.
Yes, the use of cargo planes would show poor planning, and that's the point.
There isn't any.
At some point soon, someone will wake up and realize that Iceland is dying. They'll use airplanes first in order to get immediate aid there.
The ships will come later.
To speak of cars as "lasting longer" is to speak of an asset which has been the subject of TWENTY FIVE YEARS of engineering it to fail within a specific time, and then to say - oh my, it's lasting longer.
Any charts out there comparing dealerships going tits up and newpapers soon to go tits up. No ads, no revenue.
What about the turnover in horses? Besides, try eating a hubcap when you are hungry.
Evil Henry Paulson!
OMG!
Is it the real you?
We miss you!
(Angry Saver)BTW, I penned a response to your "bout of inflation" thought on the last post. The inflation path seems straight forward, but is fraught with danger.
Yes, inflation has messy effects. It's pretty much an unadulterated good for fixed rate borrowers, but mostly bad for adjustable borrowers. (Changes are generally bad for the economy as a whole). Insofar as toxic debt is on fixed rates lending, it will "save" the toxic derivatives. I wasn't really recommending that though, so much as pointing out that even things that are pretty much worthless now could possibly be saved by certain macroeconomic choices in the future (even if those choices are overall bad.)
IMO the debts will have to be written down. If the government continues to refuse to allow bankruptcy/cramdowns/debt to equity/etc. for the financial system I think inflation will be inevitable regardless of whether it's a good thing or not.
de-lurking just to say,
Welcome back, Evil Henry Paulson!
we did miss you
Great to see you again, EHP.
RobDawg was doubting, but I called it perfectly, I told you we couldn't be anything but positive in the markets this week. Any questions...
WB EHP, I missed your commentary.
I would welcome back EHP as he's been missed. However, I'm currently extremely skeptical of the above post.
[Here's to hoping it's the real EHP]
RobDawg was doubting, but I called it perfectly, I told you we couldn't be anything but positive in the markets this week. Any questions...
\t
GiezCubed | 01.20.09 - 9:18 pm | #
Question; the week ends on a Tuesday now?
P.S. Those Treasury auctions are getting real close.
Great to have you back EHP. Hope your stay this time is uneventful.
At some point soon, someone will wake up and realize that Iceland is dying. They'll use airplanes first in order to get immediate aid there.
mp | 01.20.09 - 9:13 pm | #
-----
There were no Conjures or mps running around Iceland?
I recognize that Iceland is one of the places--sans the Sahara--that agriculture would be unreliable to say the least, but didn't at least some people up there think of hoarding beans & rice for the possibility that their little party would end. Also, what is keeping in the gov't in place? The rioters don't have enough organization to just overthrow the few PTB left on that island?
On a related note, what exactly is keeping the Icelandic police/security force loyal? Are they the few people getting paid in Euros or having food provided to them?
EHP: The Commentariat has missed you.
Wunderkind is back! Welcome EHP, and hope you're staying nimble as always.
EHP,
Satanson.
I will now start posting news and speculation about the imminent nationalization of canuck banks.
Relocating the entire population of Iceland would only backfill the last 20 years of population losses in Detroit City. Urban renewal, milder climate. Win-win.
Here be a photo to go with this here story:
Growing stocks of unsold cars around the world |
Business |
guardian.co.uk
"for the sake of financial stability ... Let us get it over with – nationalise ..."
Calls to nationalise RBS and Lloyds as markets lose faith in bail-outs |
Business |
guardian.co.uk
RD, No, but if it's going to continue like this, here's to hoping it does. The market picked a significant day to make a stunning statement, I imagine the downturn was muted because of the upbeat tone of the day.
I'm willing to see a rally late this week...
If we need cars, but we have a hard time getting credit - what kind of cars will we buy? Glorified skateboards? Electric Golf Carts with sides on them?
It amazes me that my primary car is a 20 year old Toyota Tercel (a glorified skateboard) and as near as I can tell it's more reliable than most cars that are more than 5 years old.
Still gets 37 mpg too.
I see a lot of people shifting to cheap small cars.
Evil Henry Paulson...you were much missed. Welcome back.
yagij,
Blood. Seriously. With 300k citizens, most are related to one another. Family histories are preserved in the national library...and many can trace their ancestry back a thousand years.
Urban vs Rural (vs Suburban) - Majority of growth happened in denser cities. At the extreme, most New Yorkers don't have cars.
EvilHenryPaulson | 01.20.09 - 9:08 pm | #
Urbanizaton is VERY real as public transport and "smart" growth take hold. Develpers have recently discoverd that higher density, mixed use properties pay outstanding profits.
I understand why people who trade the market care about rallies and such. For me, it is like hearing the French or German HQ just announced the gain or loss of a 100 years at Verdun.
If we nationalize the banks, what happens to pension plans, etc... who have invested?
Icelandic protests right now.
