E. M. Smith has some cogent thoughts on the matter.
Two different car traders saying cars are not selling at auction. This is bad ... The implication here is that recent interest rate rises along with price inflation and job loss has folks just not buying cars, so dealers are not buying them, even at wholesale auction, and that means banks are going to have a lot of “inventory” on their books when they would rather have the “bad loan losses” gone and be re-lending the money. But they aren’t. All around not good.
First it is cars. Then it is houses. Then it is businesses. Then the economy augers in.
. . .
Fuel costs are rising incredibly as the Gang Green Policies put reserves out of reach of production.
The Fed has been punting interest rates up at a crazy rate. What is it, 3 x 3/4% in a row (in a market where 2 x 0.25% is prone to apoplexy)?
Ford, GM, and others have announced going 100% EV (so why in hell would anyone invest in oil production and refining with a 30 year payback, and why would a dealer buy used petroleum cars for resale? Also why would folks with gas or Diesel trucks trade them in for unobtainium EV trucks?)
Bottom line is that a great shock is being pushed into the car / transport business and The People are not buying it (or the cars); so the sector (and with it the economy writ large) is shuddering to a halt.
. . .
But that the banks are not selling distressed assets (priced too high at auction), and the market is not clearing for used / repo cars… well that argues strongly for “collapse in early stages”. Watch for falling real estate prices, contracting GDP, and overall monetary decline in value in keeping with the Real inflation Rate (not the nominal government numbers). Eventually real estate will go back up in value, but only after the price bubble collapses and the market clears. Usually about a year to 18 months.
That folks are letting go of their cars is bad enough; but that brokers are not buying the inventory at prices that the banks loaned on; well that’s very bad as is indicates the Bank Loan Desks are already compressed and it will only get worse as higher interest rates and Government Mandates put them further under water. This will ripple back upstream to the car makers, their employees, and more. At a slightly slower and slightly delayed timing, the same thing ought to show up in the housing market. I’m already seeing “For Sale” signs staying up a long time on local houses; where 6 months ago they were selling the same day they were listed.
Hang onto your hats, it’s going to be a bumpy ride and the roller coaster is just pulling out of the station.
There's more at the link.
Remember our discussion last week of producer price inflation in Germany? It contained this graphic (clickit to biggit):
That last bit, the very steep rise in PPI, is presently running at well over 40% year-on-year; and the PPI is upstream of the consumer price index (CPI), which is going to be hit even harder. If - I should say, when - Germany's economy collapses, it takes the European Union with it. That also removes most of our major trading partners from the board, so the US economy will tank soon thereafter, even without considering internal issues such as inflation and supply chain problems.
Folks, this is actually happening right in front of our eyes. It's no longer hypothetical; it's no longer purely theoretical. It's going down. Now. Mr. Smith's remarks merely provide a different perspective on a reality that can no longer be denied.
As John Donne said about death and dying:
Send not to know for whom the bell tolls. It tolls for thee.
He might as well have been talking about the US and global economies at this point.
I hope and pray all my readers have taken the opportunity, and had the wherewithal, to prepare as best they can for what's coming. None of us are going to find it easy to weather the economic storm; but "forewarned is forearmed", and if we've applied ourselves, we should by now be as ready for it as we can be. That won't make it easier to survive, but we'll be better off, and have a better chance of doing so, than those who shrugged off all warnings and carried on as if they didn't have a care in the world. They're about to find out how wrong they were.
Peter
20 comments:
No worries. After November it's the Republicans fault.
And the pass the buck destruction of our Republic continues apace.
I had to grimly laugh at this morning's lead article on MSN.
Bidens Plan to end Hunger gathers 8 billion in support pledges. Speaking of the overrun Food Banks unable to get more for the NEED.
Early on was the statement that NO procedure was in place to enforce these pledges over several years.
A Let's FEEL GOOD about Biden article, eh?
That and fake money cannot create a single loaf of bread to be bought.
