Happy Days Are Here Again? Analyst Sees 15 - 16 Million Cars This Year
James W. Paulsen, chief investment strategist at Wells Capital Management, sees U.S. auto sales bouncing “back to normal” by year’s end. “Normal” being “a rate of 15 million to 16 million vehicles.” Bloomberg painted a nice Chart of the Day, which seems to support that gutsy theory.
Paulsen and Bloomberg charted the recoveries after the 1981-1982 and 1990- 1991 recessions, and overlaid them with the current sales rebound. If that rebound behaves like the previous rebounds, the chart says anywhere between 14 and 15 million by year’s end, but let’s not quibble.
Paulsen and Bloomberg are pretty much alone with that forecast. Despite a good December, J.D. Power kept its 2011 forecast at 12.8 million units. Edmunds reports a “somber atmosphere” from the Detroit Auto Show, and “is forecasting 12.9 million for 2011.”
But then, Paulsen isn’t in the car business, he is flogging stocks. Especially car stocks that “may again have a good year”, Paulsen writes. Let’s hope so.
Here in the rust belt the average lifespan of a vehicle that is driven year around is between 10-12 years. You do see older vehicles, but those are the ones that are not driven during the winter.
People don't need to be able to afford a new car to be given the opportunity to drive one home. I saw it firsthand the other day. Her's my situation: My wife and I left our jobs by choice at the end of this summer and moved from CA to CO. We bought a second house before we left and made sure we had enough savings to last for quite a while. The original house went on the market when we left. We decided we needed a new small SUV and decided to take advantage of a good national lease deal that was being offered thinking we'd rather have a small payment for a few years that be out a chunk of cash by buying outright. (Yes, leasing in general does not make sense, that's not the point here). We went to the dealer, picked out the car, filled out the credit form, stated that we moved a few months ago, the old house has sold (But had not closed yet so the payments it still on the books and the cash is not in the account yet, so effectively we had two mortgages if anyone checked), I stated that I opened my own business and jotted down a monthly income figure. I did not give a bank account number to check. Nobody asked for an income statement, bank statement, or anything. The only thing that may have been checked is my credit score which is just under 800 (excellent). So I believe that if someone wants a new car, they can get one. Being able to afford it is completely unrelated. I am not naive enough to believe tht the general public always does things that make financial sense, it's all about instant gratification. It is funny, I was stressing a little bit when I walked into the dealership, but was amazed how easy it was when I drove out.
Can you list his stock recommendations so that I can do the reverse? I thought analysts were trying to get it right, not be "controversial" Wasn't the 81 recovery after a double dip from inflation? That's not like today Wasn't the 91 recovery coinciding with the start of ABS driven loan issuance? That's not like today either. If it tracks the 1932 recovery it will be 21MM!!! Oh, wait. Different conditions then too. Jeez, maybe each one is different.