naked capitalism

bb says:

common sense.
the easiest way to increase your disposable income by $300-500 is not to trade in for a newer the car you just paid off. and you can save half as much or more from your insurance if you raise the deductible.

Bendal says:

You have to either be made of money (and pay cash) or crazy to buy a car right now. Everyone’s looking over their shoulders and thinking “is my job next?” so they’re not buying any big ticket item right now, especially if it requires credit. Appliance sales, car sales, house repairs, etc, anything that normally requires credit, are all showing a drop in sales.

Cat says:

Ours is a car culture. Some people wear cars like clothing, like fashion statements. For them, they are seeing deals of a lifetime recently. Doesn’t mean they can afford the new car, but they must have it. That and a lot of young people buy new cars as rites of passage.

These behaviors will take a while to change. But, they will change. What might happen in the short term is a lot of these cars are returned to dealers on repo once Reality takes hold and folk have a nice freakout over their own prospects. Say, 6 months down the road.

doc holiday says:

Porn is looking better all the time!

Re 1: "I share your concern, I share your anger," Bernanke told the Senate Budget Committee. "It's a terrible situation, but we're not doing this to bail out AIG or their shareholders. We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy."

Re 2: "The U.S. will be better off "moving aggressively" to solve economic problems because the alternative "could be a prolonged episode of economic stagnation," Bernanke said.

> I guess the point Bernake is making about AIG, Citi, BAC, Ford, GM and a few hundred other failing corporations, which are too big to fail, is that these failing businesses that burn cash, do not have earnings, exist because of accounting fraud and deception, are better off to go about the business of continuing to burn money and falsify earnings.

If these corporations fail, Americans may be denied the possibility of continuing to bail them out and to help artificially prop up the synthetic lifestyles that all the highly paid thieves have come to expect — now why the fuck would we want that and why would hope that Bernanke would be friends with fewer crooks? Why should we hope that Obama and ben and all the guys would be unpopular at country clubs and big fund raising events, where tax payer money can rotate in circles, from TARP-to-crook-to-politician-to-corporate gurus? These companies that are too big to fail have massive amounts of people that are experts in burning money, falsifying muniments, fabricating and engineering fraud and using their souls to help destroy America — why would we not want to finance these pirates and these shitbags that are the core cancer of this collapse? If we lose these people, it would be like cutting off a future of deception, distortion and disgusting ethical behavior — why would we do that???

Also see: Look at you. You used to be so cocky!
You were going to go out and conquer
the world! You once called me a
warped, frustrated old man. What are
you but a warped, frustrated young
man? A miserable little clerk crawling
in here on your hands and knees and
begging for help. No securities – no
stocks – no bonds – nothing but a
miserable little five hundred dollar
equity in a life insurance policy.
You're worth more dead than alive.
Why don't you go to the riff-raff
you love so much and ask them to let

you have eight thousand dollar? You
know why? Because they'd run you out
of town on a rail… But I'll tell

you what I'm going to do for you,
George. Since the state examiner is
still here, as a stockholder of the
Building and Loan, I'm going to swear
out a warrant for your arrest.
Misappropriation of funds –
manipulation – malfeasance…

Anonymous says:

Bendal said…

You have to either be made of money (and pay cash) …

That just shows how the country has changed. When I was a kid in a simple middle class neighborhood, I don’t think many people financed their cars. We surely didn’t.

By the way my mother told me I should never finance a car and I never did. But I’m not made of money, instead I drove used cars for years and learned about fixing them.

As people go back to that ethic the leveraged economy will crash and burn. But it’s still the right thing to do.

swedish lex says:

Fleet companies have to cut residual values drastically as consequence, leading to bigger holes in finance.

Anonymous says:

“Little Timmy was before the House today talking like its 1999. I mean this is like a “Twilight Zone” episode.”

These slugs have absolutely no clue and are certain to take us down for the count. The bought and paid-for Obama and his coterie of causal factors from the 1990s may find themselves one day sitting together with their Republican confederates at the defense table at the largest show trial staged since the demise of the Soviet Union. There’ll be a new constitution by that time, one that precludes public service by anyone holding office for 100 years prior to its promulgation and similarly for any former bureaucrat, and a fabulous new football stadium – a “shovel-ready” project, incidently – to hold the crowds intent on seeing justice done. Might we reserve you a seat?

Anonymous says:

AIG Q4 2008 Earnings Call, 3/2/08

Ed Liddy says financial products group has 2 trillion of exposure, with 1 trillion of that to 12 major counterparties.