Home | NewsFrettir - Icelandic news in English
Welcome back EHP.
sorry a 100 yards
“The concern is that banks around the world are short of capital,” said Philip Schwartz, who directly manages $800 million of international equities at ING Investment Management in New York. “As we increasingly come to that realization, stocks are just getting hammered.”
The Nikkei declined 196.73, or 2.4 percent, to 7,869.06 as of 9:42 a.m. in Tokyo, set for the lowest close since Dec. 2. The broader Topix index fell 17.17, or 2.1 percent, to 787.86, with four stocks falling for each that rose.
The Nikkei lost a record 42 percent last year as global financial companies posted more than $1 trillion in writedowns and credit losses and the world’s biggest economies slipped into recession. Japan’s slump will be “very severe” and may last for three years, Hiroshi Yoshikawa, head of the government committee that charts the economic cycle, said in an interview this week. That would mark the country’s longest downturn in the postwar era.
Japan Stocks Sink on Bank Concern; Nikkei Slides to 7-Week Low - Bloomberg.com
I noticed a spike in the fleet turnover at the end of each recession...it was a surprising correlation in each case except for 2001/2 -- then I remembered the whole "Buy A Car, Show the Terr'ists" patriot marketing campaign...
Relocating the entire population of Iceland would...
Rob Dawg | Homepage | 01.20.09 - 9:30 pm | #
-----
In a really tacky, inhumane sort of question, would it be better to ship in food to Iceland or ship out Icelanders to the food?
One way seems like the "bailout" manner and the other seems more solution oriented. What do you do with a dying, isolated country? Eastern Island?
TWENTY FIVE YEARS of engineering it to fail within a specific time
Popeye | 01.20.09 - 9:15 pm | #
Japan did not get the memo. Chrysler, Ford and GM, well yeah.
OT but interesting....
Jan. 20 (Bloomberg) -- Christopher Cox stepped down as U.S. Securities and Exchange Commission chairman, leaving behind a demoralized agency that failed to spot Bernard MadoffÂ’s alleged fraud and had its role diminished by the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc.
His resignation took effect at noon today in Washington...
Blood. Seriously. With 300k citizens, most are related to one another. Family histories are preserved in the national library...and many can trace their ancestry back a thousand years.
fried | 01.20.09 - 9:34 pm | #
-----
Once your "brother" rapes your "sister" and steals your home and savings, how deep is that "blood"?
Don't mean to be tongue-in-cheek, but what do you do when a select few sold you out? It isn't like there are any jobs to start a new life...
Nikkei sporting a seven handle now as well.
RD, No, but if it's going to continue like this, here's to hoping it does. The market picked a significant day to make a stunning statement, I imagine the downturn was muted because of the upbeat tone of the day.
I'm willing to see a rally late this week...
GiezCubed | 01.20.09 - 9:33 pm | #
MGIC (MTG) was a $70 stock exactly 2 years ago. Today it fell 24% Mon-Tues to $2.13. Point being, the companies that are in trouble have already fallen so far they cannot do much more damage to the indicies. It'll take another shock different from financial company sector problems to start the next leg down. Remeber also ±300pts is the new ±30pts.
"Sales won't increase right away (look at the depressed sales during the early '80s), but this does suggest that auto sales are closer to the bottom than the top, and that auto sales will increase significantly in the future"
Obviously we are closer to the bottom than the top..we are down 42% and we are not headed to zero, HOWEVER, by saying sales will increas "significantly"...not likely, we could stay in the 10-13 million range for 2-4 years
Rob - Fremont Savings (now belly up) is suing Crisp, et al (CPA, appraisers, brokers, etc..) for $4.3 millon plus legal fees, plus int, plus...
My 22 yo truck didn't pass smog and needs a new engine. I was looking for a good 10 yo truck (Ranger, Toyota, etc) with 80K miles on it...they're damn hard to find. Everything I kept coming across had over 100,000 or a bad title (no way I'll touch a salvage title).
I ended up buying a new Toyota truck. I plan to drive the truck for the next 15 years.
If each of the G-7 members were a football player, the owner of the Washington Redskins would sign every single one of them. That way he could assemble the "All Pro" team. As usual it would be all pro for 1937
ItÂ’s a crucial point as 2009 unfolds and the old leadership framework loses more teeth, if thatÂ’s even possible. The G-7 -- Canada, France, Germany, Italy, Japan, the U.K. and the U.S. -- has been completely useless over the last two years as markets crashed and economies plunged.
useless over the last two years as markets crashed and economies plunged.
nova | Homepage | 01.20.09 - 9:44 pm | #
It is a shame BRIC+T are in even worse shape.
CR: a year over year rate of change graph on the data from graph #2 with recession bars looks like it might be very interesting. Appears to dip durring recessions, but hard to tell how big the effect is, if it leads, lags or is coincident.
"MGIC (MTG) was a $70 stock exactly 2 years ago. Today it fell 24% Mon-Tues to $2.13. Point being, the companies that are in trouble have already fallen so far they cannot do much more damage to the indicies. It'll take another shock different from financial company sector problems to start the next leg down. Remeber also ±300pts is the new ±30pts.
