o rly?
I read an article this morning. Well, I read the first couple of paragraphs and had a massive "O RLY" moment, because I quickly became aware that the market analysts involved are completely removed from reality on the street.
Here's the opening paragraph of said article: "The U.S. trade deficit unexpectedly rose for a second straight month in February as a big jump in imports of foreign-made cars offset the first decline in oil imports in a year."
The next paragraph goes on to explain, that analysts were suprised, as they expected foreign imports to decline, alongside the souring domestic economy.
To me, the reasons for that not to be true are many and obvious. Allow me to demonstrate the logic behind my lack of surprisedness(c).
1) The domestic economy is stagnant, if not in recession. Conventional wisdom suggests that consumers limit decrease their consumption of luxury items, such as foreign cars. However,
2) Oil prices (and thus gasoline prices) are regularly setting record highs, and have been off and on for some time now.
3) I think everyone can agree that in general, American made automobiles have rubbish fuel economy. Last night I saw a commercial advertising the amazing fuel economy of some small american SUV (I don't remember which one, I wasn't impressed). It managed to achieve a staggering 25 MPG highway. My much larger Explorer got around 20 MPG highway before the transmission went bad, and it was made in 1994!!! 25 MPG highway is not, and will never be a significant event in auto manufacture, unless it comes in the form of an Abrams Tank. Meanwhile, as the american BIG 3 are high-fiving themselves over small SUVs attaining 25 MPG, and a very few more sensible passenger cars getting into the low 30 MPG range (take the Impala for one) while competing over who can make the biggest MAN (compensation) truck, the Japanese and Koreans have be putting out fuel efficient, competitively priced vehicles for more than a decade. Not to mention its a safe bet that these foreign cars will spend less time in the repair bay than their American equivalents.
4) The reason conventional wisdom fails in this case, is that foreign imports implies luxury vehicles, your BMWs, Mercedes, that sort of thing. I would wager that imports of luxuriously appointed vehicles probably has fallen off. But given that Hybrids and other ultra high efficiency autos can't stay on car lots, and these types of cars are overwhelmingly foreign, the net gain in foreign import cars is unsurprising, if not expected.
5) Basically what I'm trying to say is that the rapidly rising cost of gasoline is relentlessly driving consumers to more fuel efficient vehicles. The kind of vehicles that are simply not offered in any real quantity by American manufacturers.
I suppose this kind of leads to another O RLY rant. The failing American auto industy, and its resistance to make the kind of changes necessary to become competitive again. But I'll save that for another day.
The inspiration for today's post.
Trade deficit wider; jobless claims drop
Here's the opening paragraph of said article: "The U.S. trade deficit unexpectedly rose for a second straight month in February as a big jump in imports of foreign-made cars offset the first decline in oil imports in a year."
The next paragraph goes on to explain, that analysts were suprised, as they expected foreign imports to decline, alongside the souring domestic economy.
To me, the reasons for that not to be true are many and obvious. Allow me to demonstrate the logic behind my lack of surprisedness(c).
1) The domestic economy is stagnant, if not in recession. Conventional wisdom suggests that consumers limit decrease their consumption of luxury items, such as foreign cars. However,
2) Oil prices (and thus gasoline prices) are regularly setting record highs, and have been off and on for some time now.
3) I think everyone can agree that in general, American made automobiles have rubbish fuel economy. Last night I saw a commercial advertising the amazing fuel economy of some small american SUV (I don't remember which one, I wasn't impressed). It managed to achieve a staggering 25 MPG highway. My much larger Explorer got around 20 MPG highway before the transmission went bad, and it was made in 1994!!! 25 MPG highway is not, and will never be a significant event in auto manufacture, unless it comes in the form of an Abrams Tank. Meanwhile, as the american BIG 3 are high-fiving themselves over small SUVs attaining 25 MPG, and a very few more sensible passenger cars getting into the low 30 MPG range (take the Impala for one) while competing over who can make the biggest MAN (compensation) truck, the Japanese and Koreans have be putting out fuel efficient, competitively priced vehicles for more than a decade. Not to mention its a safe bet that these foreign cars will spend less time in the repair bay than their American equivalents.
4) The reason conventional wisdom fails in this case, is that foreign imports implies luxury vehicles, your BMWs, Mercedes, that sort of thing. I would wager that imports of luxuriously appointed vehicles probably has fallen off. But given that Hybrids and other ultra high efficiency autos can't stay on car lots, and these types of cars are overwhelmingly foreign, the net gain in foreign import cars is unsurprising, if not expected.
5) Basically what I'm trying to say is that the rapidly rising cost of gasoline is relentlessly driving consumers to more fuel efficient vehicles. The kind of vehicles that are simply not offered in any real quantity by American manufacturers.
I suppose this kind of leads to another O RLY rant. The failing American auto industy, and its resistance to make the kind of changes necessary to become competitive again. But I'll save that for another day.
The inspiration for today's post.
Trade deficit wider; jobless claims drop
posted by Steven Jay at 9:49 AM
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