The Enronization of America continues
and America gets what it deserves with an economy largely run by financial rip off artists.
"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it". -- Congressman Louis T. McFadde
Well, km4 - Louis said that in 1932. After that the government debt soared to over 140% of GDP in 1940's and since then went down again. Currently it is around 65-70% of GDP.
Don't you think it's time to pass Mr. Louis T McFadden and let him RIP? His speech was made in June 1932. That's the worst time of the Great Depression, imagine how it affected his thinking - and the speech.
Well, km4, the fact that Louis said the government was practically bankrupted in 1932 simply means he didn't have an idea what he was talking about. Using him and his reference today means you don't know what you're talking about.
Well if Toyota took a hit then that should soften the fallout for Ford at least. Toyota walks on water according to popular belief, so if they're sinking it gives everyone a pass.
km4, no offense, but "this book agrees with me" isn't exactly a rock solid defense in the post Barnes and Noble age. Hell Cramer is a top selling published author.
Why is it that I always get thrown by a book by every conspiracy theorist I meet? It's so easy to get covered behind a book. There are so many books in the world. How about, km4, if you educated yourself with this:
km4...I agree completely with you and in a kindhearted hand to you, am offering to take each of your worthless greenbacks..whether paper or computer blips and relieve you of the dirge of living in this disaster. Good on ya.
"This evil institution has impoverished the people of the United States and has practically bankrupted our government."
Sorry our elected leaders have bankrupted the country threw unfunded spending. We as citizens are as responsable for this as they are. Thier is no free lunch.
"If the citizens neglect their Duty and place unprincipled men in office, the government will soon be corrupted; laws will be made, not for the public good so much as for selfish or local purposes; corrupt or incompetent men will be appointed to execute the Laws; the public revenues will be squandered on unworthy men; and the rights of the citizen will be violated or disregarded."
Noah Webster - (1758-1843)
Well if Toyota took a hit then that should soften the fallout for Ford at least. Toyota walks on water according to popular belief, so if they're sinking it gives everyone a pass.
While no one walks on water... Toyota 'swims' a lot better than the rest. One thing that story doesn't tell us is Toyota is NOT cutting margins much... price Toyota vs domestics of similar class and that becomes clear pretty fast.
Toyota has been above plan for so many years they feel comfortable with low single digit 'declines' considering their capacity. If they decline for a few years I'd start calling this 'sinking'... we ain't there yet. When you're lapping the field you can afford to pull back a little.
As far as the total build - 16M units is still a very healthy rate... In many ways, like the housing start/new home build debate, it is 'too healthy'.
I'm not sure what the 'replacement rate' should be but considering how much cars cost, how long they last and lack of income growth for average Americans (relative to new car cost)... I'd say 16M is way too many new cars.
In many ways, like the housing start/new home build debate, it is 'too healthy'.
That's just it -- the market's expectations are for 'too healthy', let alone normal. What happens when the numbers actually go below normal? How about far below normal???
Toyota has overproduction problems, particularly on the Camry. Toyota over the next 3 years will look similar to Honda over the prior 3.
Probably won't hurt them operationally.
It is easy to back down assembly capacity a little without hitting their head since 70-80% of the cost to build are assembled components... And considering the weak dollar and how the increased demand for component production over the last fewer years came from offshore (a lot from Japan still)... they can back off the build, import less yen denominated components, let domestic dollar denominated component build catch up with demand and make fewer cars and almost if not more money. Not a bad place to be.
Now if the dollar skies on them... that doesn't hold up. But what's the chance of that?
What happens when the numbers actually go below normal? How about far below normal???
Then lowest cost producers survive...
More specifically the producers with the lowest fixed costs... since FC doesn't go away as volume declines. Japanese generally have lower fixed cost... not always but usually. They will generally accept somewhat higher variable cost in exchange for lower fixed coat - that in part explains their operational flexibility.
FC is a kin to 'leverage'... the more you lever up the FC the more money you make above breakeven but then also the more you lose below breakeven... Plus the higher the the FC the higher the BE point gets.
In a perfect Panglossian world FC is the bomb. But we don't live in perfection. As a result I distrust FC almost as much as I distrust debt... but that's just me.
OT: The property I live in is going into foreclosure. My landlord just came by and I spoke to them about how it is all playing out. I was surprised to hear that the bank told them that they could not have tenants in the property and they would need to be removed ASAP. This is completly false since my landlord still owns the property but just can not collect rent unless it is paid to the note holder. I find it really interesting that the mortgage services told them the tenants need to be removed. I am sure glad they had a lawyer who set the issue straight, otherwise I would not be getting the great no-rent deal and the place would be sitting vacant.
I've been thinking about a scenario. I'm not convinced it is true, but I would like to put it out there and get your comments.
I think Ford is a dead company walking. I don't base this on the quality of their vehicles but rather their balance sheet and credit. They owe a quarter of a trillion long-term, not counting untold pension and healthcare benefits. A strong economy and car market could be their salvation, but I don't see it.
I think they go down hard in the coming recession.
I see Chrysler getting broken up into pieces.
I think the UAW has foreseen this possibility, and they have no intention of cutting deals with Ford or Chrysler similar to GM. I don't see how For or Chrysler can afford to match what UAW has agreed to with GM, and I don't see any upside for UAW in giving them sweetheart.
So, this scenario would mean UAW has cast their lot with GM. I think the death of Ford will be a huge jolt for U.S. economic confidence. Not just because of the huge credit losses and job layoffs, but also because we (who invented the mass-produced car) would now be down to 1 public auto co.
This scenario would explain: 1) why UAW chose GM; 2) why they were so quick to deal. If anybody sees the trends in global auto sales, it has to be UAW. Don't you agree?
P.S. I'm sorry if I offended some people with my comments about ERISA. I really learned something from actuary/lawyer who responded. But I think Prudential is setting a trend by going after State Street on ERISA grounds, and it's going to be interesting to watch.
European, Asian and Canadian companies are taking advantage of the weaker dollar to buy their U.S. counterparts at a record pace, increasing investment in the United States but also raising fears about a potential loss of jobs and autonomy.
"We could be looking at the world's largest tag sale if we continue to see declines in the dollar," said Donald Klepper-Smith, chief economist at DataCore Partners.