Rob Dawg | Homepage | 01.20.09 - 9:40 pm | #
Ahh but consider this. Since the Dow is a price weighted average all C, AXP, JPM et al have to do is reverse split say 1 for 10 and their influence will once again be meaningful, at least in the context of the Dow. For a market cap weighted index like the S&P not a difference...
Or may be the number of registered vehicles starts to decline.
There are just too many vehicles in the US.
May be the number of vehicles sold is a precursor to the reduced number of vehicles needed in a smaller economy.
Rob - Fremont Savings (now belly up) is suing Crisp, et al (CPA, appraisers, brokers, etc..) for $4.3 millon plus legal fees, plus int, plus...
crispy&cole | Homepage | 01.20.09 - 9:41 pm | #
plus... the name of the 18 year old high school student? [ducks]
Seriously, thanks, I'll follow up.
It occurred to me that my grandkids will look at the UK and think of them as just another Greece. Only important for their past and tourism. Otherwise? Just another broke has been without good food - unless you like Indian.
My one owner 1990 Integra is now worth far more to me than anyone else (viz "The Market for Lemons"), but I still see it only lasting another three years or so.
I am at the stage where I'm torn between loving that it's depreciation free and still cheap to operate, and worrying that it won't die before these amazing car deals go away.
For those of you crapping on domestic car (and Fiat) reliability, remember that it is variable across models (some models are FAR more reliable than many Japanese models) and across time (quality really was Job 1 at Ford's for a while, until it wasn't, and appears to be improving again). Also, quality is a mountain which every global automaker has been climbing; any whose quality hadn't improved since the 1980s would have been out of business long ago.
That said, I find it bizarre that there are consumers out there so ill-informed that they'll buy the models which have proven unreliable and expensive to own for years.
I have a Toyota truck that is 22 years old. I should be paying it off soon.
How long will Obama's honeymoon last?
there is a flaw in the reasoning that sales must increase soon.
Although on average cars cannot last 24 years, almost every car on the road can last 2 more years and the majority can last 5+ more years.
With the background of belt-tightening, less discretionary travel, "staycations" and unemployment it is not inconceivable that sales can continue to remain depressed for as many years as it takes the larger economy to recover.
Such a lower than average replacement rate does little to increase the average age of the US fleet if it lasts for even three years, let alone just one year. The peaked graph can rise higher, and/or go sideways, without anything remarkable happening to the US fleet other than fewer 2009 thru 2011 models on the roads.
I've been watching fox news for 10 years.
Guess how many brain cells I have left?
@RobDawg- Dead on that most companies can no longer do too much damage to the indices. I commented on the financials in the Dow already. Combined, they are barely 1/2 of the weight contribution of IBM.
Thursday is when things could get really dicey as a whole slew of financials report earnings: BK, BBT, COF, FITB, MTB, PBCT, STI & SNV.
Good times.
Don't oversell Iceland. They can feed themselves, just not in the style to which they've become accustomed. They'll have to eat fish, mutton, and yogurt and skip the fruit and Cheerios. They also have lots of geothermal energy and high population density in inhabited area so they can ditch the SUVs for electric busses.
The current brouhaha is mostly over the IMF proposal to "lend" Iceland about 6 billion Euro (to give to foreign depositors), which is about 28,000 per Icelander - a whopping debt. That's equivalent to about 8 trillion (with a "t") for the US. Given that the debt will be almost completely foreign, Iceland could never repay it (those ratios make Argentina look good) and thus all the pot-banging by people who don't want to be reduced to a 3rd world standard of living.
Rob Dawg-Congrats on winning Jim the Realtor's prize. Maybe he'll show you that nice house in Carlsbad if you show up for his party.
Thursday is when things could get really dicey as a whole slew of financials report earnings: BK, BBT, COF, FITB, MTB, PBCT, STI & SNV.
Good times.
Mr. Sparkle | Homepage | 01.20.09 - 10:04 pm
Can't wait to see what's in their wallet.
Sales won't increase right away (look at the depressed sales during the early '80s), but this does suggest that auto sales are closer to the bottom than the top, and that auto sales will increase significantly in the future.
-CR
Yes it does. Good work. What this implies is that propping up our auto industry is well worth it. Let it collapse and take out a huge hunk of the economy, drag us down, and give all of our foreign competition the spoils... DUH.
It occurred to me that my grandkids will look at the UK and think of them as just another Greece. Only important for their past and tourism.
That's nothing new, that has been happening within U.S. boundaries for decades. Does anyone think Massachusetts is important? It used to be very important - in manufacturing, trade, politics. All of New York State (not just the city) used to be considered extremely important - industrially, politically and culturally; New York State was the BMOC of the north for most of the 19th century and much of the 20th.
People only think of New England as a quaint tourist or second-home destination these days, but it used to be the pulse and compass of the nation.
California may have now peaked.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
If no cars are sold in 2009 the turnover rate would be infinite. But the average age would advance by only one year.
