Hammer Time: The Good Old Days
Let’s pretend they never happened because… well… we’re still waiting for them. Sure, on the surface things could be worse. Real estate is getting to be cheap. Cars are getting even cheaper. We seem to be in this period of mild deflation where ‘deficits don’t matter’ and interest rates remain low thanks to China. It’s a debtly paradise that will eventually turn our economy upside down, but for now it’s all good. As John Fogerty used to say, “There’s a calm before the storm, I know it’s been calmin’ for some time.” I’m not convinced that hyperinflation will be on that menu, but a happy-go-lucky tightwad like me realizes that books and reality need to be balanced no matter what. So…
Will this strategy work out? I really don’t know. Right now my inventory is at it’s highest level in a long time. I’m not even trying to market what I have very hard at the moment, which is strange since a couple of years ago I would be in full panic mode. The new car dealerships had a very good fourth quarter last year and that usually translates into a healthy first quarter in the used car market. Tax returns. Bonuses. Everything but new hires at the moment. Like most other investments, there are pluses and minuses you have to weigh in before putting up the capital.
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I'm not a professional dealer, but have done a fair amount of curbsiding over the years. Nowadays, $250 is what the junkman will give you for any carcass. Running with the need for a lot of work, $500 to 1000. Decent runner and looker, $2000+. The issue with fuel economy vs. driving the guzzler is this: during the first oil embargo in 1973, gas was 50 cents a gallon BUT you couldn't get it. Had to wait in line for hours only to have the gas station run out as you got next to the pump. Fast forward to 2008. Yes, gas was $4.00 BUT you could buy all you want any time any where. Thus the staying power of trucks and SUVs. Myself, I'll stick with the fuel efficient cars. GM H bodies with 3800. Buy em for $500, put $500 into them, and sell them for $2500-3500. They are comfortable cars, and get 20 city/30 highway.
There are many good reasons to think that frugality will continue to reign as we unwind many years of living beyond our means. Frankly, I'd be concerned if it didn't happen. In that sense, Steven, you can't go wrong with your current inventory. As for oil prices, however, a bubble of the magnitude we saw in 2005-2008 rarely re-inflates this soon after bursting. It tends to recoup 2/3 of the decline, and just when everyone thinks we're going to the moon it stalls and goes sideways for as long as it takes us to lose interest. And then some. The sheer unanimity with which everybody seems to expect higher gas prices suggests to me that it probably won't happen for awhile. I hope I'm right.