"I'm not sure what the 'replacement rate' should be but considering how much cars cost, how long they last and lack of income growth for average Americans (relative to new car cost)... I'd say 16M is way too many new cars."
I kept my last car (Acura) for 15 years and 200K, and just sold it cheap to an ex-con who's trying to Rehabilite Himself and is happy to have a set of cool (if battered) wheels that still goes like a bomb. He'll probably get 50K out of it if he babies it along. And if he drops a replacement engine into it after that, maybe 100K more.
Most people don't nurse cars along like that these days; but if money gets tight -- they will. And the cars keep getting better and lasting longer.
I agree that Ford will not survive in it's current form but do you entertain the possibility of Ford as a niche producer of (say) the F-series (domestically) and in some partership agreement with a European firm for it's successful small car line?
Actually Rich, if anything I see the UAW as being even more motivated to cut deals with Chrysler and Ford. dryfly alluded to a big part of why I believe this to be the case. The big three all have very high fixed costs and are sickly in what is likely to be a tough market for the next several years. That to me is a recipe for a round of competitive airline industry-style bankruptcies to try to reduce those fixed costs. Bankruptcies allow labor contracts voided and and wages cut, not to mention pensions and retiree health care to be foisted off on the PBGC. One of the things the UAW got out of GM was that health care was to be administered out of a trust that GM would fund.
Bob Dobbs<
I have always appreciated the fact that a vehicle is a depreciating asset. Yes there are some that like the wow, gosh its new feeling. Not me. In 28 years I have bought 3 cars and was given one as a bonus in 87. Thats it. I drive a 11 year old Tropper that lives up to its name. Some of my friends shake their heads but I dont care.
When the Tropper dies (god rust its soul) I will decide on another by going to a dealership and choose one by colour - I still have never owned a red car.
Kinda funny, when I have bought a car the sincere sales folks always ask if I want to see under the hood - wtf, I would expect an engine to be there and I say so why would I wanna look.
Lived in SoCal for a while and my lord everybody got a new car at least every year.
When household budgets get tight, purchasing a new car falls way down the list. What I wonder about is that for the last few years, most car buyers have become to appreciate the 0 down and 0 interest. If this marketing program changes dramatically, and it will, how will buyers react?
Ford & Chrysler will get the same 'pattern agreement'... count on it.
That is unless Ford & Chrysler ask for more than they'll get a loooong strike.
Still may not be enough to save them - both are at risk over liabilities. Ford with all the pensions & Chrysler wit the LBO debt.
I wouldn't be at all surprised to see BK a la airlines. Or even an ESOP. Equity will be looking for any escape hatch they can find to evade reorg. They lose all in reorg. Exec mgmt though could get quite a sweetheart through reorg if they are kept on. Another example of corporate 'class warfare'.
European, Asian and Canadian companies are taking advantage of the weaker dollar to buy their U.S. counterparts at a record pace, increasing investment in the United States but also raising fears about a potential loss of jobs and autonomy.
If there are fears of losing jobs from this then the Asians and Europeans should worry. The reason foreign companies buy US when the dollar tanks is to practice 'labor arbitrage' in reverse. They buy our companies to gain access to 'cheap labor'.
Dry,
There sure is an unnamed EU biotech company looking for acquisitions here.
I think this is part of what's going to continue to carry US equities up. If Sarkozy gets his way and they devalue the Euro, they'll buy deflated values and receive income in parity values.
At least that's the idea.
Uh, how exactly does a 16.2 mil unit annual rate for Sept. get spun as a weak number? If the fleet sales were so lame, then consumer sales must have been pretty decent. Honestly, after reading the headlines this morning, I was expecting to hear something around 15.2 at the end of the day. What gives?
I see your 11 year old Trooper and raise you an 11 year old Camry, lol.
And I raise you both my 20 year old Acura Integra - bought it new in 1987. Great car. But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
I agree that Ford will not survive in it's current form but do you entertain the possibility of Ford as a niche producer of (say) the F-series (domestically) and in some partership agreement with a European firm for it's successful small car line?
I can definitely see Ford as a niche producer. But what happens to all those debts and liabilities?
The direct effect of $80+ oil will change the auto industry. If people are looking at $5+ gallon gas next spring, it will put a dent in truck/SUV sales.
But beyond that, I think $80+ oil gradually sucks the U.S. economy dry, period. Little by little. I don't think we can handle it while importing 16 million barrels a day. It's too much wealth outflow over time.
Ford won't be allowed to fail. They already have 50% of their sales overseas. If they can get Volvo/BMW and PAG to stop stucking wind, they will be fine. They have to get 2 of 3 things right, and right now they are getting one. They need to break even on domestic sales. They need to get profit out of PAG. They need to continue making money in Europe, South America, and continue developing the Eastern European and Russian markets.
"If they can get Volvo/BMW and PAG to stop stucking wind"
Volvo is part of PAG, isn't part of BMW, and has almost no likelihood of being sold to BMW. Jag is the only part of PAG that sucks at this point - though it does suck really hard. Both Land Rover and Volvo are near break-even, and Aston Martin was sold once it reached break-even.
It's in NA Ops where the money disappears. And looking at the current lineup, the NA problems won't get fixed anytime soon.
Credit crunch ripples into U.S. mega-mansion market
As the credit crisis started to shake global financial markets in August, the owners of the 22-acre (9-hectare) estate at 309 Taconic Road in Greenwich, Connecticut, cut their price to $19 million, showing turbulence in the U.S. housing market penetrating the wealthiest strata of American society.
"People are looking instead of buying, maybe since the second week of August," said Julianne Ward, director of fine homes at broker Prudential in Greenwich, a coastal town of 61,000 about 30 miles from New York City.
Until recently, the nation's most extravagant homes had defied the two-year slide in prices and surge in foreclosures roiling the broader property market, where existing home sales are down more than 20 percent from a 2005 peak, according to industry data.
But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
Good thing you didn't say "half as frugal" because there are three of us meeting that criteria, lol.
Come to think of it. I'm not necessarily half as frugal. We don't know for sure yet. It isn't like I'm buying a new car tomorrow, or next month, or next year, or next.... D'oh!
