Soft and Hard

In "What's 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 maintained.

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.

Another class 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.

For whatever reason, "fun" cars that I never saw on the lot before are now there in abundance.

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.

Once again, 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.

Of course, 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?

Comments

[roger]

Simple arithmetic,
nécessité oblige.
Philosophicaly:
Status symbol turned into it's opposite.

[Ground down]

People on the street?

THE $26 billion foreclosure settlement deal announced this month arrived in the final throes of Hollywood’s annual awards season. It also arrived too late for my neighbor, a screenwriter and director who moved out of her two-bedroom house the week before last, after her bank foreclosed on the property.

There had been no “For Sale” sign, no telltale rental tenant, no evidence of anything untoward in our canyon neighborhood, an enclave of writers, directors and actors. I saw nothing until the night I stood on my front steps, my heart in my mouth, and heard her sobbing scream — “I’m 47 years old, and I am going bankrupt!”

Now she is gone, another “statistic,” as she put it when I went next door to say goodbye as the movers loaded the last of her belongings. Her eviction follows that of our mutual neighbors, actors on a well-known soap opera forced out of their house in a foreclosure in a driving rainstorm four days before Christmas. Their dark, vacant houses, emblazoned with the public notices taped in the windows like shameful scarlet A’s, are holes in the hidden, fraying social fabric of Hollywood, where a vast majority belong not to the 1 percent but to the 99.

Of the 11 million Americans under water on their homes and facing foreclosure, more than two million reside in California. None of the Hollywood guilds keep records of how many of their members are among them, but several unions and charitable performing arts foundations report an increase in members applying for emergency housing assistance. When two of my three immediate neighbors have been foreclosed on, there are undoubtedly untold screenwriters, actors, directors and others quietly, invisibly struggling to keep their homes.

http://www.nytimes.com/2012/02/23/opinion/foreclosure-story-untold-in-hollywood.html

[John S]

I made a similar move last week: I traded one of my big road motorcycles for a little Honda scooter. (Plus a money back from the dealer.) So now I have a 110 miles per gallon vehicle in the garage for that day when gasoline hits $10 gallon with little warning.

[Little bezzle here, little bezzle there and presto recovery!]

7 accused of $375M Medicare, Medicaid fraud

DALLAS — Years after Jacques Roy started filing paperwork that would
have made his practice the busiest Medicare provider in the U.S.,
authorities say they've found most of his work was a lie.

They accused Roy on Tuesday of "selling his signature" to collect
Medicare and Medicaid payments for work that was never done or wasn't
necessary. Others charged in the scheme are accused of fraudulently
signing up patients or offering them cash, free groceries or food
stamps to give their names and a number used to bill Medicare.

Roy, 41, a doctor who owned Medistat Group Associates in DeSoto,
Texas, faces up to 100 years in prison if he's convicted of several
counts of health care fraud and conspiracy to commit health care
fraud. Six others, including the owners of three home health service
agencies, are also charged. More than 75 agencies linked to Roy have
had their Medicare payments suspended.

http://news.yahoo.com/7-accused-375m-medicare-medicaid-fraud-080550997.html

[Two worlds apart]

University of Maryland plans $7.2 million president’s mansion while employees suffer

One wouldn’t think we lived under the yoke of the Great Financial Crisis if they talked to university spokespeople. According to them, the school has a dire need for the new mansion. They argue that the new mansion will woo supporters (the one percent) and attract major donations at a time when state funds are drying up faster than industrial jobs in the mid-western rust-belt and they make up less and less of the overall budget. They also say that the cost of the presidential mansion will be picked up by about 30 private donors. Unfortunately for the shrinking state budgets, once the ‘presidential palace’ is finally constructed, the university will continue to be legally obligated to pay for general upkeep and utilities for the mansion but with a hitch: this time the cost will be more than twice the size of the current home. The donors will provide the seed money for their narcistic endeavor while the university and its students, faculty and classified workers will provide the yearly maintenance.

http://dailycensored.com/2012/02/28/university-of-maryland-plans-7-2-million-presidents-mansion-while-employees-suffer-sexual-abuse-low-wages-and-students-face-massive-tuition-increases-and-spiraling-debt/

[hmmm]

The mall for entertainment. I was at a mall in Northern Virginia not long before Lehman collapsed and was shocked by the number of people in the concourse areas. It was packed, but the stores themselves were deserted which was great for me, I hate crowds. People were going to the mall for cheap entertainment.