What this means is that we can easily stay at a low level of sales by keeping and repairing our cars. At least for a while.
Neel Kashkari, the official who administers the Troubled Asset Relief Program, wrote to Citigroup Inc., Bank of America Corp. and 18 others on Jan. 16 seeking figures on business and consumer loans. Treasury also wanted details on purchases of mortgage-backed and asset-backed securities, according to documents obtained by Bloomberg News. Kashkari will stay for a few months after President-elect Barack Obama is sworn in today.
ObamaÂ’s aides criticize outgoing Treasury Secretary Henry PaulsonÂ’s approach to rescues as lacking transparency and not doing enough to get credit flowing though the economy. While Paulson has defended the cash injections as having averted a collapse of the financial system, Obama had to pledge changes before lawmakers approved the release of the second $350 billion.
“Banks are becoming the whipping boy for the Treasury’s failed policies,” said Joseph Mason, a Louisiana State University professor in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency. “They’re going to continue to face this pressure.”
which is about 28,000 per Icelander
Uncle Sam pays a signing bonus somewhere around that amount... jus sayin.
By requesting monthly status reports, Treasury officials aim to dampen such criticism. The department also plans a quarterly comparison of banks that received rescue money with banks that didnÂ’t, as report data becomes available. In the meantime, the monthly statements will track the activity of the banks receiving the most aid.
“The purpose of this snapshot is to provide insight” into how banks are behaving after receiving rescue funds, the Treasury said in its letter to the banks.
Obama’s team has asked some of Paulson’s staff to stay on for the first few months of the administration. One of those officials, Kashkari, said last week that markets and the economy are mired “at a point of low confidence” that’s slowing the flow of credit.
Confidence
“As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans,” he said in a Jan. 13 speech. “As confidence returns, Treasury expects to see more credit extended.”
California may have now peaked.
\t mal | 01.20.09 - 10:06 pm | #
November 17,
California may have now peaked.
\t mal | 01.20.09 - 10:06 pm | #
November 17, 2003
Rob Dawg | Homepage | 01.20.09 - 10:10 pm | #
for god's sake man:
November 2003 - Wikipedia, the free encyclopedia
Rob was that he day Arnold took over?
yeah, it's a sign of how history is speeding up, that you could date California's peak to a single date maybe...
Massachusetts started to decline after the Civil War (but slowly) and New York State started to decline after WW2, or even before (again slowly, but faster). Maybe California's equivalent is the end of the Cold War.
Victory demands its sacrifices.
I think Alaska peaked for about 6 weeks this summer, then crashed.
Are all republicans empty skulled?
Oh and forgot to add: The United States is the only country that eats itself and doesn't call it famine.
Rob was that he day Arnold took over?
Tim & the Tax Man | 01.20.09 - 10:13 pm | #
Yes but the "jump the shark moment" isn't specifically tied to him but that we successfully recalled a governor and proceeded to elect someone no better. Sadly, we had an opportunity to elect a candidate that campaigned on a platform of tough love and bitter fiscal medicine; McClintock.
Massachusetts started to decline after the Civil War (but slowly) and New York State started to decline after WW2, or even before (again slowly, but faster). Maybe California's equivalent is the end of the Cold War.
mal | 01.20.09 - 10:14 pm | #
Massachusetts: June 21, 1974
Nice to have you back, EHP. Always enjoyed reading your posts.
A question that is only tangentially on-topic: can anyone point me to a reference regarding the economics of vehicle replacement vs. maintaining an existing aging vehicle? i.e. when, if ever, does it become more economical to replace a vehicle vs. just replacing the parts as they wear out? Intuitively, I would think almost never - as there are only so many major components that can wear out (transmission, engine, etc). Many other parts are consumable (clutch, brakes, etc) which require replacement at roughly the same rate on either an old vehicle or a new one.
I would argue that vehicle replacement only makes sense when (1) when safety features on newer vehicles make the older one undesirable/risky, (2) parts and/or expertise on repair of the vehicle start to disappear, (3) reliability requirements change (e.g. no longer just driving around town, need new-car reliability for cross-country trips, or (4) vehicle size requirements change (e.g. growing family).
Otherwise, IMHO vehicle replacement is generally falls into the "I want it" category, as opposed to the most thrifty choice. Of course, a young coworker who just replaced his '95 Accord w/ a BMW disagrees.
McClintock scared the local RNC - boy, did they want him to shut up.
(I could figure it out and I wasn't even a McClintock fan...)
EHP, welcome back. Your insight has been missed.
A curious day to return. Does TG need to prove unworthiness before a handle change?
Late to thread, but wanted to comment (in case others hadn't) that there's a significant possibility of a reduction in the number of licensed drivers, or at least of the licensed drivers who own a car. The high fuel prices last year seem to have kicked a number of people over into "green" mode. If that sticks, then mass transit, bicycles, and other forms of transportation (besides the privately owned vehicle) will cut into the pool of auto customers for some time...