I usually do well in these "ostentatious parsimony" contests. My "old car" is a '78 Volvo. The new car is a '93. The peak oil sites have convinced me to wait for the all-electrics . . . and I'm still waiting.
But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
Good thing you didn't say "half as frugal" because there are three of us meeting that criteria, lol.
Come to think of it. I'm not necessarily half as frugal. We don't know for sure yet. It isn't like I'm buying a new car tomorrow, or next month, or next year, or next.... D'oh!
Stagflationary Mark |
My 2002 Expedition was paid for in 2005. It still runs like a champ. Could get 3-5 more out of it. People who live with long term car debt, and change cars alarmingly fast, orfeel there persona is defined by a car bother me.
Oh well, it'sthere money being pissed away not mine...Gold and Silver don't wear out...and I got a nice stash. Keep the penis mobile, I'll take gold.
The other shoe is sales and property tax receipts. The news from Michigan and some of the counties in California, is getting ominous on those.
Ya but both states are currently negative indicators no matter what happens to the economy overall... considering the auto and housing markets.
I'd say look at a couple states that are more 'middle of the pack'... not so dependent on housing or automotive and not in boom or bust... yet... and big enough to have an effect but not at the vortex of the problems.
I'd say watch Texas & Illinois... if their tax revenue decline... that would be an ominous sign.
Oh, and I don't mean budget deficits or surpluses because the spending side plays such a large role with that... (I know Illinois has major budget issues with unfunded liabilities with or without increrased tax revenues).
So just watch the revenue side of these two - if they start tanking then we'll have a good idea just how far containment has spread.
More than 65 percent of investors in mortgage-backed securities are struggling to find bids for their holdings, according to a survey of 251 institutions last month by Greenwich Associates, a Greenwich, Connecticut-based consulting firm. Among holders of CDOs, the figure is 80 percent.
"There is maybe $6 trillion in mortgage-backed securities outstanding. 65% of that amount would be $4 trillion.
There is maybe $1.5 trillion in CDOs outstanding. 80% of that amount would be $1.2 trillion.
We are probably very close to reaching a situation where there would be NO BID on these securities.
Can someone tell me how the world financial system could even function with NO BID on $5 trillion in securities stashed in financial institutions worldwide?"
My 2002 Expedition was paid for in 2005. It still runs like a champ. Could get 3-5 more out of it. People who live with long term car debt, and change cars alarmingly fast, orfeel there persona is defined by a car bother me.
I think cars are about as sexy as machinists think machining centers are sexy... tools of the trade, my cubicle. I maintain them well but drive them into the ground.
The only cars I've replaced shy of 200K miles are the ones that don't hold up to hard travel. I had one 2001 Ford Focus I dumped at 90K (ate tires no matter how many times I had it aligned & balanced) and a Chrysler Minivan I dumped after 140K (when the third tranny fell out. Grrrrrr, never bought another MV).
My wife and I now have two Jetta diesels - both with sticks, both get 50 mpg... one with 125K and the other with 150K on them. Awesome machines... I can drive from Minneapolis to Chicago and back on about one 12 plus gal tank of diesel. But still 'not sexy'.
But the record goes to my mid-90s Escort wagon... 308 mpg routinely and almost 300K on it when the engine finally blew. I drove it 150K without a single maintenance event other than oil changes & new tires. What was even more amazing is that my kids learned to drive stick on it (plus half their friends) and the tranny/clutch held up through all of that. Smelled charred but kept running.
An 80s Jeep Cherokee (old version) is a close second... I sold it to the mechanic who worked on it for me at around 300K... He says in now has something like 450K on it and still running. It would be #1 except it needed occasional maint. (rebuilt the clutch & tranny at about 125K & 250K).
Years after we sold the car to my mechanic - his daughter and my daughter would take it out four wheeling on the mud roads along the Mississippi back waters. It cracked the two girls up that was the car my daughter was hauled to dance lessons in as a very little girl... From dance lessons to 4WD off-roading... That's Daddy's girl!
I beat up cars like nobody on this planet... but then I cover a territory from Eastern Front of the Rockies to the Western Edge of the Great Lakes Region and from Canada to about Texas. Most accounts are rural so flying isn't even an option.
Expensive cars equal self-esteem for people without self-esteem. I like cars I can buy used, use the hell out of (Japanese to at least 200k), and get reimbursed for the miles I drive. Cash cows. If you are not already filthy rich, any car over $30k that you don't keep for at least 10 years is a waste of money and is compensation for some kind of huge short coming.
Correct me if I'm wrong but don't all three US auto firms essentially get the same deal from the UAW every contract round? I know little about labor issues, but my impression was that one of the big three is picked to be the negotiator, and then the other two inevitably follow along with the same deal. I was under the impression that was the result of some binding agreement, but it might just be custom.
Anyways, Ford won't die anytime soon, the Feds wouldn't allow it to.
I was under the impression that was the result of some binding agreement, but it might just be custom.
Its custom but customs do change. Cat & Deere had the same arrangement with the UAW for many years... Then at one negotiation session Deere settled and Cat didn't follow. Long multi-year strike where UAW eventually caved. They no longer have complete 'pattern agreements' though still have good contracts.
I don't see that happening with the Big One and Sorta Big Two Others.
Fed employees spent $146 million over a one year period on business and first class airline tickets.
In one case, a deputy director of the FDIC flew business class from DC to London and back at a cost of $7,200, while a coach class ticket would have cost $800.
A little less money left for those NetBank uninsured depositors. Let them eat the lobby donuts!
"Can someone tell me how the world financial system could even function with NO BID on $5 trillion in securities stashed in financial institutions worldwide?"
I'll be happy to volunteer as a white knight at .0000000000001 on the dollar.
12 year old Saab bought 9 year ago for cash - never a single penny wasted on car finance costs. Good for several more years, easy. And bought before GM got in there and screwed it up so the 900 now looks like a Honda.
Umm, no offense to Honda owners. I owned an Accord back in the early nineties and it was a super car. Just annoyed at what GM has done to a previously unique looking car.
vader, you're little joke isn't too far off the mark. With ~$2T in reserves, China just might try to buy Taiwan too. What else can they do with them...
checker wrote: The peak oil sites have convinced me to wait for the all-electrics
I personally prefer Diesel SVO (straight vegetable oil) as a hedge against peak oil potential. For SVO usage, you can get post-fast food oil for free (or cheap) or other (cheap) source like expired vegetable oil. And SVO seems to burn cleaner than diesel and you can't beat the smell: hot french fries!
