Monday, March 17, 2008

Reality leaves a calling card, or two.

There were numerous articles available today bewailing how many banks and investment firms are insolvent and/or up to their eyeballs in red ink, and papers like the UK Independent saying ugly things like "second great depression," but those things don't really have any meaning for todays young and middle aged couples. They have no reference experience to deal with those ideas.

So I thought I would link something a bit more "every-day-ish," something I mentioned would happen and now has.

Gas guzzler glut
Fuel prices have SUV owners anxious to unload big vehicles
By NATHAN HALVERSON and Clark Mason
THE PRESS DEMOCRAT March 16, 2008

..."I'm getting four to five people a week with big SUVs and pickups screaming at me, 'Help me get rid of this,' " said Dave Bower, owner of B&L Auto Sales, a used car dealer on Santa Rosa Avenue. "But I have to turn a lot of them away. I've already got enough."

...While demand dwindles, supply is increasing as more people unload their inefficient rides for something with better gas mileage. Prices have plummeted anywhere from 30 percent to 50 percent for used trucks and SUVs, according to Sonoma County car dealers.

"They are just not getting the same prices they were a few years ago," said Cherie Adamson, whose family has run the weekend Carmart for 24 years at the Sonoma County Fairgrounds in Santa Rosa. "Everybody is looking for smaller four-cylinder vehicles now."

...About three out of four people who come into B&L Auto Sales with a used car to trade in are "upside-down" on their car loans -- meaning they owe more than the vehicle is worth.

"These are everyday, working-class people," Bowen said.

Nationally, one in four people who traded in a used car to buy a new one in 2007 was upside-down on their loan, according to Edmunds.com, which tracks industry sales.

These people owed an average of $4,059 -- the greatest disparity between vehicle value and loan value on record. And the trend is only expected to get worse in 2008, according to Edmunds.com...


But people will soon realize that they can go and buy a new more efficient care while their credit is still decent, and then default on the gas-guzzling SUV's and trucks. And for those not quite so deep in debt for their cars but who still can't sell them, expect to see a rash of "car thefts" that all result in the cars being burned up. That way they can use the insurance money as a down payment for an efficient car. Others may try and sell them as parts or scrap, to just get whatever they can back out of them - because the price of gasoline and diesel is now or will soon be worse than the difference between what they owe the bank and what the vehicle is worth.

I'm afraid the time to get rid of your inefficient car by selling it or trading it in for a good car has passed - as I warned it would. The window of opportunity has closed. Those bank and investment house failures are still out there, too, and the dollar is still well on its way to becoming worthless (pray hard for asset deflation instead, class - hyperinflation is much less fun than finding out you overpaid for your stuff), and peak oil is not going away, either. So why not save yourself both the cost of another car and the gasoline and move near mass transit while you still can? How many more windows of opportunity will close soon?

And the second calling card of the day:

The Daily Grunt
~ If I have anything to say
March 17, 2008:

A correspondent working for the US Dept of Agriculture brings strange tidings about government solvency.

"I'm writing you this email to tell you something which I find pretty
disturbing. USDA is the second largest federal office building in D.C. It is
massive, with hallways that stretch for three city blocks on seven floors, and
one block the other way on each floor. For the last few months, every other
overhead light in the halls has had their bulbs removed. Sometimes, two lights in a row are dark. It's bright enough to walk down, no doubt, but still
noticeably darker. Moreoever, each floor has two banks of elevators at each
end, with three elevators per bank. For the last few months, one elevator at
each bank has been put out of commission. Further, employees are now forbidden from putting space heaters in their offices, which many have done because the heating in the building has been turned down to a level where even I, a descendant of hardy Russian peasants, feel cold.
"What does this tell me? It tells me that the government of the United States of America is having difficulty paying its utility bills. Think about that.
Federal offices cannot keep all the lights on, or keep the heat sufficiently
high. (We'll see what the air conditioning is like in a few months, when D.C.
turns into a humid swamp). This is what one expects of Third World governments, not the USA."


How much longer can the government keep paying market rate prices for gasoline and diesel? How much longer before they decide to enact demand destruction and eliminate the competition from private automobiles? There's no way to tell - all we can do is look for signs that the government is in trouble. And there are several, class. How much time do you have left to reposition yourself for the new economic realities? Not much time, class. Not much at all.

3 comments:

Garnel Ironheart said...

1) The SUV thing is not new. During the last recession the same headlines also came out. And over time, SUV sales went up anyway. Me, I don't understand the point of an SUV. A van, fine, if you have a large family and feel like locking yourself in a confined space with them for a period of time. But an SUV is a status toy, period. So no sympathy for me.

2) I'm taking the lightbulb story with a grain of salt. Governments are the last organizations to cut back since they can always suck more money out of the taxpayer to cover their expenses. Having said that, when I went to U of T, I remember many a night walking past the Ontario Hydro building and seeing every single freakin' light in the place still blazing at 10 pm. If this story is true, well again I have no sympathy.

Garnel Ironheart said...

First of all, have an easy fast.

Second, I'm surprised you didn't have anything on the commodity meltdown yesterday.

In fact, I'm getting more reassured the lower the market goes. My one big fear has always been that the market is irrationally high based on Boomers sticking money into it at a mad rate in the hopes of unrealistically easy returns. The concern I had was: what happens in 10-15 years when the majority of them have retired and starting yanking that money out for their living expenses? The lower the Dow and TSX (our index) go, the less nervous I feel about the future. It makes the eventual drop that much less painful.

Also, keep in mind: If you invested money on the day BEFORE the stock market crash in 1929, by 1939 you'd have been very rich.

Never discount the future. As Mr. Spock once said, "there are always possibilities."

Ahavah said...

The equilibrium value of the stock market is somewhere between 8000 and 9000 right now, I think - very rough estimate. So stocks are still very overvalued - having them come down is good. What's bad is when they continue to go up - it reflects currency devaluation, not stock value.

Thank you for the wishes for the fast. Fasts mess up my blood sugar and give me a terrible headache, so be glad you're far away...LOL