CA and MA problems = too many social programs.
mp writes:
Yes, the use of cargo planes would show poor planning, and that's the point.
There isn't any.
At some point soon, someone will wake up and realize that Iceland is dying. They'll use airplanes first in order to get immediate aid there.
Actually, I believe the use of cargo planes is a calculated move. Iceland is of great military significance, partially for its use as a harbor, but mostly due to its use as an airport. Airlifting the food in, even if it isn't the best way to do it, brings the point home; "If we weren't in an air treaty with the US..."
Dead on that most companies can no longer do too much damage to the indices.
Mr. Sparkle | Homepage | 01.20.09 - 10:04 pm | #
Unless thier default/collapse would damage the broader economy. It is a good thing we used that TARP money to provide sustainable alternative to those potential faillures....
Sadly, we had an opportunity to elect a candidate that campaigned on a platform of tough love and bitter fiscal medicine; McClintock.
Rob Dawg | Homepage | 01.20.09 - 10:18 pm | #
Yeah, but he is not sufficiently versed in the power of crystals, or telepathic dolphin communication, to be realistically considered for governor of California.
Ugh, always forget to close italics. Sorry.
Can't wait to see what's in their wallet.
Mike in Long Island | 01.20.09 - 10:05 pm | #
Makes me think of that MAD magazine cartoonist that whenever he wanted to show that some one was poor would show them opening thier wallet and a moth flying out.
Ztexas, when the cost of a repair exceeds the value of the vehicle, you dump it. I.E. you need a new transmission or engine.
If you love the car, buy another one and use the dead one as a parts bin for the new (probably old actually) one.
If you really really love that model, buy other people's basket cases, pull all the good bit bits, and scrap them. If done properly you get the parts and cash for the wreck. Much easier on the available garage space when dealing with motorcycles though.
At this point, I'd like to recommend for your reading list, "Collapse," by Jared Diamond. Interesting chapter on ancient Greenland, and its collapse. Not a lot of currency issues involved, but worth reading. Also, great chapter on Easter Island, and one titled, "Why do some societies make disasterous decisions?" Bedtime reading. Set your Conjure clock.
CA and MA problems = too many social programs
Real estate was driven up to high to maintain competitive jobs. The indigent population got too greedy.
.
"President Obama Makes Surprise Appointment
In a move that surprised Beltway insiders, President Obama announced this evening the appointment of Sister Ominous from Our Lady of Perpetual Unhappiness as the new 'bad bank' Czar. 'It has come to the attention of my administration,' the newly elected president stated, 'that any bad bank that we may create might lack the appropriate sense of its own mistakes, its own badness. Through the efforts of Sister Ominous, this nation can rest assured that the bad bank will truly, deeply understand just how bad it is.'"
I guess we can safely say, we have reached Peak Autos in the US.
Considering we may have reached Peak Oil, I find this highly ironic and amusing.
On another note, was there any doubt this would happen.
20 years ago my father used to ponder the thought of all the car dealerships in Northern NJ and think about who was buying all the cars.
He was off by about 20 years, but he knew the day of reckoning would come.
Heck, why doesn't Obama just give everyone a house and a new car and charge it to the Fed?
At least this way our tax money is buying us something!
ewly inaugurated...arghhh
Can we screw up our comments, yes we ca
I guess we need a car czar!
Considering we may have reached Peak Oil, I find this highly ironic and amusing.
It's almost inevitable if you think on it carefully.
.
Set your Conjure clock.
Comrade Yossarian | 01.20.09 - 10:35 pm | #
Has the Conjure clock not already ticked passed midnight by now? Good lord. I think we're there.
I was thinking we could use a Czar Car, maybe egg-shaped with lots of doohickies on it.
Comrade Yossarian: Diamond's "Collapse" is unfortunately not his best work. (His "Guns, Germs and Steel" however is rather brilliant; I think it is the seminal modern work on the development of civiliations...)
Joseph Tainter's "The Collapse of Complex Societies" is really more worth your while; he produces a much more comprehensive theory of collapse which encompasses Diamond's theories and goes much farther.
Very interesting set of graphs !
CR, your conclusions have a fundamental assumption that the USA continues to maintain its standard of living.
I reckon that the standard of living is going to decline ( and we should be educating the nextgen to lower their sights(materialwise)) - some of the characteristics of a lower standard of living are exactly the ratios you've discussed:
From that perspective, sales won't rise to anything like the level you envision.
-K
mal writes:
Oh and forgot to add: The United States is the only country that eats itself and doesn't call it famine.
The days of bush diving have passed
RockyR- "Has the Conjure clock not already ticked passed midnight by now? Good lord. I think we're there."
Conjure asks, "What are you, some kind of doomer gloomer?"
My '78 landcruiser will outlast the gasoline supply, at which point I'll melt it down for spears.
What are you guys gonna do with your plastic-and-fiberglass cars?