BREAKING NEWS:
Deutsche Bank said it will take up to $3.3 billion in charges on leveraged loans and other credit products. Full article coming shortly.
If CR is right, and consumer spending is softening that is, of course, the biggest news there is.
What is ironic is that it will be taken as bullish by Wall Street: raises the probability of the Fed lowering rates.
So, there you have it: the dichotomous, psychotic United States at "work".
We have a group of very rich people in the "financial" industry whose lifeblood is easy money.
We have another group who are being squashed by the boot of Darwinian fantasies harbored by the first group who desperately need a sane monetary environment.
Let us hope that the latter group never decides that the former group would be better off at the end of a rope than driving around in German luxury cars.
Not related to auto sales but may be of interest...
Bernanke Spoke With Rubin as Credit Crisis Worsened
"The Federal Reserve's Aug. 7 decision to keep interest rates unchanged set off a chain of high-level discussions with Wall Street executives, money managers and cabinet officials that culminated in Chairman Ben S. Bernanke's public about-face 10 days later..."
OK, I'll chiume in (late). Every car I've owned I sold over 150,000 miles. Currently 135,000 on a Y2000 Olds Intrigue. Got 253,000 on my previous car, a Mazda Protege.
I say Dow at 12750. It may dip lower in the autumn somewhere, but there's usually an end of year rally.
Housing and auto sales are crucial to the economy because of all the "spillover" effects. Every decline in home sales means fewer agent commissions, fewer mortgage app processing fees and broker commissions, not to mention future hits to furniture and appliance sales.
Declining auto sales are less "contagious", but still have some spillover effect due to reduced sales commissions and dealership profits.
I'd wait til November to see confirmation of this apparent trend, however it does not look good for the US economy right now.
Nonfarm private employment grew 58,000 from August to September of 2007 on a seasonally adjusted basis, according to the ADP National Employment ReportTM. The estimated change in employment from July to August was revised down by 11,000 to 27,000.
This months ADP National Employment Report was the third consecutive weak reading and confirms the recent deceleration of employment.
let's all speculate what happened to Tanta this morning. i'll start:
abducted by Gretchen Morgenson in the middle of the night; bound and gagged and left in an abandoned van out by the docks.
bacon dreamz | 10.03.07 - 10:12 am | #
892
Calculated Risk:
This is second time in a row you mix "Q2" with "Q3" and the issue is the same. Please check again.
The Enronization of America continues
and America gets what it deserves with an economy largely run by financial rip off artists.
"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it". -- Congressman Louis T. McFadde
Has anyone posted this:
The article requested is no longer available.
this is big !
here the headline is better:
Greenspan: "It's Not Sub-Prime But Sub-Prime Asset-Backed Market That Created Credit Crisis" | AHN
Well, km4 - Louis said that in 1932. After that the government debt soared to over 140% of GDP in 1940's and since then went down again. Currently it is around 65-70% of GDP.
Don't you think it's time to pass Mr. Louis T McFadden and let him RIP? His speech was made in June 1932. That's the worst time of the Great Depression, imagine how it affected his thinking - and the speech.
Yal, i shal say this
its a bird, its a man, its a SubPrimeMan xD
Mr. Bail Out interestingly enough Louis T. McFadden quote is more approrpriate today then ever before so perhaps he was prescient
Like I said the Enronization of America continues....at FULL blast !
Well, km4, the fact that Louis said the government was practically bankrupted in 1932 simply means he didn't have an idea what he was talking about. Using him and his reference today means you don't know what you're talking about.
Mr. Bail Out you're in denial of reality.
That's your problem !
km4 - conspiracy theorists come and go all the time, but the Fed remains. I've chosen not to fight the windmills.
Mr. Bail Out pick up this book and get more educated on subject matter...
The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein (Author)
Amazon.com: The Shock Doctrine: The Rise of Disaster Capitalism (9780805079838): Naomi Klein: Books
Well if Toyota took a hit then that should soften the fallout for Ford at least. Toyota walks on water according to popular belief, so if they're sinking it gives everyone a pass.
km4, no offense, but "this book agrees with me" isn't exactly a rock solid defense in the post Barnes and Noble age. Hell Cramer is a top selling published author.
Why is it that I always get thrown by a book by every conspiracy theorist I meet? It's so easy to get covered behind a book. There are so many books in the world. How about, km4, if you educated yourself with this:
http://www.bos.frb.org/about/pubs/begin.pdf
while waiting for another 100 years Fed to get abolished.
km4...I agree completely with you and in a kindhearted hand to you, am offering to take each of your worthless greenbacks..whether paper or computer blips and relieve you of the dirge of living in this disaster. Good on ya.
"This evil institution has impoverished the people of the United States and has practically bankrupted our government."
Sorry our elected leaders have bankrupted the country threw unfunded spending. We as citizens are as responsable for this as they are. Thier is no free lunch.
"If the citizens neglect their Duty and place unprincipled men in office, the government will soon be corrupted; laws will be made, not for the public good so much as for selfish or local purposes; corrupt or incompetent men will be appointed to execute the Laws; the public revenues will be squandered on unworthy men; and the rights of the citizen will be violated or disregarded."
Noah Webster - (1758-1843)
Well if Toyota took a hit then that should soften the fallout for Ford at least. Toyota walks on water according to popular belief, so if they're sinking it gives everyone a pass.
While no one walks on water... Toyota 'swims' a lot better than the rest. One thing that story doesn't tell us is Toyota is NOT cutting margins much... price Toyota vs domestics of similar class and that becomes clear pretty fast.
Toyota has been above plan for so many years they feel comfortable with low single digit 'declines' considering their capacity. If they decline for a few years I'd start calling this 'sinking'... we ain't there yet. When you're lapping the field you can afford to pull back a little.
As far as the total build - 16M units is still a very healthy rate... In many ways, like the housing start/new home build debate, it is 'too healthy'.
I'm not sure what the 'replacement rate' should be but considering how much cars cost, how long they last and lack of income growth for average Americans (relative to new car cost)... I'd say 16M is way too many new cars.
