Wednesday, August 22, 2007

Bye Bye Dollar

So it looks like the decision has been made. Bernake and the FED will save the billionaires on Wall St at the expense of Joe 6 Pack.

But, but, but Bernake is doing the right thing. Cramer told me so. He is injecting liquidity so that the stock market can go up and millions of poor homeowners can be saved from foreclosure.

Well OK so your 401k will go up in value by 10% thanks to Ben B. Yipee!! But oops, the dollar has lost 30% of its value over the past few years. While Democrats complain about the high cost of gas, they advocate a policy of cheap money that devalues the dollar. When the dollar loses 30% of its value everything imported goes up 30%. And what do we import? Oh not much, just pretty much everything we buy.

Ben B is listening to the Cramer and Kudlows of the world. I don't buy into some deep conspiracy or anything like that. It is just old boys club at its finest.

But it won't work. The credit markets are simply too f**ked up for the FED to help. Which is why we will see a short term jump for the next month or so followed by a drop in the fall.

Really CNN?

Wow you mean the housing mess might hurt auto sales? Really? No!! Who could have predicted that? Thank goodness the crack team of MSM reporters is on the case.

Tuesday, August 21, 2007

Harley Davidson

Harley Davidson (HOG) was in the low $70s not too long ago. It is in the mid-$50s today. Ahh, a buying opportunity would say our fearless MSM bafoons. Why? Well simple because like real estate stocks only go up. Therefore when a stock is $15 below it's all time high you BUY BUY BUY.

Not so fast.

Let's think who your typical Harley buyer is.

1. Classic Harley bad-ass buyer. The blue collar tough guy. The kind of buyer who rides his hog as his primary vehicle.

2. The middle class, middle aged guy in the suburbs. This is his toy for the weekend. Probably couldn't figh his way out of a paper bag but gets on the bike and he's Mr. Badass.

Harleys are not cheap. Top of the line models - and also top of the line profits for HD - can hit $20K.

Analyzing groups of buyers:

1. Blue collar guys don't have $20K in cash. They way they buy bikes is through the "no money down, $99 a month" dealer come ons. Over the past few years this has been doable since anyone with a pulse could get a loan. Prime, subprime, super duper sub double seceret probation prime...didn't matter. Chances were pretty good a 0.9% loan was waiting.

2. HELOC HELOC HELOC. Along with boats, SUVs and plasma TVs, Harleys were what HELOCS were used for. Value of your home goes up $50K, refinance your home take $50K out and voila you have a brand new toy, be it a Harley a Hummer or a Henley boat.

Whether 1 or 2 the cheap money is over. Adios. Finito. Buh-bye. The housing debacle means no more funny heloc money and no more easy credit. It also means many desperate home owners with ARMs resetting who will be selling their toys. Lots of for sale signs on Harleys will depress prices people are willing to pay for new ones. If you can buy a 1 year old from a desperate homeowner for 40% off, why pay full price for a new one? Look for HD to start offering serious discounts.

Checkcraigslist ads and ebay. Keep a running tab on harleys for sale week to week. You should see a steady increase in the numbers of for sale. Here's a nice one: notice the Hummer in the picture in front of the recenly built McMansion? I rest my case.

I'm saying $45 by the end of the year.

HD reports next on 10/8.