Cheers,
prat
At this point, I'd like to recommend for your reading list, "Collapse," by Jared Diamond. Interesting chapter on ancient Greenland, and its collapse. Not a lot of currency issues involved, but worth reading. Also, great chapter on Easter Island, and one titled, "Why do some societies make disasterous decisions?" Bedtime reading. Set your Conjure clock.
RockyR:
What event today do you think caused the clock to strike midnight?
And I suspect many of these sales will be of Used (or reconditioned) cars that are cheaper than new.
Re: Collapse and Iceland/Greenland. The main factoid I remember from the book is how the colonists from Iceland who went to Greenland (and who lived there for about 500 years) did not eat fish. Diamond's theory was that there was some sort of taboo that forbid fish eating and that was a big problem once Greenland could no longer support cattle farming. (The colony died out).
I wonder what our big taboo is and what we should be doing now that we won't even consider.
vehicles/licensed drivers ratio will drop from 1.1; for reference the UK ratio is 0.79 - about where the US was in 1960 - will the US return to a 1960 standard of living ? perhaps.
For the standard of living (in this limited sense) to equal 1960's with its level of car ownership, household size and population density would have to regress, too. Smaller households living farther from downtown (or, ahem, anywhere) with the same car/driver ratio implies a lower standard of living -- think waiting forever for a bus, hitchhiking, Shank's mare.
First time since 1986 Intel warning first quarter possible loss, to close to call...internal web-site claim
What will the US automotive industry look like in five years. Well Chrysler will be a sales arm of Fiat; GM and Ford will have vanished; Toyota and Honda will be still building some cars and probably most imports will come from China or India and they might be starting to set up factories here.
when the chips are down, the chumps bail
blackhalo-
What is this "profitability" you speak of in mixed-use projects?
As an assembler/option holder prior to LDP, maybe. However, without brownfield monies and/or other state/muni- sponsored "guarantees", these deals are hard to translate from excel-world to real-world profit unless the capital structure is inverted from status quo.
Planners (public and private)- love'em. Bankers- gettin' nervous. Developers- along for the ride.
Consumers/end users- "this ain't like the brouchure"
The profit was stripped out prior to groundbreaking (per usual).
I can feel Rob's ire building...
Note: I'm not anti mixed use. Every town is an organic mixed use project.
I'd just prefer that we let Nature take it's course and design mixed use projects in an incremental (sustainable) way rather than trying to cram a density and design in 5 years that Glod would have preferred happen over 50.
I wonder what our big taboo is and what we should be doing now that we won't even consider.
Like this?
Ralph, that is very very funny but even if we used Americans' fat to power our cars it would only get us another 34 weeks on the way to peak oil.
I'd just prefer that we let Nature take it's course and design mixed use projects in an incremental (sustainable) way rather than trying to cram a density and design in 5 years that Glod would have preferred happen over 50.
hong konger | 01.20.09 - 10:56 pm | #
THe Domain and whatever they turned the Airport into have been considered fairly successful mixed use areas in Austin, TX but Eason mall in Columbus OH was my fist exposure to the phenomena and has held it's value very well over many years.
I wonder what our big taboo is ,etc?
When you got behind the car, did it remind you of Auschwitz?
I wonder what our big taboo is and what we should be doing now that we won't even consider.
Gas tax.
Oops and while we are tabooing away there is a new thread.
Intel warning first quarter possible loss
LAM | 01.20.09 - 10:54 pm | #
I sure hope it is just due to Shanghai stealing share or else I will be weeping for my AMD calls.
Gas tax.
Anonymous | 01.20.09 - 11:03 pm | #
Nice Taboo.
McClintock scared the local RNC - boy, did they want him to shut up.
locust | 01.20.09 - 10:26 pm | #
l
blackhalo-
Like I said, w/o state-muni (or FED) help, these deals really don't work.
The govy guarantees and kickbacks help to smooth out the losses on uneven absorptions and give the banks some breathing room.
In any case, outside of posi spin in the trades and biz press, these projects are very hard to make work in any traditional development (accounting) sense.
I would characterize the problem in a similar light as that which plagues the FED: too many competing mandates.
EHP - good to see you
I heard from a president of a large interstate trucking company that during previous recessions companies just parked trucks, but this time they were selling them overseas. (trucking is a leading indicator - the industry's been down for 2+ years.) He expected semi fleet size to contract significantly, overcorrecting for excess capacity in the last five years.
Conjure asks, "What are you, some kind of doomer gloomer?"
mp | 01.20.09 - 10:50 pm | #
hehehe... touche`. I deserve that. It's been a long day, further exacerbated by the stupendous decline of the equities markets.
What event today do you think caused the clock to strike midnight?
Basel Too | 01.20.09 - 10:51 pm | #
I'm not qualified to venture a guess. I suppose Fiat making a move on Chrystler, followed by a renewed crash of financial sector equities combined with what now appears to be the inevitable nationalization of UK banks and what appears to be a move to do the same in the US... oh, and layoffs, layoffs, layoffs... made it feel a lot like capitulation time to me.
I can feel Rob's ire building...