JMHO.
Did the final auto sales number for September come out?
km4 - conspiracy theorists come and go all the time, but the Fed remains. I've chosen not to fight the windmills.
I wish we didn't have a fed or fiat... 'cause if we didn't have them I'd invent them, patent it and get rich.
Eh... but then I might elect to 'buy land' with my riches.
Toyota has overproduction problems, particularly on the Camry. Toyota over the next 3 years will look similar to Honda over the prior 3.
Did the final auto sales number for September come out?
REBear
That's what I want to know. Did someone get stuck in traffic of something?
Metrics Wonk the 1932 quote was too retro for Mr Bail Out so I posted something more up-to-date.
I don't recall explicitly stating "this book agrees with me" but did say 'get more educated with the subject matter'.
In many ways, like the housing start/new home build debate, it is 'too healthy'.
That's just it -- the market's expectations are for 'too healthy', let alone normal. What happens when the numbers actually go below normal? How about far below normal???
Toyota has overproduction problems, particularly on the Camry. Toyota over the next 3 years will look similar to Honda over the prior 3.
Probably won't hurt them operationally.
It is easy to back down assembly capacity a little without hitting their head since 70-80% of the cost to build are assembled components... And considering the weak dollar and how the increased demand for component production over the last fewer years came from offshore (a lot from Japan still)... they can back off the build, import less yen denominated components, let domestic dollar denominated component build catch up with demand and make fewer cars and almost if not more money. Not a bad place to be.
Now if the dollar skies on them... that doesn't hold up. But what's the chance of that?
Did the final auto sales number for September come out?
12.4
Bloomberg.com:
Economic Calendar
Now if the dollar skies on them... that doesn't hold up. But what's the chance of that?
Slim and none
What happens when the numbers actually go below normal? How about far below normal???
Then lowest cost producers survive...
More specifically the producers with the lowest fixed costs... since FC doesn't go away as volume declines. Japanese generally have lower fixed cost... not always but usually. They will generally accept somewhat higher variable cost in exchange for lower fixed coat - that in part explains their operational flexibility.
FC is a kin to 'leverage'... the more you lever up the FC the more money you make above breakeven but then also the more you lose below breakeven... Plus the higher the the FC the higher the BE point gets.
In a perfect Panglossian world FC is the bomb. But we don't live in perfection. As a result I distrust FC almost as much as I distrust debt... but that's just me.
"Chrysler.. fleet sales were down 20 percent in September, while GM's were down 7 percent"
Not consumer related but speaks to softening business investment, or rather expected business conditions
OT: The property I live in is going into foreclosure. My landlord just came by and I spoke to them about how it is all playing out. I was surprised to hear that the bank told them that they could not have tenants in the property and they would need to be removed ASAP. This is completly false since my landlord still owns the property but just can not collect rent unless it is paid to the note holder. I find it really interesting that the mortgage services told them the tenants need to be removed. I am sure glad they had a lawyer who set the issue straight, otherwise I would not be getting the great no-rent deal and the place would be sitting vacant.
I've been thinking about a scenario. I'm not convinced it is true, but I would like to put it out there and get your comments.
I think Ford is a dead company walking. I don't base this on the quality of their vehicles but rather their balance sheet and credit. They owe a quarter of a trillion long-term, not counting untold pension and healthcare benefits. A strong economy and car market could be their salvation, but I don't see it.
I think they go down hard in the coming recession.
I see Chrysler getting broken up into pieces.
I think the UAW has foreseen this possibility, and they have no intention of cutting deals with Ford or Chrysler similar to GM. I don't see how For or Chrysler can afford to match what UAW has agreed to with GM, and I don't see any upside for UAW in giving them sweetheart.
So, this scenario would mean UAW has cast their lot with GM. I think the death of Ford will be a huge jolt for U.S. economic confidence. Not just because of the huge credit losses and job layoffs, but also because we (who invented the mass-produced car) would now be down to 1 public auto co.
This scenario would explain: 1) why UAW chose GM; 2) why they were so quick to deal. If anybody sees the trends in global auto sales, it has to be UAW. Don't you agree?
P.S. I'm sorry if I offended some people with my comments about ERISA. I really learned something from actuary/lawyer who responded. But I think Prudential is setting a trend by going after State Street on ERISA grounds, and it's going to be interesting to watch.
(Convicted felon) Michael Milken says housing market won't recover soon.
Milken Says Housing Won't Recover for `Quite a While' (Update2) - Bloomberg.com
PS- correct me if I'm wrong, but is this the first time Milken has been anything but 100% bullish on anything related to the US economy?
European, Asian and Canadian companies are taking advantage of the weaker dollar to buy their U.S. counterparts at a record pace, increasing investment in the United States but also raising fears about a potential loss of jobs and autonomy.
"We could be looking at the world's largest tag sale if we continue to see declines in the dollar," said Donald Klepper-Smith, chief economist at DataCore Partners.
Weak dollar prompts record foreign buyouts of U.S. companies - The New York Times
Just like WallMart every day low prices.
"I'm not sure what the 'replacement rate' should be but considering how much cars cost, how long they last and lack of income growth for average Americans (relative to new car cost)... I'd say 16M is way too many new cars."
I kept my last car (Acura) for 15 years and 200K, and just sold it cheap to an ex-con who's trying to Rehabilite Himself and is happy to have a set of cool (if battered) wheels that still goes like a bomb. He'll probably get 50K out of it if he babies it along. And if he drops a replacement engine into it after that, maybe 100K more.
Most people don't nurse cars along like that these days; but if money gets tight -- they will. And the cars keep getting better and lasting longer.
Rich,
I agree that Ford will not survive in it's current form but do you entertain the possibility of Ford as a niche producer of (say) the F-series (domestically) and in some partership agreement with a European firm for it's successful small car line?
NC Jim I thought the same thing, but who could seriously afford to buy them AND not overlap models.
Actually Rich, if anything I see the UAW as being even more motivated to cut deals with Chrysler and Ford. dryfly alluded to a big part of why I believe this to be the case. The big three all have very high fixed costs and are sickly in what is likely to be a tough market for the next several years. That to me is a recipe for a round of competitive airline industry-style bankruptcies to try to reduce those fixed costs. Bankruptcies allow labor contracts voided and and wages cut, not to mention pensions and retiree health care to be foisted off on the PBGC. One of the things the UAW got out of GM was that health care was to be administered out of a trust that GM would fund.
