How the Minivan Once Saved Chrysler – Now It’s Near the End of the Road
This article embodies an automotive paradigm shift that has been occurring over the last few years. The car consumer has become very sport utility vehicle centric. This article emphasizes that not only is this preference one of practicality – but it’s one of image as well. For all intents and purposes, the minivan could arguably be more practical a vehicle than the SUV – but it might be facing obsolescence. Meanwhile, SUV’s are appearing in all shapes and forms. Lamborghini comes out with an SUV that becomes its highest selling model, following Rolls Royce, Bentley, and other luxury car makers – makers from which you wouldn’t traditionally expect an SUV. Other brands are abandoning models like the station wagon for a lineup of SUVs. Car manufacturers have been happy to oblige, since most SUVs have been based upon truck platforms and are highly profitable. At the end of the day, the perceived image of a product is a major factor in its success. The emerging reality seems to be that in millennial eyes (at least, those millennials who don’t outright reject automotive transportation) the SUV is more attractive even though it’s less functional. It doesn’t carry the stigma of a minivan renowned for its large family capacity and soccer mom styling. In further contradiction, most would agree that SUVs are less fuel efficient and not as good for the environment – so much for climate change concerns. In the end, catering to customer demands rather than trying to change perceptions can work out well for all parties.
Millennials Have an Average of $28,000 in Debt and the Biggest Source isn’t Student Loans
The first thought that comes to mind when the words “millennial” and “debt” are associated: student loans. However, credit card debt is actually the biggest factor in millennial debt. Why? Well student loans might actually be part of the problem. The millennial consumer has been forced to cope with increasingly limited purchasing power as the prices of items rise, and the added burden of student debt becomes much more ubiquitous. However, one pervading factor is that millennials want to maintain the lifestyle of someone without these issues and there’s one relatively easy (though consequential) way to achieve this result: credit card debt. Thus, millennials are finding themselves in this dangerous situation. The money spent on credit card debt balances is largely taken away from that which could have gone towards saving for the future. Thus, the millennials might end up being much less prepared for future and retirement then past generations. This could potentially lead to concerning situations related to consumer debt and recession-tolerance in the future.
https://www.cnbc.com/2019/09/18/student-loans-are-not-the-no-1-source-of-millennial-debt.html
Housing Starts Rose Significantly in August
US housing starts took a pretty significant boost in August. This is after many months where the housing markets appeared largely stagnant. Many builders have maintained uncharacteristic discipline since the Great Recession and have refused to give in to the urge to overbuild to meet basic demand, especially for starter-type homes. However, a combination of low rates and supply shortages seems to have actually convinced the builders to pick up the pace. This is a potentially good sign for the future consumer and economy since home-builders are in a sense betting on the availability of future home-buying customers in the relatively near future. Will this continue? Low rates might be a reason to say yes. However, , we think trade uncertainty and consumer confidence will be a major factor in determining whether housing will start pulling its weight in terms of its contribution to economic activity.
https://www.wsj.com/articles/u-s-housing-starts-rose-significantly-in-august-11568823150
Repo Spike Signals Wrong Kind of Volatility
A few days this week saw a relatively high spike in repurchase agreement rates. That this spike occurred in the middle of the month was unusual – and potentially concerning. Usually, repo rates increase in volatility during the end of the month when banks use them as a way of performing a sort of regulatory maintenance. However, this may point to a potential liquidity crunch within one of the most liquid markets in the world. Such a possibility is unsettling to say the least. This could mean that some markets aren’t as tradable as they might seem, and this could point to trouble in a time of crisis. This increase in repo rates could make balance sheet operations more difficult for banks and for the Fed and it should be monitored as a potential warning sign if it persists.
https://www.wsj.com/articles/repo-spike-signals-wrong-kind-of-volatility-11568834514
A Decline in RV Sales Is Bad News for Trump
As we have discussed before, the RV market might be the harbinger of a recession. Unfortunately, there isn’t much of a consensus in this respect. But either way, it is generally agreed that the RV sector is largely connected to manufacturing activity – which has suffered not only in the US but around the world as well. In some ways, RVs particularly tie manufacturing to the consumer in a very concrete way and RV sales haven’t been doing very well this year. This could just be a misjudgment in terms of pricing and incompetent inventory management (which seems unlikely for an industry as a whole) – or it could offer some sort of insight into and the psyche of the consumer. Higher-priced RVs are being hit the most. Could the consumer’s uncertainty in the RV market warn of a recession? There are proponents who say yes. While, RV sales is only one indicator, it is increasingly sending a negative message that should be considered.
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Index Definitions:
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