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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7522)	2/9/2004 11:45:17 PM
From: ild	Read Replies (1) \| Respond to of 110194

A friend of mine in NH last week bought a new 2004 Grand Caravan. He paid $17,977 with invoice $25,645 (sticker was $26,940).

To: mishedlo who wrote (7522)	2/10/2004 8:36:01 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

<This smacks of a huge inventory glut and no pricing power whatsoever.> The evidence does support your observation about an inventory glut. If you will recall I've been short Autonation (covered for a couple buck gain), so I've been tracking them. Wall Street completely ignored a substantial inventory build yoy: 2,919.3 B vs 2,598.4 B(71 days vs 63 days). On the otherhand, you can't characterize auto sales as soft or "poor": 3,849.3 Bvs 3,786.1 B. biz.yahoo.com How do these guys maintain activity? I have a relative and friend who owns the local GM dealership, and he tells me never underestimate the power of easy money and finance. And you know, I fought that notion just like you have, but he's consistently proven otherwise. He says they can (and do) finance anybody: crack heads, the mentally ill, 14 yos, you name it. Pricing power? He tells me most buyers haven't a clue what they are paying, it's all about the "monthly payment". You could sell them a complete turd as long as it was zero down, and the monthly payment made sense. I believe that's generally true of housing and most big ticket consumer items as well. So this brings me back to my central point, as long as easy money and the credit bubble go on, vehicles will get moved. Can the auto companies, and dealers pass on increased inflation and costs? I suspect so, as long as cheap highly inflationary financing and stupid lenders (the BOJ based enabling chain) are available. Message 19788706 But break up (inflationary panic?)the enabling chain, and it's over.

To: mishedlo who wrote (7522)	2/10/2004 11:38:46 AM
From: Silver Super Bull	Read Replies (1) \| Respond to of 110194

Mish, RE: "Tell me they can pass on rate hikes. I dare you." I don't argue with your arguments on auto pricing...however, I think that one needs to separate what GM (and Ford) are doing vs. the rest of the industry. GM and Ford have been seriously discounting (and offering generous financing) in order to sell cars. The strong foreign automakers have been doing must less so. Nonetheless, I think the average car price has been creeping up. To get a nice (not great) car now one will have to pay, minimally, in the high 20s. As far as passing on increased material costs, how can they not?? As JW just pointed out, in aggregate the domestic automakers aren't making any money on car ops right now. One way they may try to absorb the increased raw material prices (as well as some other raging cost increases such as health care) is to cheapen the vehicle...of course a flawed strategy but it has happened before. DB