Looks nice, Chris, but it's just not that turquoise green like out in the Caribbean.
Tyco, the whole things is very disheartening but has been coming for at least 10 years. Korea and Japan are also in big trouble, with auto sales in their home countries as well as here dropping like rocks. Toyota actually had a worse monthly sales drop than GM or Ford in April. Germany is basically a non-player, with only Mercedes and BMW in the game and both of them are in nearly as much trouble as the other car companies. Ford is, by far, the healthiest car company in the world, and should remain that way assuming that the current administration doesn't find a way to destroy it too.
Here's the way I see that history unfolded:
1. Car companies continually expanded capacity with the idea that more people meant more cars.
2. Credit was easy to get and the rise of car leasing meant that many of what would be excess capacity cars were absorbed in the market. This was seen as real demand when it was, in fact, artificial and temporary.
3. All car companies, to a greater or lesser degree, improved quality and durability. It used to be common for a car to be worn out in 100,000 miles. Now, getting 200,000 miles out of a car isn't uncommon. Thus, an incipient decrease in demand developed that it took auto manufacturers far too long to recognize.
4. Refinancing overpriced homes was easy and a lot of that money went into new cars. As long as people saw the money as "free", pricing was not a big issue.
5. The Fed began to raise interest rates to stop non-existent inflation. This was the beginning of the end for the housing bubble and easy money for credit and new cars.
6. About 2005, there was a growing feeling that the housing market was on the cusp of collapse and people with sense sold while they could. At the same time, many more people were lured into homes they couldn't afford through low or no interest teaser rates and outright mortgage fraud.
7. Home prices began their inevitable collapse in about 2007. This dragged the net worth of individuals down at a rapid rate as many people couldn't refinance their teaser loans at a payment they could afford.
8. The SEC and Fed allowed the packaging of mortgages into all sorts of bizarre investment vehicles, like collateralized debt obligations. The exact value of each component wasn't important as long as the lender could foreclose and turn around and sell the house for 10% more than they lent.
9. House prices began to fall rapidly as people couldn't get loans and banks got stuck with foreclosures that were worth less than the 110% mortgages they sold.
10. The Fed didn't recognize the seriousness of the problem and took way too long to start lowering interest rates. At the same time, the greed and easy money of making 30% a year on real estate came home to roost as banks were stuck with more and more defaulting assets.
11. Foreclosures rose dramatically, almost no new homes were built, and it became nearly impossible to sell an existing home without taking a huge loss. Banks had to start writing down bad loans, which made them insolvent except for the fact the government was willing to come in and give our money away to save them.
12. To bring us back to cars, the average person either was less well off or felt less well off as his house plummeted in value. Unemployment began to rise as the banking crisis spread. Banks were fearful of lending any money to maintain capital ratios or they would be seized by the government. No lending meant no car loans. Again the car companies were asleep at the wheel and didn't recognize this was coming. They maintained a production capacity of 15 million units per year when the demand was dropping below 10 million per year. All this excess capacity pushed Chrysler over the edge and GM will shortly follow. This is what should have happened six months ago instead of using taxpayer money to support the living dead.
That's my take on all this. Multiple mistakes were made by both political parties and almost every industry in America. There is much more pain to come as more banks fail and become nationalized when the commercial real estate markets undergoes a similar collapse that the residential market suffered. After that, we have the coming Treasury bond bubble and hyperinflation to deal with. I'm no expert but I've been an investor for a long time and lived through a lot of recessions. This one is not like any we've had before, including the Great Depression. It's going to take us a long time to work our way out of this mess and, the longer the government keeps using taxpayer money to prop up those that should be allowed to fail, the more extended our pain will be.
For our children's and grand children's sakes, I hope I'm wrong.
We've really thought about Florida but none of the women have ever been to the tropics so that's why we're going to the Bahamas. Florida would have been fine with me but you've got to keep the women happy.
Stop your whining your water proof, so get out there and mow your lawn!