Well, if Toyota would get me my hybrid minivan already, they might have another sale.
Why does Canada get them but I can't?
I just put up a chart of the Canadian dollar going back to 1971 if anyone is interested (with previous economic recessions shown too).
Bob Dobbs<
I have always appreciated the fact that a vehicle is a depreciating asset. Yes there are some that like the wow, gosh its new feeling. Not me. In 28 years I have bought 3 cars and was given one as a bonus in 87. Thats it. I drive a 11 year old Tropper that lives up to its name. Some of my friends shake their heads but I dont care.
When the Tropper dies (god rust its soul) I will decide on another by going to a dealership and choose one by colour - I still have never owned a red car.
Kinda funny, when I have bought a car the sincere sales folks always ask if I want to see under the hood - wtf, I would expect an engine to be there and I say so why would I wanna look.
Lived in SoCal for a while and my lord everybody got a new car at least every year.
When household budgets get tight, purchasing a new car falls way down the list. What I wonder about is that for the last few years, most car buyers have become to appreciate the 0 down and 0 interest. If this marketing program changes dramatically, and it will, how will buyers react?
Deloitte declines to stand for reappointment as Radian's auditor. That doesn't say a lot for Radian's book of business.
Ford & Chrysler will get the same 'pattern agreement'... count on it.
That is unless Ford & Chrysler ask for more than they'll get a loooong strike.
Still may not be enough to save them - both are at risk over liabilities. Ford with all the pensions & Chrysler wit the LBO debt.
I wouldn't be at all surprised to see BK a la airlines. Or even an ESOP. Equity will be looking for any escape hatch they can find to evade reorg. They lose all in reorg. Exec mgmt though could get quite a sweetheart through reorg if they are kept on. Another example of corporate 'class warfare'.
Barley,
I see your 11 year old Trooper and raise you an 11 year old Camry, lol.
Soon will it rest, yes, forever sleep. Earned it it has. Twilight is upon it, soon night must fall. - Yoda on car ownership
European, Asian and Canadian companies are taking advantage of the weaker dollar to buy their U.S. counterparts at a record pace, increasing investment in the United States but also raising fears about a potential loss of jobs and autonomy.
If there are fears of losing jobs from this then the Asians and Europeans should worry. The reason foreign companies buy US when the dollar tanks is to practice 'labor arbitrage' in reverse. They buy our companies to gain access to 'cheap labor'.
Laugh all you want but that's a fact.
dryfly,
I'm not laughing.
It seems Spain has a LOT to worry about these days.
on sequitor:
Stop the BS and every one this thread including CR give their Dec 31 Dow Jones Index prediction.
Mine DJI =13500
Dry,
There sure is an unnamed EU biotech company looking for acquisitions here.
I think this is part of what's going to continue to carry US equities up. If Sarkozy gets his way and they devalue the Euro, they'll buy deflated values and receive income in parity values.
At least that's the idea.
Uh, how exactly does a 16.2 mil unit annual rate for Sept. get spun as a weak number? If the fleet sales were so lame, then consumer sales must have been pretty decent. Honestly, after reading the headlines this morning, I was expecting to hear something around 15.2 at the end of the day. What gives?
Geoff, where did you get 16.2? I saw 12.4. I don't recall the last time I saw a number in the 16s.
Uh, 12.4? That would be a catastrophe. Here is what Im referencing:
GM, Honda Post U.S. Sales Gains; Ford, Toyota Fall (Update7) - Bloomberg.com
Stagflationary Mark : nice chart
Geoff: given the mark-up in truck sales and there tanking sales, i wonder if these companies can survive on selling fuel efficient cars.
I see your 11 year old Trooper and raise you an 11 year old Camry, lol.
And I raise you both my 20 year old Acura Integra - bought it new in 1987. Great car. But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
Geoff, I am seeing domestically produced vehicles. The 16M+ number is more like it - the total sold.
Econoday Reports - Consumer Price Index
October
17,
2007
I can definitely see Ford as a niche producer. But what happens to all those debts and liabilities?
The direct effect of $80+ oil will change the auto industry. If people are looking at $5+ gallon gas next spring, it will put a dent in truck/SUV sales.
But beyond that, I think $80+ oil gradually sucks the U.S. economy dry, period. Little by little. I don't think we can handle it while importing 16 million barrels a day. It's too much wealth outflow over time.
Ford won't be allowed to fail. They already have 50% of their sales overseas. If they can get Volvo/BMW and PAG to stop stucking wind, they will be fine. They have to get 2 of 3 things right, and right now they are getting one. They need to break even on domestic sales. They need to get profit out of PAG. They need to continue making money in Europe, South America, and continue developing the Eastern European and Russian markets.
Barley, StagMark, Bofiz,
I knew it would come to this--ostentatious parsimony! Can't beat bofiz, but I do drive a 12-year old Saab.
"If they can get Volvo/BMW and PAG to stop stucking wind"
Volvo is part of PAG, isn't part of BMW, and has almost no likelihood of being sold to BMW. Jag is the only part of PAG that sucks at this point - though it does suck really hard. Both Land Rover and Volvo are near break-even, and Aston Martin was sold once it reached break-even.
It's in NA Ops where the money disappears. And looking at the current lineup, the NA problems won't get fixed anytime soon.
Numbers by brand and group:
By The Numbers — Autoblog
Credit crunch ripples into U.S. mega-mansion market
As the credit crisis started to shake global financial markets in August, the owners of the 22-acre (9-hectare) estate at 309 Taconic Road in Greenwich, Connecticut, cut their price to $19 million, showing turbulence in the U.S. housing market penetrating the wealthiest strata of American society.
"People are looking instead of buying, maybe since the second week of August," said Julianne Ward, director of fine homes at broker Prudential in Greenwich, a coastal town of 61,000 about 30 miles from New York City.
Until recently, the nation's most extravagant homes had defied the two-year slide in prices and surge in foreclosures roiling the broader property market, where existing home sales are down more than 20 percent from a 2005 peak, according to industry data.
