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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (97193)	5/1/2009 4:57:02 PM
From: Sr K	1 Recommendation Respond to of 116555

Federal regulators shut down Silverton Bank in Atlanta, a move that could shake the already fragile condition of hundreds of other banks in the Southeast. online.wsj.com

To: mishedlo who wrote (97193)	5/1/2009 5:15:28 PM
From: ajtj99	Read Replies (2) \| Respond to of 116555

If unemployment is going to rise for the next year, as I believe it will, it is not likely we will see a significant pickup in auto sales. There are a couple of dynamics at work here. We have the de-leveraging and the popping of the debt bubble. I think the natural sales rate for autos has been around 10-12-million in bad times and 15-million in good times. The rise to 17.5-million in sales pre-2008 was on the backs of sub-prime buyers, fleet sales, and other programs that artificially inflated demand. If someone applied this natural rate of sales back 10-years, making the sales in 2001-2002 at an 11-million rate and everything else a 15-million rate, we'd get about 14-million annual average sales. Going back to 1999 the annual rate of sales was about 16.7 million. Going by my theory, that means we've got about 24.7 million more vehicles sold the past 10-years than my esitmated natural demand. I think it may take two years of 9.5 million in sales (2009 and 2010) and three years of maybe 11-12 million in sales to get auto sales close to the natural mean. The quality of cars and trucks today far surpasses that of prior generations. This means folks can and will hold onto their vehicles longer in rough economic times. In the 60's and 70's you had to ditch a car after 5-7 years due to rust or engine/transmission issues. This is not the case today. The other dynamic in play is per capita auto ownership. As a result of the slowdown in the economy, many 3 car households will become 2 car households. Furthermore, slower business in building trades impacts truck demand. We may hit production lows in 2010 for autos, but the recovery should be anemic initially with growth slowly building.