Your Favorite 'On the Ground' Recession Indicator?"
California-based author and publisher of the Of Two Minds blog (a longtime
favorite of mine), Charles Hugh Smith, writes about an interesting
development in his neck of woods:
I've sold a few
cars myself at the local "sell your own car" lot, so I know it's
reputable and a model that works for buyers and sellers. For
a flat fee, you park your car on their lot and price it however you want.
Potential buyers get to test-drive it, take it to their mechanic, etc. It's a
big lot, so the selection of cars and prices is suggestive of larger
trends--at least to me.
Back in 2009 at
the initial depths of the recession, the used Toyotas and Hondas vanished and
the lot filled with Volvos and other big-car-payment brands. I took this to
reflect people were ditching their car payments and snapping up older
reliable cars they could buy for cash and get another 100,000 miles out of.
I hadn't been
by the lot in a while and what I saw astonished me. The
lot was packed with "fun" cars and luxury brands: four
recent-vintage Cooper-Minis were lined up (none sold in the week I monitored
the lot). A cute yellow VW Beetle--another "fun" car-- was over by
the Mercedes. Yes, Mercedes, and Porsches, all beautfully
For the first
time in the two decades I've scanned this lot, it was chockful
of luxury cars: a pristine black 2002 Porsche Boxter
with low mileage that raised my blood pressure and sorely tempted me because
it was "priced to sell"--and for a Scots-Irish-French tightwad,
that's saying something; an equally beautiful Mercedes 500-series two seater, low mileage, brand-new in appearance; a fairly
decent Jaguar; another pristine 300-series Mercedes, a classic, unbelievably
well-maintained Porsche 911 (1991)-- the list goes on.
In the good old
days, these "still look new" luxury cars would have been snapped up
at these prices. But now they sit here, unsold, day after day.
of "fun" car was also represented--the muscle car: a very clean
recent vintage red Trans Am attracted onlookers in one corner of the lot.
Sellers can add
comments to the sales tag, and on at least two of the luxury vehicles it was
noted that the car had been their father's, one owner. Others indicated the
original owner was selling.
If you know
some car buffs, or you are one, then you know what these low-mileage
super-clean luxury cars represent: they represent the lifetime achievement
car for a guy, or the trophy car the rising exec takes out on the weekend.
There is no other explanation for a 10-year old car to have 17,000 miles, or
33,000 miles--they were all garaged and enjoyed as a third or fourth car.
It seems Dad is
getting too old to drive, or it's no longer feasible to ease into the
low-slung Porsche, and so he's given it to one of his kids. And the kid drove
it to the lot to turn into cold hard cash.
As for the
"fun" cars: maybe they're still selling big numbers of new
vehicles, but the glow of owning a mediocre-mileage car with no room for the
dog or kids seems to be fading for existing owners. My sister-in-law spent a
fortune having her Mini Cooper fixed last year, and our friend with a cutsy VW Beetle had a repair bill after a few years of
ownership that could have bought a decent used car instead.
reason, "fun" cars that I never saw on the lot before are now there
This is all
anecdotal, of course, and wide open to interpretation. If you go to the
techie-hipster favored neighborhoods in San Francisco, the tony cafes and
restaurants are crowded: there's plenty of Web 2.0 money floating around. If
you only look at these concentrations of talent and free-flowing investment
capital, the economy looks like it's booming. Ditto
if you try to book a table near the Opera on performance night: there's
plenty of old money around that can spend $100 per dinner, too.
there were no older Toyotas or Hondas on the lot, only a few 2-year old
models asking near-new prices. I interpret this thusly: older reliable cars
that will last another five years without major expense are snapped up
immediately, and superfluous "fun" cars and luxury trophy vehicles
are being turned into cash.
When people are
driving their pride and joy cars out of their pampered garages and selling
them for cash, not trading them in for a new car or keeping them for
pleasure, I think that's saying something about the "real" economy
you won't find if you hang around Twitter HQ or the bejeweled Opera crowd.
anecdotal reports like this don't quite jibe with the allegedly hard data that
policymakers and economists keep feeding us. For those who prefer that I
refute the "we're in a recovery" line with data points and trendlines, I present a chart from UBS (via The Reformed
Broker) detailing the significant and historically unusual
gap between our nation's unemployment rate and Americans' perceptions about
how plentiful jobs are [red annotations mine]:
Of course, none of this matters if your an equity
trader -- right?
Michael J. Panzner