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Entries in Economy (19)

Thursday
Feb062014

Global Economic Intelligence

Interesting to look at the big picture and get a feel for what sort of economic world we will be navigating in 2014, take a look. An easy read the graphics are intuitive.

 

 

 

 

Monday
Dec022013

Current Reality

Lets start the last month of the year reflecting on  the big picture for a moment. 

Here is the deal:

  • CMS (Citizen Main Street) has been carrying the Canadian economy for a few years now. Its part of the New Reality from a few years ago.
  • We all know that CMS has been empowered by "cheap credit". Agreed it facilitated Canada dodging the bullet of the "global recession", although a ton of pundits constantly made reference to the "recession" which never really existed in Canada.
  • We all know that most companies are sitting on a ton of cash, withholding investments, and waiting for "something" (gotta wonder about that something).

 The present:

  • Auto sales powered by new product, but primarily cheap credit, and long term loans are literally through the roof in 2013. 
  • Real estate (construction, resale) powered by the same cheap credit is through the roof, and evolving into the main industry in Canada.
  • CMS appetite for credit is over the top, and through the roof.
  • Until Carney was cautionary the rest of the world was patient. Now that Poloz is saying that its normal, the rest of the world and some Canadian banks are pushing the "caution button".
  • Obvious that CMS is close to the end of the road dealing cheap credit.
  • Pundits have shared their thoughts from all directions since the beginning of the year, usually on the premise that its all normal, and part of a new reality.
  • The Canadian dollar recently embarked on an inexorable downward slide, which will help most Canadian companies exporting (the ones that have not closed or moved).

 The immediate horizon:

  • For how long can vehicles be sold with long finance terms, to facilitate rolling over deficiencies? 
  • What happens when CMS reigns in the appetite for cheap credit? We are getting a glimpse.
  • What happens as the "Bitumen Bubble" endures, and inexorably turns the Oil Sands into expensive oil?
  • What happens as Gen Y wages/income continue to stagnate?
  • What happens as the world continues to see Canada as a bubble on the cusp of bursting?

The immediate auto business:

  • Manufacturers after a through the roof 2013 will soften the level of incentives going into 2014.
  • Can CMS continue to budget $500/month for a vehicle, to do a deal?
  • Will dealers finally understand the relation between "brick and mortar" and "digital" that we described in iDealer.
  • It will be Plan A, Plan B, and even Plan C to navigate 2014.

 

 

 

Thursday
Oct172013

Citizen Main Street

We have been saying for a few years that CMS (Citizen Main Street) has been powering the Canadian economy, with many companies sitting on piles of money.

If the 2 largest purchases of a family are houses, and vehicles, house sales are booming in Canada, and vehicle sales are almost off the charts...in both instances its powered by OPM (Other People's Money) at extremely low rates.

At one point it was "Lets temporarily power up CMS with cheap OPM"...by now the rest is history...

The impact on contruction to build houses acquired with OPM

Chart-Ben Rabidoux

 

As housing takes off others sit on the sidelines "waiting"...waiting for what?

 

Chart-Ben Rabidoux

 

To bring it closer to home in the auto business...

 

Chart-JD Power

 Its a new reality in discovering the effects and impact of inexpensive OPM (Other People's Money) on CMS (Citizen Main Street) to temporarily power up the Canadian economy.

We urge you to connect your own dots for the last quarter of 2013 and 2014.

 

 

 

Friday
Sep202013

Vroom Room

Good Morning!

Its Friday, its the Vroom Room come in make yourself comfortable, we have cappuccino and biscotti, join the conversation.

Last Saturday we went for a drive to Owen Sound to attend the Cobble Beach Concours d'Elegance. We had not gone for a lenghty drive (over 2 hours) on surface roads in some time. Yes...Walter (E500) remains a fun car to drive on such roads, as well there is a country side peacefulness that is a contrast from the habitual crowded GTA roads.

On our return for a few kilometers there was a 1959 Cadillac following us. Revealing to see from the rear view mirror the side over hang, the narrow tires, and such a huge car. There a myriad reasons cars are safer today, less over hang, better tires are certainly a couple of components.

You must have noticed that numerous pundits are talking about the 5th anniversary of the "financial crisis" think about this...it was 5 years ago. At the time we shared our thoughts with New Reality, which still resonates today.

Fascinating this past Wednesday to see how the markets were behaving prior to, and past Ben Bernanke's (The Feds) announcement on wether they were going to "taper" or not. Even more interesting when everyone seemed to have the answer, and it was not the correct answer.

Its still CMS (Citizen Main Street) that is powering the Canadian economy...think about this for a moment.

Its still the Canadian taxpayer that is back stopping mortgages in Canada...think about this too.

Perhaps the lingering lesson from 5 years ago: "When folks get too creative with money in one fashion or another, it always takes a perilous / uncharted direction". Lets leave it at that for the moment...

In case you missed it, we also started "The Backstory" which we will continue, our first backstory was to get "Where is the Money" out of the vault, since it increasingly resonates, with most folks wondering where all the money has gone.

Keep an eye, it will be interesting, and fascinating to see how Sergio Marchionne deals with the Chrysler IPO, and VEBA, obvious the end result is to own Chrysler...lets see how Sergio plays this one out.

Our usual old race cars from the Goodwood Revival Tourist Trophy.

 

Tuesday
Mar122013

Household Numbers

Are we still in a ranty mood? We might as well keep on going, and what do household numbers have to do with the auto business. 

Back in 2008 we mentioned that we were entering a new reality for the auto industry, the auto business, as well as an economic new reality. As usual when a thought is a little too far ahead....yes we all know!

if you are getting the feeling that main stream media is on a mission to pound CMS (Citizen Main Street) to the ground you might be on the correct thought vector.

Our prescient comments from almost 2 years ago on the Canadian Economy and Consumer.

We have constantly repeated that CMS has been powering the Canadian economy, and obvious that at some point CMS was going to run out of credit facilities and/or arrive at a higher understanding than to continue powering the economy. In the meantime (4 years) has anyone else picked up the slack? Has anyone taken on additional risk, compared to CMS? 

Some points:

 

  • Canadian banks through CMS made substatial sums of money available in the Canadian economy.
  • CMS rode the wave.
  • Canadian companies cashed in on the wave, and are sitting of substantial sums of money.
  • What seemed secure a few years ago is no longer as secure.
  • As usual the top of the pyramid will fare better than the bottom.

 

For the auto industry, auto business:

 

  • It will get dramatically more competitive to create customers and sell vehicles.
  • Yes...some will be left behind
  • CMS will continue to do transactions that fit the monthly budget.

 

For the economy:

 

  • What has to frustrate many folks, CMS took it upon themselves to power up the Canadian economy at a perilous juncture.
  • Its finally sinking in to CMS that his wave has run out.
  • Its clear that no one (to avoid risk) is stepping up to replace CMS in the Canadian economy.