As Ice Age Farmer and Michael Yon has pointed out WE ARE EATING LAST YEARS Food production and this year's isn't going to be near enough.
Just before the Great Depression the Democrats dumped the election to the Republicans knowing THEY would take the heat. Thus, President Hoover a Republican got to be the boo hiss word for homeless shanty towns being "Hoovervilles" and a Smash Sandwich of two bits of bread were "Hoover Steaks" and so on. Then the Dems ran Roosevelt with the song "Happy Days are here again" and a Chicken in every pot.
THEN the confiscations of gold and 30% devaluation of the dollars "Given" for that gold commenced.
Happy Days are here again and again and again.
Nothing new under the sun
and we just guaranteed the collapse of europe by blowing up the nordstream pipeline and brought on ww3, all to line the pockets of the grifters via ukraine. i just hope they never live to enjoy their spoils and they die an agonizing painful radiation death.
What Smith hints at but doesn't say in the shortest possible sentence is that this is all being done deliberately by the central banks. It may be driven by "gang green," but they'd have no power if we had a stable currency. The central banks' whole existence is based on the idea that the economy is theirs to control. They created raging inflation by creating too much money too fast, and now they're killing the inflation the only way they can by killing the economy.
The whole problem is central banking. If for no other reason than it gives big government-types the power to destroy. The power to destroy us.
I'm kinda sorta in the market for a 3/4 or 1 ton truck to haul the RV. Right now I'm doing it with a 10 year old 1/2 ton which works, but I'm pulling at or slightly above the rated tow limit for the truck. So, new trucks (what I'm looking at, anyway) are $65k or more in decent trim and good luck finding one specc'ed out like you want. Ford stopped making F-250's several months back and all dealer lots are half-empty. So for $65k, if I'm not able to get exactly what I want new, I'm not buying whatever they happen to have left-over on the lot.
That leaves a used truck. I don't mind buying used, but 5 year trucks with a 100k miles on them are, wait for it, $65k or so on Carmax right now. That's a new truck price. Well holy crap, batman. Looks like I'm not buying a used truck either.
The entire truck market can collapse at this point for all I care. My old 1/2 ton still runs good, and I can make it last. At this point in time, hopefully you have what you need. Take care of it, make it last, and hope there's some light at the end of the tunnel however many years down the road it takes to recover.
I've just watched this YouTube video on the auto market and associated price corrections as repos go exactly nowhere at auction. Highly interesting stuff and matches what is being said in this blog post.
"Auto Sales Insider Just Shared This Crazy Info ( Banks About To Crash )"
https://www.youtube.com/watch?v=2DgrL-T8LCw
I see 2008 repeating. That was when I got out of the car biz after twenty+ years. In the majority of sales there are two customers, the purchaser and the lender. In 2008, other than the captive lenders (GMAC, FMC, etc) financing was hard to near impossible to obtain even for solid citizens.
A related problem today that wasn't a factor in the past is repairs. Mechanics I know say getting parts is difficult and the quality of the parts they do get has greatly declined. In my small city the good shops are jammed with a waiting time for an appointment a month.
Every time I think I have stored enough food another indicator pops up saying, "Oh no you haven't". Today it is canning: 14 quarts of legs and thighs, 6 quarts of broth, drying: 6 lbs of cherry tomatoes, 4lbs od whole green beans, and 22 lbs pf biltong. Tomorrow I do more of the same.
For the first time in nigh forty years in business, a friend had stopped taking new work orders. His business is a busy six stall auto garage.
Don:
Have you considered looking at a used commercial box truck or flatbed type? I would think they would make an excellent tow rig. Preferably a diesel, although some of them have v8 gas engines. The diesel will last much longer, and you may have excess carrying capacity to haul things you couldn't with your current light duty pickup. It should be much cheaper than $65k if you don't need a new vehicle.
@Will: Two questions for you.
1. Some private insurers won't insure a flatbed or box truck for private ownership - they claim those are commercial features, so the vehicle needs (more expensive) business insurance. Any advice on how to get around that?
