In the past 15 years, the automobile industry has witnessed monumental shifts, such as the boom in the popularity of the SUV, a Japanese company becoming the world’s largest automaker, and the rise of the hybrid. However, one thing in common between June of 1993 and June of 2008 in the world of automobiles is that roughly the same amount of cars were sold. Today it was announced that US auto sales reached a 15-year low, and I think that it is a fitting reflection of the larger economic situation.
For over a hundred years, automobiles have been mass produced in America. Their presence has encouraged, perhaps more than any other invention, the amazing growth that has occurred in both our cities and populations. When Americans navigated the Oregon Trail in the 19th century, their journeys would last five or six months. Now, because of the automobile, that famous trek could be completed within two days (if you drive like my father does) or three days (if you drive like someone who values their own life).
There are plenty of reasons for why so few cars are being sold. Many of those reasons are similar to the problems facing many of the world’s top economic authorities: oil prices, credit woes, price instability (inflation), etc. Despite automakers best attempts to entice buyers, the fish just aren’t biting on those lines, no matter how appealing the bait. The bottom line is that gas in the US is over $4 per gallon, with no end in sight. Unless a new car can get you fantastic mileage, the odds that a person even wants to consider buying one is slim to none.
Perhaps, in some twisted way, this is a sign of more responsibility being taken by individuals. Perhaps this is an indicator that more people are looking for alternative ways to get around town. Perhaps this is a sign that the US is finally going to start demanding less oil… perhaps probably not. There is a long way to go before the US will kick what my colleague John labeled “our heroin-like addiction to oil.â€
When I studied ‘Black Wednesday’ and the subsequent recession that the UK experienced, I read an interesting commentary on the episode. The economist wrote that the whole process was necessary in the long-run in order to “wring out†inflation from the UK’s economy. So perhaps, if certain pieces fall into the right places over the next few years, this current recession might be able to help “wring out†high oil prices and our addiction to automobiles from the US economy. If that ever happens to be the case, maybe today’s announcement will be seen as a landmark for when consumers finally began the long-overdue process of ending “our heroin-like addiction to oil.â€
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July 2, 2008 No Comments
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           Expect range trading until Thursday, because so many market moving events take place in one day. Blame the long weekend, but if we don’t play the news correctly the weekend could be very long indeed. The major news for Thursday is the ECB’s rate decision; expect the following commentary to be picked apart extensively following the decision. The hike is almost a given, as it has already been priced in the market. Trichet will most likely explain that inflation within the EZ is his main concerns. The ECB is viewed as the world’s hawk, and they are poised to defeat the inflation beast. Prior to the decision Swiss CPI numbers come out, as well as EZ retail sales. Expect the CPI to be high and exceed expectations, and expect retail sales to be in line with expectations. In short the jump in CPI will move the market, because inflationary fears will seep in. While the retail numbers will not be horrible and not signal a contraction but it will indicate modest growth in tune with expectations.Â
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              Shortly after US unemployment data comes out which is likely to be larger than expected, the market moving non farm payrolls follows and it may shock. The growth of the past quarter was almost entirely export driven. This sector of the economy must compete on a global scale, and because of this they are uber efficient. An increase in export production does not correlate to a decrease in unemployment. Expect the non farm payrolls disappointment to indicate a future slow down in the US economy, and has the potential to be very market moving. The Fed definitely dropped the ball last week because all the data juxtaposed with expectations do not look promising. In short all the news together may move oil to past the $150 threshold. Gracias Bernanke & Co. The economy will recede regardless of the interest rate; however the depth of the recession will reflect the Fed’s future decisions, and reputation.Â
July 2, 2008 No Comments
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