Note: I'm not anti mixed use. Every town is an organic mixed use project.
hong konger | 01.20.09 - 10:56 pm | #
Not so much "ire" as frustration. I'm not anti-mixed use either and excellent point about towns. My beef is the sales job. Mixed use just cannot perform as advertised. Give an honest description an let the public judge. Ain't gonna happen so I'm gonna keep filling in the parts they don't tell you. It's a hobby.
Where is EHP??
Sparkles....Did you expect Stae to get such a whooping? At current levels it is 3x book, no?
Our Portrait:
2008 family income: 150K
Networth: 1000K
Rents a home
Drives 1995 car & 1999 minivan
No plan to buy a car
No wonder car industry will go broke!
whoops
Stae + State
I've been pushing for a gas tax adjustment for a long time. We are about 6¢ short of sustainable best practices, 9¢ behind catch up funding for poor management, 11¢ short of taking care of our roads and providing enough juice to get the cities and transit advocates to shut the hell up. I'd prefer 2/3rds stay with the State but this is the new age of the shining symbol.
I'm not sure if it's cliff-diving or sky-rocketing!
Fair Economist writes:
Don't oversell Iceland. They can feed themselves, just not in the style to which they've become accustomed. They'll have to eat fish, mutton, and yogurt and skip the fruit and Cheerios. They also have lots of geothermal energy and high population density in inhabited area so they can ditch the SUVs for electric busses.
Their geothermals are great for all of their greenhouses so Icelanders will continue to eat healthy. Fish is brain food, though it didn't help them recognize their impending financial doom. Maybe it was mercury.
Also, welcome back EHP! We've missed your commentary.
Interesting data. But we do not want an increase of auto sales, do we? This data elaboration is based on the assumption that there is no change in the buyers attitude.
Read A NEW CAR? NO, THANKS!
Post the source of your data on your graphs!!!!!!!!
If it is raw data obtained from another source, you need to post the source. If it is information calculated from raw data from another source, you need to post the source.
It's right up there with stealing if you don't.
I keep hearing that Ford will fail. But I must be missing something. They did not need a bail out. Their new models -especially the new fusion which looks better and has better gas mileage then it's competitors. (reliability on the old fusion has been good). Same story with the new Taurus. I think Ford is being sold short and Ford will be just fine. If you look at Ford in Europe it's a respected brand. In fact they are bringing over the Ford Fiesta to America.
Very good work. Strongly suggests car sales collapsed mainly for lack of credit, and would recover if that credit were restored.
"This graph shows the total number of registered vehicles in the U.S. divided by the sales rate"
Wait a minute, CR, if the fleet age is relatively young (due to extreme turnover due to the past easy financing, people buying a new car every 2 years, etc.), it could be some time (several years) before the 15 million a year number is "needed" in order to replace aging vehicles.
Also, I would guess that some of the "fleet" are second and third cars that are great to have during a boom, but not necessarily needed (or even wanted) during a bust.
In other words, it still may be quite some time (years?) before sales hit 15M again. No one really knows.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
If no cars are sold in 2009 the turnover rate would be infinite. But the average age would advance by only one year.
What this means is that we can easily stay at a low level of sales by keeping and repairing our cars. At least for a while.
Zephyr | Homepage | 01.20.09 - 10:07 pm | #
Zephyr wins the prize...
Couple with this:
Ztexas, when the cost of a repair exceeds the value of the vehicle, you dump it. I.E. you need a new transmission or engine.
\t EEngineer | \t \t \t \t01.20.09 - 10:34 pm | #
Not 100% true in a RECESSION... but generally true in a healthy economy. In a recession the question becomes 'What can I afford TODAY?'... If you don't have a lot of cash, a very old & near worthless vehicle and a breakdown occurs... the question is which [fix or buy] will take the least amount of cash today? Which ever one is lowest [buy or fix] will be the one most people will do even if fixing may cost more than what the vehicle fixed could sell for... the person isn't trying to maximize their asset values, they are trying to minimize the cost or immediate ownership. If we find ourselves in a long drawn out recession - that will be the 'new calculus'.
That is why low interest rates & easy credit terms are so critical to automakers... the only way buying a car is 'less expensive' from an immediate cash out of pocket perspective is if we have zero down, zero rate financing & 'zero income verification'... otherwise it is almost always less expensive to fix even if th efixed vehicle is 'worthless'.
I figure my 87 Honda still has 3 or 4 more good years left in it.
Why not take a poll on how many cars will be sold in the US in 2009? My guess is 9.5m.
CR:
I don'tagree with this assessment. It doesn't pass the sniff test. What I mean is yeah, you can probably conclude what you did from the charts but......it doesn't really make sense. just MHO.
1.1 cars per licensed driver is much, especially since in the USA most adults have the license.
With decent public transit and more compact cities, you will not need that many cars.
In central Helsinki (Finland) (e.g some 7 km from the center), 60% of the households do not have cars. And we still have rather high living standard.
Owning a car requires almost a day's work each week. Makes no sense.
