The collision of global markets and social mood

Tuesday, August 11, 2015

Update -- China, SPX, Muscle Cars

Still on vacation, but couldn't help noticing China devalued the yuan again.

This subject was discussed here in 2010.

Here's a snippet:

"Would you want your currency pegged to something that has just entered a multi-year bull market? I didn't think so. The Chinese may be greedy, but they aren't fools."

Today's news is yet more confirmation that the macro picture is the one to watch while playing Three-card Monte with central banks. The Fed would prefer that you kept your eye on the micro -- the day-to-day price of the major stock indexes -- but that would mislead you.

They love that.

Price may be the final arbiter, but price itself can mislead, just like your car can continue at highway speed until it runs out of gas. It's good to check the fuel (& temperature) gauge once in a while.

Markets are currently down hard. Happily it doesn't matter much until/unless 2044.02 breaks. In the meantime, here is another gauge to keep your eye on: social mood.

As with September Vogue 2014, the article is chock full of accidental subtext (emphasized). And the irony that it's from USA Today should not be lost either.

"Back in the 1960s and '70s, we were looking at 300-, 325-horsepower engines. Now you've got 500-, 600-, even 700-horsepower," said Ken Gross, an automotive historian, museum consultant and journalist. "Never in my lifetime did I think I'd see the day when I could drive a 700-horsepower street car."

In other words, we're at an extreme social mood juncture.

"We are living in the Golden Age of the performance car," said Matt Anderson, curator of transportation at the Henry Ford Museum and Greenfield Village. "The cars from the 1960s and '70s were good cars, but basic. Not as fast or sophisticated as today's cars. With new technology, improving fuel economy and reasonable gasoline prices, there's no end in sight."

Just like the Golden Age of private equity . . . right before 2007-2008. There's never an end in sight at the end of a trend.

"Affordability was part of what drove the first muscle car boom, and it's a major selling point for Detroit's modern performance cars. Prices for the Shelby GT 350 start at $49,170. You can get into a Challenger Hellcat or Charger Hellcat for $58,295 or $62,295, respectively. The Corvette ZO6 goes for $79,400."

The writer thinks a depreciating asset costing 50K is affordable. The writer does not realize that Fed money is essentially free while money velocity (turnover) is plunging.

"While some of the model names appeal mostly to aging baby boomers, automakers are trying to create legends for a new age."

Hilarious legends like, "Remember when people would spend 50 grand for a car that got 8 MPG??? Hahaha . . . "

"Half a century after the muscle car era, we've got double the horsepower and triple the fun," Gross said. "I can't imagine where we're going to go from here."

Take a guess.

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