2. Where would one look for such vehicles in decent condition? I'm sure most of us know how to evaluate private vehicles, but what should one look for in a commercial vehicle that might have been much more heavily used? Are there pitfalls?
Checked around with a few pals in the car biz in the Upper Midwest. No noticeable 'auction problems' up here. Prices paid have gone down marginally over the last 2 months or so, but volume is holding pretty steady.
I just checked on one of my kits that has 20 year old 1lb propane canisters. No sign of rust and they have gas. Still, that didn't stop me from buying "replacements" while I still can.
@Will
Any vehicle I get would have to do double duty - daily driver and tow rig. That pretty much rules out any commercial style vehicle. If I got something strictly as a tow rig, then I'd have to pay to park it somewhere as there's not enough room at the house.
Part of my problem is that I want a very specific set of options, thus I would plan on placing an order and waiting for it to be built. Except most dealers hate that and the current market sucks. My 10 year old truck still works, so it's more a matter of "I want" rather than "I need" right now. I'll wait until things get better (or worse, depending).
Thanks for the suggestion, however.
Just a thought given the huge number of flooded out vehicles from Hurricane Ida.
BE careful about buying a older vehicle as it's too easy to sheep dip a flooded FL vehicle as a used GA vehicle.
Check for signs of flooding please or you're going to have the lemon vehicle from hades.
Personally, I'd have my mechanic check it out for hidden flood damages. I'd rather pay 40 bucks than own a lemon.
Don:
If you are involved in an accident, and the insurance discovers you are towing above your tow rating, you may/will have a coverage problem.
Commercial chassis come in all sorts of lengths. I drove one as a tow truck for 5 years (Mitsubishi Fuso), and it would fit in a regular parking spot. The only parking problem I encountered was the city reduced their residential street weight rating, so I had to park in the driveway, since the weight was ~9400 lbs (truck had a 25,995 gvwr), and they had moved from 5 tons to 4 tons limit.
Don:
The only problem with that Fuso (1999 and 2001) was fuel mileage was worse than the other brands, (~11mpg combined, 6 cyl diesel). That tow company moved to Fords. Newer trucks (most all brands) have the 4 cyl diesel instead, so supposed to be better mileage.
Peter:
probably have to look for an insurance broker to find coverage, instead of dealing with your ins agent. Those tend to be really limited in what they can write.
Generally, the lower mileage the better, of course. The type of use may be a factor to consider. A truck that ran between cities would tend to be in better condition than one that ran a local route. The type/weight of cargo, if known, may help decide. A truck that moved bulky but light cargo is much preferred.
I would avoid anything that transported fresh seafood, especially if it worked dockside. You can't get the smell out of any wood or metal, and leaking salt water can really damage the structure, both steel and aluminum. For that matter, avoid any truck that worked around a salt water environment.
As far as a flood salvage truck goes, that may be a viable truck to buy if cheap enough, and you can do the work to clean it up, but I would avoid it if the water got high enough to get the dash wet. Replacing the instruments may be VERY expensive, or not even available. Paying a mechanic to fix up a flood vehicle is not generally viable, as it really takes a lot of time to do it right.
Stay away from salt water flooded vehicles, period! EVERYTHING that is not a sealed unit requires disassembly and cleaning, especially the wiring harnesses. Not worth it.
You can make an awful lot of major repairs and upgrades to an older vehicle for a third of what the new vehicle will cost.
I find the irony painful.
My wife grew up in Kazakhstan in the USSR. Never mind their history of starvation with Stalin (1/3 of the ethnic Kazakhs died), during the breakup of the USSR her family went weeks at the ragged edge of starvation.
YET... she assures me that can't happen here in America, that nothing bad's going to happen at all in the world, etc.
Denial. Not just a river in Egypt. And I'm prepping as best I can, offsite. But what I expect, fully, is that WHEN the SHTF and I produce stuff for us to eat, she'll be more angry at me for that than the situation we'll be in.
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