Wednesday, March 3, 2010

Car sales look strong

Car sales dipped in February, but over the past year they are up 13.7%. Nothing moves in a straight line, but it seems to me that the upward trend here is clear (especially if you abstract from the temporary gyrations caused by cash-for-clunkers program last August). The bounce we've seen in the past year is about as strong as any we've seen coming out of prior recessions.


septizoniom said...


Benjamin Cole said...

Go auto sales.

Still, investors are on the sidelines, mostly. No real drive to invest.

I wonder if we do need financial reform.

The Long Term Capital Management collapse was not caused by regulation, yet had repercussions. Now we have doznes and doznes of "investors" similarly leveraged.

Buffet called leverage and derivatives "weapons of financial mass destruction." Obviously, Munger agrees.

Of course, there is use to a hedge, put-call option, derivative etc. There is also use to a V-8 with 350 horsepower.

Do you let your teenage son drive a 350 hp V-8? (I am showing my age here, but you get the point).

If private sector investors-speculators can levberage up 100-to-1 on a couple billion dollars of equity, what are the potential consequences?

I agree that regs foir regs sake are a bad idea. Yet, I also currenly lack confidence that another financial bust could not happen. Obviouly, we jsut had a bust in present regulatory framework. Could happen again, to state the obvious.

I am beginning to think that all we need for sustained boom is a feeling by investors that our financial sytm is rock-solid, and the federal debt is retreating, not growing.

I know how to cut federal debt (not politically, but...).

I am no sure hwo to make investyors believe the financial system is rock-solid. Free markets are prone tp busts--but we do not want our financial system to bust.


alstry said...


This from Calculated Risk:

This is the lowest level since September - when sales fell sharply after the "Cash-for-clunkers" program ended in August. The current level of sales are very low, and are still below the lowest point for the '90/'91 recession (even with a larger population).

Right now it looks like both seasonally adjusted auto sales and residential investment will be lower in Q1 than in Q4 2009.

As you were the one who taught me to view conditions on the appears on the margin, conditions are getting worse for housing, autos, tax recepits and bankruptcies.

Scott Grannis said...

The best way to minimize the danger of another financial system bust is to minimize the government's involvement. The roots of the recent financial crisis go straight back to too much government regulation, intervention and interference in markets. Fannie, Freddie, CRA, Congressional "oversight," etc.

Scott Grannis said...

alstry: sometimes looking at change on the margin is complicated by external events such as record snowstorms.

alstry said...


I wholeheartedly agree with you that you can't tax a nation into prosperity, but only ruin.

But the current problem is really pretty simple to can't lend a consumer economy into prosperity either....but you sure can have a fun party while it lasts.

We borrowed about $50 trillion dollars between 1980 and 2008....and most of that amount was borrowed AFTER 2000.

As a nation we lent each other money to consume and most of that debt is what makes up our life insurance policies, retirement accounts, and investment accounts....and foreigners only own a relatively small percentage of the total US public and private debt.

Just look at homebuilder HOV's earnings....they only earned a profit because of a one time tax rebate from government as revenues evaporated. Since homebuilders capitalize interest and not expense it, they conceal to the casual observer that they are barely generating enough revenues to cover the billions in debt obligations.

But HOV's issues are not unique...too much debt infects our schools, hospitals, cities, counties, states, businesses and families.....and now it is getting harder and harder to service the debt as credit is being cut off at all levels.

It will be interesting how this plays out as now government's spending has little correlation to its tax receipts. And as your charts so perfectly demonstrate, the gap is getting wider as we run a serious Constutional question about the legitimacy of government spending on a variety of levels.

We do live in intesting times and you have one of the best blogs on the internet.