Credit crunch ripples into mega-mansion market
| Reuters
Trickle up.
bofiz, Barley, HVH,
But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
Good thing you didn't say "half as frugal" because there are three of us meeting that criteria, lol.
Come to think of it. I'm not necessarily half as frugal. We don't know for sure yet. It isn't like I'm buying a new car tomorrow, or next month, or next year, or next.... D'oh!
OK. I will not make too much hay out of one month...
But I've been waiting for this shoe to drop. New auto sales are one of the most reliable harbingers of a recession.
The other shoe is sales and property tax receipts. The news from Michigan and some of the counties in California, is getting ominous on those.
I usually do well in these "ostentatious parsimony" contests. My "old car" is a '78 Volvo. The new car is a '93. The peak oil sites have convinced me to wait for the all-electrics . . . and I'm still waiting.
Stop the BS and every one this thread including CR give their Dec 31 Dow Jones Index prediction.
Mine DJI =13500
Moose |
OK Moose...dow 12000, dollar at 65...calculate that.
Cheers,
bofiz, Barley, HVH,
But I suppose that if everyone were as frugal as I am, we'd be in a the next Great Depression.
Good thing you didn't say "half as frugal" because there are three of us meeting that criteria, lol.
Come to think of it. I'm not necessarily half as frugal. We don't know for sure yet. It isn't like I'm buying a new car tomorrow, or next month, or next year, or next.... D'oh!
Stagflationary Mark |
My 2002 Expedition was paid for in 2005. It still runs like a champ. Could get 3-5 more out of it. People who live with long term car debt, and change cars alarmingly fast, orfeel there persona is defined by a car bother me.
Oh well, it'sthere money being pissed away not mine...Gold and Silver don't wear out...and I got a nice stash. Keep the penis mobile, I'll take gold.
Cheers,
The other shoe is sales and property tax receipts. The news from Michigan and some of the counties in California, is getting ominous on those.
Ya but both states are currently negative indicators no matter what happens to the economy overall... considering the auto and housing markets.
I'd say look at a couple states that are more 'middle of the pack'... not so dependent on housing or automotive and not in boom or bust... yet... and big enough to have an effect but not at the vortex of the problems.
I'd say watch Texas & Illinois... if their tax revenue decline... that would be an ominous sign.
Oh, and I don't mean budget deficits or surpluses because the spending side plays such a large role with that... (I know Illinois has major budget issues with unfunded liabilities with or without increrased tax revenues).
So just watch the revenue side of these two - if they start tanking then we'll have a good idea just how far containment has spread.
JMHO.
From reader Bernard Ber at Winter Watch:
Fed Fails to Restore Creditor Confidence, Pimco Says (Update1) - Bloomberg.com
More than 65 percent of investors in mortgage-backed securities are struggling to find bids for their holdings, according to a survey of 251 institutions last month by Greenwich Associates, a Greenwich, Connecticut-based consulting firm. Among holders of CDOs, the figure is 80 percent.
"There is maybe $6 trillion in mortgage-backed securities outstanding. 65% of that amount would be $4 trillion.
There is maybe $1.5 trillion in CDOs outstanding. 80% of that amount would be $1.2 trillion.
We are probably very close to reaching a situation where there would be NO BID on these securities.
Can someone tell me how the world financial system could even function with NO BID on $5 trillion in securities stashed in financial institutions worldwide?"
I'll pick DOW = 11500
My 2002 Expedition was paid for in 2005. It still runs like a champ. Could get 3-5 more out of it. People who live with long term car debt, and change cars alarmingly fast, orfeel there persona is defined by a car bother me.
I think cars are about as sexy as machinists think machining centers are sexy... tools of the trade, my cubicle. I maintain them well but drive them into the ground.
The only cars I've replaced shy of 200K miles are the ones that don't hold up to hard travel. I had one 2001 Ford Focus I dumped at 90K (ate tires no matter how many times I had it aligned & balanced) and a Chrysler Minivan I dumped after 140K (when the third tranny fell out. Grrrrrr, never bought another MV).
My wife and I now have two Jetta diesels - both with sticks, both get 50 mpg... one with 125K and the other with 150K on them. Awesome machines... I can drive from Minneapolis to Chicago and back on about one 12 plus gal tank of diesel. But still 'not sexy'.
But the record goes to my mid-90s Escort wagon... 308 mpg routinely and almost 300K on it when the engine finally blew. I drove it 150K without a single maintenance event other than oil changes & new tires. What was even more amazing is that my kids learned to drive stick on it (plus half their friends) and the tranny/clutch held up through all of that. Smelled charred but kept running.
An 80s Jeep Cherokee (old version) is a close second... I sold it to the mechanic who worked on it for me at around 300K... He says in now has something like 450K on it and still running. It would be #1 except it needed occasional maint. (rebuilt the clutch & tranny at about 125K & 250K).
Years after we sold the car to my mechanic - his daughter and my daughter would take it out four wheeling on the mud roads along the Mississippi back waters. It cracked the two girls up that was the car my daughter was hauled to dance lessons in as a very little girl... From dance lessons to 4WD off-roading... That's Daddy's girl!
I beat up cars like nobody on this planet... but then I cover a territory from Eastern Front of the Rockies to the Western Edge of the Great Lakes Region and from Canada to about Texas. Most accounts are rural so flying isn't even an option.
But the record goes to my mid-90s Escort wagon... 308 mpg routinely and almost 300K on it when the engine finally blew.
I wish... try 38 mpg. Damn fat fingers and blurry old eyes.
My personal joke was that instead of a war, West Germany just bought East Germany and reunited.
Likewise, the rest of the World, tired of US screw ups, could just buy it.
Expensive cars equal self-esteem for people without self-esteem. I like cars I can buy used, use the hell out of (Japanese to at least 200k), and get reimbursed for the miles I drive. Cash cows. If you are not already filthy rich, any car over $30k that you don't keep for at least 10 years is a waste of money and is compensation for some kind of huge short coming.
Likewise, the rest of the World, tired of US screw ups, could just buy it.
From what I've seen of the transplants they'll be better owners too, take better care of 'the assets'.
