Wednesday, April 2, 2014

Auto Industry Dreamland

The following chart shows the 12 month moving average of the annual percentage change in new orders for motor vehicles and parts industries divided by disposable personal income.

Click to enlarge.

Dreamland case: Growth accelerates to the upside from here.
Best case: We return to the blue trend line.
Worst case: We continue on to the red trend channel.

March 5, 2014
Subprime Auto Boom Besieged by Late-Payment Jump: Credit Markets

Underwriting standards began to decline amid five years of Federal Reserve stimulus that set off a race for higher-yielding assets, spurring a surge in issuance of bonds tied to subprime auto loans.

This is your captain. Please fasten your seat belts and brace for impact again.

This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart


Rob Dawg said...

The lack of replies might have something to do with using disposable income.

PDI has been abused beyond any value IMO.

Stagflationary Mark said...

Rob Dawg,

If you believe that the effects of disposable personal income are overstated (due to rising income inequality perhaps), then the chart in this post is actually even worse than it looks.

For what it is worth, I just take all the data with a grain of salt. It isn't all that difficult to create ugly charts out of the government data, so if they are purposely massaging the data to make it look better, then thet aren't doing a very good job, lol.

That said, I'm glad I don't live in China. How could I post any charts if I couldn't trust any of the data (which I wouldn't)?

Stagflationary Mark said...

As a side note, I'm somewhat surprised that I get as many comments as I do.

The stock market keeps pushing new highs. We're told that the economy will continue to improve.

This post scoffs at auto sales, which have undeniably been rather stellar (as seen in the chart).

The illusion of prosperity is a tough sell again, just like it was in 2007.

I'm a loyal salesman though. I truly believe in the illusionary product. There will come a time when it will practically sell itself again, lol. Sigh.

Gallows humor. :(

Anonymous said...

One possible explanation for the large increase in car sales is lower home sales. You can't show off a new house - but you can show off the new car. Never mind the high interest rate subprime loan.


Anonymous said...

Check this out.
Auto loans & home sales. The pattern changes may be due to subprime auto loans and increased housing prices.

Just found it interesting.


Anonymous said...

Forgot the graph.

Stagflationary Mark said...


Never mind the high interest rate subprime loan.

Yeah. Risk on. Sigh.

Broken link. Got another?

MrGotham said...

Subprime Surge Helps March Used Sales Soar

"Spinella pointed out that the used-vehicle industry generated these sales numbers with 13 percent fewer used shoppers searching lots versus year ago, “indicating the pent-up demand log jam may well be breaking.”

Alternative explanation: Anyone who could fog a mirror this year got a car loan and left the lot behind the wheel.

Stagflationary Mark said...


Thanks for sharing!

“But the good news doesn’t stop there,” Spinella said. “Franchised transaction prices rose a healthy 10.8 percent on the back of growing certified pre-owned units.

Forehead. Desk. Whack. Whack. Whack.