Thursday, June 21, 2018

Because nothing really matters.

Source.   How can it be possible that Netflix is more valuable than Citigroup? Has Netflix even turned a profit yet?

I guess I'm starting to freak out a bit about interest rates. I know everyone seems pretty happy right now but it feels like a lot of canaries are starting to yelp. Interest rates have too come far too fast.

And I think I've finally discovered the source of all the auto buildup. A few days ago Mr S. and I were talking about the cars because I'm becoming a little obsessed. I've never seen anything like it. He wondered if you could find out how many loans were being originated. And it turns out you can. Although like government data it seems to be somewhat delayed. But it looks like ordinations have been down for quite a while. I mean, they aren't down 30% like it was in the recession...... however, whenever charts chart looking like a moonshot - they only fall to earth.

They have pulled a ton of auto demand forward. It wouldn't surprise me if we hit a very big downdraft pocket. They goosed that sector with zero % interest rates for a really long time. It's not at the highest range, but I wold say we are very toppy.




  1. I looked at the number of car loans & thought of the cash for clunkers program, that was in 2009. It doesn't seem to have done much.
    I have to say that there are sure a lot of car loans out there today!

  2. Capital of Texas RefugeeThursday, June 21, 2018 10:12:00 PM

    Here's something interesting about the area around the Royal Portbury Docks in Bristol, BTW: there's a Rolls Royce factory nearby. (It's over by Cribbs Causeway, the big box complex with a mall in the middle, near a train station.
    I remember it was near the museum at the former RAF Filton where that Concorde I'd mentioned is on display.)

    What's interesting about it: their factory parking area is not chock full of vehicles, and it never has been as long as I've been watching the satellite snapshots of that area.

    They're not over-producing and they're not counting on loans.

    So here's why that's the case ...

    If you're self-employed or have a complicated earnings structure that involves intellectual property, it's usually difficult to get banks to lend you money. They don't see the whole picture of your income because what they see is the end result of all of the tax avoidance strategies that you have established just to make sure you don't take your earnings as straight income.

    One sneaky way around this while you're still increasing your net worth is to create a "notional employee" relationship in which you're paying yourself the unavoidable amounts of straight income you have through another firm that's creating a W-2 employee relationship for you. This can be a typical contractor relationship, which is the easiest to manage, although some of these firms prefer to create the full employee appearance package complete with 401(k) and medical benefits options you can purchase.

    Then your actual main job looks like a side business and your W-2 prop job looks like the real one. Banks are happier to lend you some money at that point should you turn out to need some of it, although the ongoing problem is that banks still will not tend to lend you the amounts of money you really need.

    But at some point, your net worth becomes high enough that you don't care whether the banks actually feel like lending you money or not, and you probably have a private banker anyway who will arrange private lines of credit for your businesses.

    In essence, anyone who's buying Special Toys or even higher-end vehicles doesn't need to take out loans with dealerships or regular banks.

    One interesting part about that is that losing money on a Special Toy isn't all that bothersome because you've already dealt with sunken costs, especially the biggest one when you put your foot down the first time on the gas to drive a Special Toy off the dealer's lot. While it's irritating not to get as much as you'd hoped from a sale of a Special Toy, you can still get enough out of that sale to make it worthwhile.

    What I'm seeing in all of the Carpocalypse(tm) lots is 0% Special Toys and 100% vehicles that are going to be financed primarily by dealers.

    That's probably the only way dealerships make any reasonable amount of money these days anyway.

    Otherwise, the idea of having a somewhat pricey but not too pricey kit car like the Caterham is that it's an experience to build, an experience to operate, and it's not a silly expensive Special Toy. There are people who like these things because of the oddities surrounding them and they're interesting to be around.

    I'm liking this idea a lot more right now than a 180+ mph Special Toy.

  3. Yeah.... but we aren't talking about 180MPH special toys. Those types of toys are all special order anyway. We are talking about SUV's, and because a lot of ghost lots still have them in wrapping, I can't even tell who they belong to from afar. SUV's pretty much all look the same to me.

    It's an interesting perspective..... but 2019 models will be coming to lots pretty soon. It's troubling that some dealers are still trying to get rid of 2017 models. Everywhere I look it's like we are floating on a sea of cars. And I've never seen a market last for long when your philosophy is... we don't mind losing money because we've already lost that money. That is a market completely disconnected from supply and demand. I would even wager to say those are classic bubble signs. But I can see what you are saying.

    I saw a Noble about two weeks ago. Those are 180MPH kit cars. But it was on the road going the opposite way and I couldn't get a shot. But I hadn't seen one in a super long time. Probably years. I still love them. I guess they have a beach buggy now.