Tuesday, November 4, 2008
It never fails: "buy the rumor, sell the fact." Auto sales data released yesterday plunged, and as the chart shows they are abysmally low. Yet the market is rallying because it is looking ahead to the next new new thing. On that score, I would note that auto sales have fallen by one-third so far this year, but the number of people working has fallen by less than 1%, and real personal income has been about flat. That means the decline in sales of big-ticket items is temporary, a rational response to all the negative headline news. By pulling back, the consumer is building up his cash reserves (something that everyone has been doing of late). When confidence returns (as it is now returning to the equity markets, albeit slowly) then spending can rebound.
Posted by Scott Grannis at 12:27 PM