Correct me if I'm wrong but don't all three US auto firms essentially get the same deal from the UAW every contract round? I know little about labor issues, but my impression was that one of the big three is picked to be the negotiator, and then the other two inevitably follow along with the same deal. I was under the impression that was the result of some binding agreement, but it might just be custom.
Anyways, Ford won't die anytime soon, the Feds wouldn't allow it to.
I was under the impression that was the result of some binding agreement, but it might just be custom.
Its custom but customs do change. Cat & Deere had the same arrangement with the UAW for many years... Then at one negotiation session Deere settled and Cat didn't follow. Long multi-year strike where UAW eventually caved. They no longer have complete 'pattern agreements' though still have good contracts.
I don't see that happening with the Big One and Sorta Big Two Others.
From what I've seen of the transplants they'll be better owners too, take better care of 'the assets'.
A lot of Americans would not mind a change of owners. At the factory level and above that.
Millions Wasted on Government Travel
Fed employees spent $146 million over a one year period on business and first class airline tickets.
In one case, a deputy director of the FDIC flew business class from DC to London and back at a cost of $7,200, while a coach class ticket would have cost $800.
A little less money left for those NetBank uninsured depositors. Let them eat the lobby donuts!
Report: Millions Wasted on Gov't Travel
"Can someone tell me how the world financial system could even function with NO BID on $5 trillion in securities stashed in financial institutions worldwide?"
I'll be happy to volunteer as a white knight at .0000000000001 on the dollar.
1997 Honda Civic
Year-End Dow 14,700
USDX ~80
(Too many articles about a "sucker's rally" and "Black October". It's not time, yet.)
Telegraph UK
Jump off the deranged bull now
Telegraph Blogs
12 year old Saab bought 9 year ago for cash - never a single penny wasted on car finance costs. Good for several more years, easy. And bought before GM got in there and screwed it up so the 900 now looks like a Honda.
Dow 13800 despite another rate cut.
Umm, no offense to Honda owners. I owned an Accord back in the early nineties and it was a super car. Just annoyed at what GM has done to a previously unique looking car.
vader, you're little joke isn't too far off the mark. With ~$2T in reserves, China just might try to buy Taiwan too. What else can they do with them...
checker wrote: The peak oil sites have convinced me to wait for the all-electrics
I personally prefer Diesel SVO (straight vegetable oil) as a hedge against peak oil potential. For SVO usage, you can get post-fast food oil for free (or cheap) or other (cheap) source like expired vegetable oil. And SVO seems to burn cleaner than diesel and you can't beat the smell: hot french fries!
sterlingerl: what did GM do to Honda Accord?
As far as I know, GM works with Toyota at NUMMI (Fremont, CA) and GM owns part of Isuzu and Suzuki. But GM and Honda?!?
Front page of the journal:
BREAKING NEWS:
Deutsche Bank said it will take up to $3.3 billion in charges on leveraged loans and other credit products. Full article coming shortly.
What was that about the confessional being open?
sterlingerl: what did GM do to Honda Accord?
As far as I know, GM works with Toyota at NUMMI (Fremont, CA) and GM owns part of Isuzu and Suzuki. But GM and Honda?!? - DannyHSDad
My GM reference related to the post before. They bought Saab. I own an old Saab now.
If CR is right, and consumer spending is softening that is, of course, the biggest news there is.
What is ironic is that it will be taken as bullish by Wall Street: raises the probability of the Fed lowering rates.
So, there you have it: the dichotomous, psychotic United States at "work".
We have a group of very rich people in the "financial" industry whose lifeblood is easy money.
We have another group who are being squashed by the boot of Darwinian fantasies harbored by the first group who desperately need a sane monetary environment.
Let us hope that the latter group never decides that the former group would be better off at the end of a rope than driving around in German luxury cars.
Not related to auto sales but may be of interest...
Bernanke Spoke With Rubin as Credit Crisis Worsened
"The Federal Reserve's Aug. 7 decision to keep interest rates unchanged set off a chain of high-level discussions with Wall Street executives, money managers and cabinet officials that culminated in Chairman Ben S. Bernanke's public about-face 10 days later..."
Bernanke Spoke With Rubin as Credit Crisis Worsened (Update1) - Bloomberg.com
HVH and Sterlingirl: Buyin' them new-fangled 4 strokes huh? Some of us think that if you can't smell it comming, it's not a REAL SAAB.
Disclosure: While I've never bought a new car, my current vehicles won't put me in the front of the parsimony rally.
BankUnited (BKUNA) warns of an earnings shortfall.
OK, I'll chiume in (late). Every car I've owned I sold over 150,000 miles. Currently 135,000 on a Y2000 Olds Intrigue. Got 253,000 on my previous car, a Mazda Protege.
I say Dow at 12750. It may dip lower in the autumn somewhere, but there's usually an end of year rally.
Housing and auto sales are crucial to the economy because of all the "spillover" effects. Every decline in home sales means fewer agent commissions, fewer mortgage app processing fees and broker commissions, not to mention future hits to furniture and appliance sales.
Declining auto sales are less "contagious", but still have some spillover effect due to reduced sales commissions and dealership profits.
I'd wait til November to see confirmation of this apparent trend, however it does not look good for the US economy right now.
From the ADP report:
Nonfarm private employment grew 58,000 from August to September of 2007 on a seasonally adjusted basis, according to the ADP National Employment ReportTM. The estimated change in employment from July to August was revised down by 11,000 to 27,000.
This months ADP National Employment Report was the third consecutive weak reading and confirms the recent deceleration of employment.
BankUnited's NPAs went from $124MM to $210MM in the last 90 days. Now about 1.7% of loan balance.
ew game:
let's all speculate what happened to Tanta this morning. i'll start:
abducted by Gretchen Morgenson in the middle of the night; bound and gagged and left in an abandoned van out by the docks.
ew game:
let's all speculate what happened to Tanta this morning. i'll start:
abducted by Gretchen Morgenson in the middle of the night; bound and gagged and left in an abandoned van out by the docks.
bacon dreamz | 10.03.07 - 10:12 am | #
Corn field.
Don't f***ing second guess Bernie.
The truly big news is that grain prices are topping out.
Brian, any more details about BKUNA's non-paying assets? That's a heck of a rise!
Maybe the world can breath alittle easier with less cars on the road.