The markets sold off heavily today and it feels like there's more to come. Maybe not the end of the world type of selling, but certainly a downward move that will shake off the froth. Yup - a 10% moonwalk may be in the cards. That won't be fun. It looks like housing is weaker than anticipated and the "bottom" has not yet arrived. In spite of relatively low interest rates, buyers are in short supply and inventories continue to climb. Hmmm... Prices have fallen a bit more with some areas (even those previously resistant) in real pain. It's really a lot about credit, and greed, and denial. The extension of credit to those less qualified and the creativity of the terms are unraveling. Somebody somewhere must have known that not all these silly loans would get paid as agreed. Pain... Real pain is likely here. Well, I guess you can call it real pain - even though it's essentially the head being blown off the brew (froth). There's probably more selling to come. The ill feeling and the underlying concerns are heavy thought s to carry into business.
This yuck is spilling over into autos as AutoNation and a few other big fellows seem to be coming up short. The stale mortgage environment (especially sub prime) is sure to catch up with cars. When people struggle to pay their mortgage, they are likely to struggle with their car payment as well. Lenders will quickly tighten. If dealers can only sell cars to people with good credit, they will struggle. They've had a steady diet of "finance anyone" that will soon dry up. Mike Jackson, CEO of AutoNation Inc., said last week that business conditions have created "one of the toughest environments I've ever seen." In the northeast auto business there are stories about some suffering. It looks like those who were surviving in a strong market (1998 - 2006 was an extended period of good times) are now bleeding in the soft one. You can no longer be clueless and still get by. Some situations; sinking franchise in beefy real estate, or maybe a dealer who moved his awareness and involvement to the periphery when things were easy pickings - are causing more problems. The tighter lending standards (forced by years of easy paper) are coming you guys. Don't think it won't happen - it will. Some dealers will try to survive and fail. Some will be fortunate to recover their working capital and get out. Some will take advantage of the herd thinning, and do just fine.
Chrysler came out with a lifetime powertrain warranty today. What? Yup - lifetime, whatever that means. It's an act of desperation. We'll see more of these.
This shake out should produce some opportunities for the liquid and the patient. Hmmm...
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