“The following is just a sampling of our global reach and our interconnectedness. We operate in more than 130 countries and jurisdictions and have approximately 74 million customers and policyholders. We are the world’s largest property casualty insurer. We are the largest provider of retirement savings for primary and secondary school teachers and healthcare workers. We have a $2 trillion financial products operation, with over $1 trillion of that amount concentrated with 12 major global financial institutions. We are one of the largest life insurance providers in the US and in Asia. We insure the property of 94% of the Fortune 500 companies. And we are the largest owner of airplanes in the world and the largest customer of Boeing and General Electric’s Aircraft Maintenance Division, among others.”

http://seekingalpha.com/article/123915-american-international-group-inc-q4-2008-earnings-call-transcript?page=-1

charlie says:

Yves, I think the 2-3 car household is not going away anywhere soon. I’ve seen some sales models that are predicated on the per capita ownership, but that isn’t a very useful figure. People can keep cars a bit longer (2-3 years). We’re a mobile society and we need our cars.

I think what will be interesting to watch is people coming off of lease deals. Do they lease a new car, or just buy the old one (or buy another used replacement). Either is a big investment. The lease ties you into a 3 year deal, and saving 12-18K cash for a purchase of a used model also requires some planning ahead.

We seem to be stabilizing around an annualized rate of 8.5 to 10 million car sales a year (dec, jan and feb). That is down from 16 million. It is very sustainable but a lot of factories need to go.

I think the GM bailout plan was expecting something like 12 million sales a year. Cutting another 20-30% off that is not hard.

Anonymous says:

Used car market is actually doing ok. Dealers dumped used cars at $4 gas, now wholesale prices are actually increasing a little due to demand. The numbers for new cars are horrific however!

The issue is everything.. no traffic, can’t get approved, and tightening credit standards.

capt dave says:

Lew Rockwell did the math on GM losses and said that GM lost $4000 on every car it sold last year. Is this a sustainable business plan? As long as we make up the losses, nothing will change. As long as GM, the unions, and bond-holders think we will keep bailing them, the hard decisions and cramdowns will never be made. If the Gov had walked away at the beginning, they might have tried to save themselves. Now they rely on lobbying to keep the party going.

Anonymous says:

This is potentially far more destabilizing: Japan using Forex reserves to subsidize exports.

They draw down reserves, offering financing to push manufactures, and neatly avoid a WTO issue because it is “export financing” rather than a subsidy.

If it takes off, China will follow suit very quickly.

Chinese banks have already moved heavily into LC financing to take up the slack from the collapse of LCs from Western lenders.

D

————

“Japan taps forex reserve in aid of firms overseas
Draw of $5 billion will be used to fund loan program for Japanese exporters”

http://www.marketwatch.com/news/story/Japan-taps-forex-reserve-aid/story.aspx?guid=%7BE599B939%2D8210%2D4ED5%2DA7F7%2D756F201011DC%7D

alex black says:

What are the knock-on effects of isolated teenagers in the suburbs without cars? Hey, that was me and my friends. Um, we all had a lot of sex with each other…..

Is there an ETF play for that?

Anonymous says:

Are these year over year figures?

Absolutely. And it’s still news because at this level of sales (9.5M SAAR) very few car companies can be profitable. I doubt F and GM can survive at all below 11M SAAR.

eh says:

What do you think about the “Abwrackprämie” German government has included in its second economic stimulus?

It hasn’t been around long enough to know if it will stimulate sales or not. Also to a large degree it was done for ‘green’ reasons — i.e. in order to give car owners an incentive to replace their older, dirtier cars with new, cleaner ones. That’s why it is also known as the Umweltprämie, where Umwelt is the environment.

Anonymous says:

The question then becomes will Deloitte & Touche GM's auditor follow through by issuing a going concern notice as GM suggested they might. We know GM has said GM Europe will run out of cash in the second quarter and is urging European governments to step in. Brian Johnson from BarCap believes ceding some or all of its ownership and operational control of GM Europe, could lose important growth platforms in eastern Europe further questioning GM as a going concern. Since GM Europe own the technology for the under pinnings for its C and D class vehicles (Chevrolet Cruze and Mailbu) GM US may have to pull some of its lines depending on the separation.

Anonymous says:

Are these year over year figures?

Absolutely. And it’s still news because at this level of sales (9.5M SAAR) very few car companies can be profitable. I doubt F and GM can survive at all below 11M SAAR.

I totally agree that the level of car sales is a big story, but I’m dubious that car sales failing to recover in January and February is news to anyone, considering how terribly we all knew the economy was doing.

I think the more interesting questions are how far car sales will fall (and it seems so far like the big drop was late last year and now we’re plateauing at that low level) and whether the low levels are a new long-term equilibrium (and thus GM is toast) or sales will rebound to some higher equilibrium once the crisis passes (and thus money spent keeping GM going might be a fair investment). I’m not sure this story does anything to answer those questions.