I find it interesting that we have omitted car sharing from this discussion. From my intercity location (Chicago), I see a brisk business in Igo and Zip car rentals which rent cars by the hour. Also, public transportation is free for seniors. If this "free ride" lasts, car ownership will continue to decline for urban residents here.
I'm headed to a VW dealer today to buy my wife a Diesel Jetta wagon.
My own '02 diesel Jetta sedan has 125,000 miles on it and I have had only minor problems with it.
I do wish Ford or GM had someone with enough brains to have introduced a diesel that was worth buying, in a car profile, but I must go for what is available with a price I can handle in a cash-buy transaction.
1.2 vehicles per licensed driver.....is a bit misleading. The bottom 75% of this country probably has a much lower ratio....and the top 1/4 has a much higher ratio.
My parents (top 1/4) up till last year had four cars for the two of them and they still have 3.
As the "middle" and "upper middle" class gets demolished economically those ratios will drop signifigantly IMO and the ratio should move closer to the ratio that exists currently towards the lower income quintiles.
Also as the country ages demographically that ratio should drop. My grandparents had one car and now they have zero as they are in a assisted living home.
And financing rates have no where to go but up over the next half a decade and beyond which will make new cars that much more expensive.
New car sales are toast for a long time to come.
If you are concerned about green being the future I don't see it for a long time. Lots of new gas power and mileage coming especially in GM and Ford. Long term Gas diesels under development from GM and MBZ. I am impressed with this design idea. On the short term look for smaller engines with Direct cylinder fuel injection, Electrically driven turbo chargers, They will every bit of the same power output with better gas mileage. If the Big3 can get the legacy's cost off their back and the funds can go back to R&D and final price competitiveness they will be excellent.
Cars are a declining asset in value but an increase in low cost transportation but as the more miles produced the cost per mile goes down. New car sales are generally emotional for many. My view is no matter what a car is worth it is more about how much to operate for value. New car payment of $400 mo needs to overcome repairs of $4800 a year to consider replacement. New car drops 20% the minute you drive it off the lot, tax and insurance increases need to be considered. Who cares how many cars a family has you can only drive one at a time.
If the average age of a car was 9 years last year then it can be no more than 10 years this year. The shift in the turnover rate is all about the denominator (sales).
Well theoreticaly it CAN, but it's unlikely. If people torch their new cars for the insurance and continue to drive the old junker that they hadn't gotten rid of.... I'm sure that there will be isolated cases like this, but it's not likely to be statistically significant.
CR's chart shows that unlike housing, there hasn't been a spike in the actual supply. The growth in vehicles per driver has been slow and steady. So cars will gradually get older, but net ditching of vehicles is not likely to be significant.
the taboo our society needs to overcome but hasn't is mandatory birth rate control.
CR, I totally agree with your point here. The thing I keep noticing here in San Diego is that the 'fleet' is quite new. SO many of us used HELOC $ to either pay off or buy new car/suv/truck. But most of these models are not built or designed to last longer than 5-7 years without major work. There is a tradition here of keeping old clunkers running, but only among the poor. Most Californians want - and need - new cars. Sales will have to pick up unless we're all going to breaking down everywhere. The question then is, what do we buy? I am not alone in holding out for a plug-in electric.
CR, you wrote: Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!), and the ratio will probably decline over the next few years. This could happen with vehicles being removed from the fleet, but more likely because of a sales increase.
You mention that the ratio can decline through a removal of existing vehicles as well as an increase of sales. You then make a case why sales are expected to increase. I would, however, pause a little longer and reflect more about the possibility of larger effect caused by removals of vehicles.
This would come in several ways: 1) a marginal car owner sees the final break down of his single old car and decides not to replace it - voluntarily or involuntarily; 2) the same car owner replaces the broken car with another used car, a car that is sold to him by a household that had three cars and no will go on with just two.
The second scenario (including variations) appears to me much more likely and potentially extensive in its scope.
If we take into account fully the meltdown of suburbia in the outer fringes of exurbia (Riverside in Los Angeles, Stafford County & Prince Willams County near Washington, DC), will see a significant number of housefolds that can be expected to reduce their cars.
If the prediction is true, that American settlement is moving away from outer Suburbia to inner Suburbia and particularly into downtowns and small towns and middle towns, there will much less households with more cars than adults and also - explosively - more housefolds with just one car.
Reductions of cars per households due to future settlement patterns - and also due to distressed finances for marginal car buyers (two very distinct groups) and hence reduction of overall cars (non-replacements of cars in current multi-car households) could be underestimated.
That would mean the ratio of 1.2 is a testament of the finale of exurbia of 2003-2007.
Since CR is always early in sensing these things, like Doppler Radar, maybe we should all invest in car companies, as there may be a 40% increase in sales. Thanks CR, by the way, crysler or AMC as your top pick?
But this doesn't include the Honda factor. I drive my Honda's 200,000+ miles (if I don't wreck them first). I would never do that with a Big Three. My family's safety means too much to me.