Tuesday, June 3, 2008

Hey buddy, wanna get into a new car?

Numbers for sales in Japan came out today and it was bleak. The so-called experts are predicting numbers for the US to be as bleak. $4 gas, blah blah blah, you know the rest. However what the so-called experts are missing is a key ingredient. And that is the $1200 tax rebate check.

Maybe it's localized to my neck of the woods, but holy shit I have never seen so many new cars grouped together outside of a car dealer. The office where I'm hanging out these days has 10-15 new cars in the parking lot. This is for a parking lot that holds maybe 200 cars. I know they are new because they have dealer tags. At first I couldn't figure it out. Was there some huge bonus that the company gave out I though. Nope. It was the bonus courtesy of Uncle Sam in the form of a $1200 bribe to get out and spend spend spend some more. And man oh man did the masses spend it. The checks started going out the 2nd week of May. And coincidentally enough that is when the new cars starting popping up as well. So much for the "I will pay down debt with my bribe check" theories out there. And also so much for the $4 gas hurts theories. There is a new Range Rover, a BMW 5 and a Land Cruiser among the new toys on the lot. Which makes me think oh boy, you bought an $80K car with a $1200 downpayment. Yeah, that's gonna get really ugly really soon. Not unlike the 0% down, $800K house.

So all this means there should be a slight pop when new car sales come out for May. I want to buy some calls, but not sure which ones. The BIg 3 are hurting due to truck sales, but they could surprise by not hurting as much as everyone expects them to hurt. The Japanese are hurting in Japan, but if they have a blowout May in the US, investors will overlook the bad news. They always seem to. In a conflict of good vs. bad news, good usually wins. Or all this could be a fluke localized to one zip code. I doubt it but you never know.

Whatever pop there is will be short lived. About the length of the stimulus check bribe-athon. As soon as those stop coming, it's bye bye auto industry for the rest of 2008 and 2009.

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