I really don't know what to believe about the liquidity bubble built by most of the world's central banks since 2009. I have become numb, and simply shake my head in disbelief.
But a recent article on Zero Hedge got me thinking about a more concrete manifestation of the liquidity bubble. They think the motor vehicle bubble is ready to pop. In particular, there are millions of leased cars and trucks that will be turned in soon, creating a glut of 3-year-old used cars and trucks.
Since I think the used truck market is even more over-priced than the new truck market, their prediction is mouth-watering, even more so considering that circa 2013 trucks are likely to be as good as trucks ever get. Of course they could start making smaller pickup trucks, but don't hold your breath.
Have you seen the ridiculous numbers that CAFE, the government-imposed fuel economy requirement, is demanding in the years ahead? What are they planning on doing? Much of the low-hanging fruit has already been picked. For each incremental unit of complexity that is added to modern vehicles, you are going to see the fuel economy improve by 0.3 miles per gallon here, and 0.2 there.
But I enjoyed thinking about this article on the day that the masses head back to their hamster wheels. At the McDonald's of a crossroads town in a touristy area, you can watch the most amazing parade of motor vehicles, trailers, and toys. Why, I almost felt sorry for the poor losers who had huge pickup trucks pulling house-sized fifth wheel trailers, because other people had super-crew pickup trucks pulling fifth wheel trailers with three axles.
It's a wonder that we aren't seeing three-row pickup trucks by now! Or how about quartz kitchen counters in motorhomes, now that granite counter-tops have become so common and declassé.
Think of all the trends in the automobile industry, during a long lifetime, that came out of nowhere and went crazy: giant fins in the post-Sputnik era that were supposed to make the car look like a jet; muscle cars in the late 1960s; Pintos and Vegas after the oil shock of 1973; minivans in the 1980s so that baby-boomers wouldn't feel like their parents driving a station wagon; truck-based gas-hog SUVs in the early 1990s that allowed Mom to avoid a minivan; and now the super-crew, four-wheel-drive monster pickup truck that allows cubicle-bound, suburban husbands to feel like real men.
Well, I don't want to deprive anyone else of what they like. But for my part I want the pickup truck market to crash and burn. I will be there to salvage something at a decent price.
But a recent article on Zero Hedge got me thinking about a more concrete manifestation of the liquidity bubble. They think the motor vehicle bubble is ready to pop. In particular, there are millions of leased cars and trucks that will be turned in soon, creating a glut of 3-year-old used cars and trucks.
Since I think the used truck market is even more over-priced than the new truck market, their prediction is mouth-watering, even more so considering that circa 2013 trucks are likely to be as good as trucks ever get. Of course they could start making smaller pickup trucks, but don't hold your breath.
Have you seen the ridiculous numbers that CAFE, the government-imposed fuel economy requirement, is demanding in the years ahead? What are they planning on doing? Much of the low-hanging fruit has already been picked. For each incremental unit of complexity that is added to modern vehicles, you are going to see the fuel economy improve by 0.3 miles per gallon here, and 0.2 there.
But I enjoyed thinking about this article on the day that the masses head back to their hamster wheels. At the McDonald's of a crossroads town in a touristy area, you can watch the most amazing parade of motor vehicles, trailers, and toys. Why, I almost felt sorry for the poor losers who had huge pickup trucks pulling house-sized fifth wheel trailers, because other people had super-crew pickup trucks pulling fifth wheel trailers with three axles.
It's a wonder that we aren't seeing three-row pickup trucks by now! Or how about quartz kitchen counters in motorhomes, now that granite counter-tops have become so common and declassé.
Think of all the trends in the automobile industry, during a long lifetime, that came out of nowhere and went crazy: giant fins in the post-Sputnik era that were supposed to make the car look like a jet; muscle cars in the late 1960s; Pintos and Vegas after the oil shock of 1973; minivans in the 1980s so that baby-boomers wouldn't feel like their parents driving a station wagon; truck-based gas-hog SUVs in the early 1990s that allowed Mom to avoid a minivan; and now the super-crew, four-wheel-drive monster pickup truck that allows cubicle-bound, suburban husbands to feel like real men.
Well, I don't want to deprive anyone else of what they like. But for my part I want the pickup truck market to crash and burn. I will be there to salvage something at a decent price.
Comments
I'm in Big Time ATV Country so I saw all of that. But in many cases the house-sized fifth wheel had an ATV trailer hooked to the back of it. The entire three part rig was a long as the coal haulers that pass by the RV Park on their way to and from the mine.
I have never worked through the arithmetic, but I just assumed that leases were rip-offs. I'll bet "Living Stingy" has savaged leases a couple times!
Unfortunately, you may not get the buying opportunity in used truscks/cars that would nomally occur. All of this easy money liquidity (AKA cheap subprime loans) distorts basic supply/demand economics and drives up the prices of assets. We can go in with cash and try to negotiate a good price on a vehicle, but the price is non-negotiable because the dealer knows they can entice one of the sheeple to bite on a no money down, 3% used vehicle loan that gives the dealer the full price for the vehicle as well as a juicey fee for originating the loan. All of those loans are then bundled and resold repeatedly by the big banks. To add insult to injury, most of those loans are now also backstopped by the US taxpayer. The dynamic of higher prices due to easy excess liquidity is seen throughout our economy now in housing, college tuition, RVs, healthcare, etc.