Tuesday, November 4, 2008

U.S. Auto Sales

U.S. Auto sales have plunged to levels that cannot support the auto industry under any circumstance.  The bailout cometh.

Total Oil imports into the U.S. have declined in 2008 from 2007 by over 8% year to date.  Cars will simply wear out slower and slower in the U.S. without the fuel needed to run up the mileage and destroy the vehicle.  Same with tires, glass, steel, car insurance, etc...

Get this:  If the decline rate in U.S. Oil supply remains at just over 1 million barrels per year (TOTAL petroleum products supplied declined to 19,645,000 barrels per day in 2008 from, 20,697,000 per day in 2007; imports declined from 12,176,00 barrels per day in 2007, to 11,168,000 in 2008) for the next 5 years; Then, the U.S. currently has ALL of the vehicles it will EVER NEED.  We will not need a single new car, truck, or aircraft.  We will need only to maintain the ones we have.  

Think about that.

We are in a similar position regarding housing.  Absent a massive immigration of folks from other lands (and why would they come here just as our resource picture goes off a cliff?), population growth and household/family formation will cease.  We have too many homes by over 20 MILLION or so (families with second homes will have need of only one home in the absence of a growing oil supply).  The U.S. needs another housing/condo development like it needs a hole in the head.  The level of denial here is incredible.

For example:

Yesterday I spoke with a Real Estate broker in South Carolina.  I put in a bid on some farm land and he was so offended by my bid that he let me know I was "just trying to steal something".  He went on to tell me that these properties had "tremendous development potential".  So I asked him:  What is the inventory of unsold homes in this region of South Carolina?  How many months/years will it take to work off this inventory?  What is the recent median price to family income of the region?  What are the employment trends in the region?  When he realized that I wanted EMPIRICAL data to support his position, he changed tack and insisted that he has been doing this much longer than I have and that I would not get a deal done at my price, or at least he HOPED SO.

Get that?  He HOPED.  In other words, he was advising his client that my bid was too low.   Based on what?  He told me my price would be back to 2003 levels.  Jeeash!  Can you imagine?  I wanted to buy property at prices that reflected economic potential rather than the "greater fool theory" hoping another buyer would come along and pay me more than I paid because he thinks another buyer will come along and pay him more than he paid, etc...

Oh, well.  Real estate brokers are not economists, investment professionals, mathematicians, etc...  They have harmed their clients greatly over the past decade.  Their industry stands in the way of advising their clients to price their properties at a point that would clear the market.  What else should I expect?


Mentatt (at) yahoo (d0t) com

5 comments:

Don said...

The overvaluation of property has had devastating consequences for producers of all types.

Farmland is based on specualtive value for some other purpose--not on its productive capability.

Small businesses and factories can't compete because of high rent.

But rather than allow this to correct itselt (which WILL be painful), we bail out the system that got us where we are.

Nothing short of a collapse remedies this and a collapse we will get despite the efforts of all the king's horse and all the king's men.

Changing of the guard will not affect this scenario.

Both those on the left and the right have sold their souls for this easy wealth (the various bubbles we've had, none of which were fueled by production of anything), and they don't want to let it be dissolved.

Anonymous said...

Here in the Peoples Republic of Wisconsin, farm land has remained very high priced for what the land can actually do. The land here is a binding agent for the seeds and the petroleum based chemicals that make the seeds grow and the other chemicals that kill bugs. The soil is so depleted that huge pumps and sprinkling systems are powered by petroleum products to deliever other pretoleum based products to the geneticly altered seeds. But People are paying $3000 and up for an acre of binder. Oh yes and I forgot all the petroleum powered tools that are needed to get the seeds in the ground and the base product in the combine. This is such a joke....
And our Real Esate agents get as indignant as yours if you offer less than the asking price. They argue with me the same as you..
Carl In Wisconsin

Anonymous said...

Stop being a bloody optimist Greg. Why are you offering any money for real estate now. What is the hurry? Do you think that we are going to have a huge demand for farmland soon? Well perhaps there will be a DESIRE for farmland but will there be an ability for those with desire to actually afford it? And what the heck do you want to be a farmer for? Especially a farmer who has to work with his hands, and transport goods to the market on animals. That would suck. You already have some farmland in Tennessee. Just keep that. I think the problems I have with large farms right now are:

1. Prices still high compared to what they can produce without the petroleum subsidy.
2. Taxes will be very high because of the purchase price. You may loose the land due to non payment of taxes.
3. Working the land yourself is HARD. Having others (serfs, share croppers) do it will require a level of hardness that you may not possess. I sure don't but your mileage may vary.
4. So i think it is better to wait a bit until the prices are a bit lower and the situation is clearer.
No hurry. This situation is only going to get worse.

Just my opinion. Don't take offense because of my bluntness! You are a good guy. I love you MAN! SOB...

Best!
Chuck H.

Anonymous said...

Oh BTW. The SOB... was NOT and acronym. I just thought I would make it clear. It was tearful drunken sobbing. Just wanted to clear that up.

Chuck H.

Anonymous said...

Oh and I am not Gay or anything. Not that I have anything against gay people. That was just humor you know. I hope we are clear on that.

Heterosexually yours,
Chuck H.