Here are a few odds and ends regarding our Last Christmas (until next year):

– The best thing about the holidays is the world is not likely to blow up for at least a week. Politicians are out of town visiting their families (hiding). Bankers are hanging upside down in caves or sleeping in coffins …

– You know the world is a mess when the whereabouts of bankers is ‘important’ to anyone.

– This is the ‘Last Christmas’ in many ways, perhaps we shall see the last of wasteful consumption for its own sake. If this is so, the next Christmas is likely to be much more appealing and user friendly, that is, ‘merry’.

– Back in the day … there used to be this ‘thing’ called ‘civilization’ that provided ‘value’ to those lucky or smart enough to expose themselves to it. Bits and pieces can be seen here and there among the ruins: listen to the annual Bachfest broadcast to your computer by WKCR.

– This appears to be the last Christmas for the public idea of ‘economic growth’. Ideas gain currency with the passage of time, one such idea is that any growth likely to take place in the perceptible future will exclude themselves.

– The establishment’s conflicted — and bad faith — efforts at ‘stimulating’ growth since 2007 speak for themselves. Profound forces are at work, something more than simple excess inventory or shortage of liquidity. The promoters of ‘growth’ and ‘growth plans’ sound increasingly foolish: listeners murmur, ‘How?’

– Worrisome is when listeners cease murmuring and assume there is nothing left to lose: this is the Last Christmas of something to lose.

– This will be the last Christmas of ‘credit crisis’ being somehow distinct from ‘energy crisis’. To the credit analysts — and mainstream economists — energy is like peanut butter, something to sneer at: a lowly input. What really matters is the cost of money. I will say right here the marginal cost in money of money is no different from the marginal cost in money of petroleum. If 2% in the rate of discount effects a country’s ability to borrow, 200% increase in the cost of petroleum likewise effects the same country’s ability to service that 2% increase in credit.

– Energy risks are far most costly than risks associated with money (Fukushima).

– Credit risk cannot be distilled from general risk when the credit is extended as a subsidy for non-remunerative energy consumption or a substitute for that consumption’s returns.

– America went to war with Iraq twice because of oil and the potential effect of that oil on price/returns in the US, not because of the Iraq central bank’s discount rate.

– The economic productivity of consumption matters. What cannot be earned must be borrowed. Our incredible, furry consumption does not pay its own way. When was the last time your salad shooter provided some family income? How about the toaster? The dog? What about the massive bloatmobile stuffing the garage … that costs $100 to fill up … twice a week? How about the garage, itself? Merry Christmas!

Meanwhile: Aftermarket Insight tracks sales of auto- and truck parts sold for repair (not the parts found in a junkyard or auto salvage or components used of new car manufacture). Generally, when times are tough, people repair their existing cars rather than replacing them new, trying to keep them running as longs as possible. This adds to demand for aftermarket parts:

 

“2011 marks an aftermarket first: a year when car and light truck products will record substantial growth (approximately 3%) despite a near record downturn in miles driven. Traditionally, aftermarket growth has been fueled by more cars and light trucks on U.S. roads driven more miles. During 2011, neither of those two growth factors were present.”

“2011 car and light truck aftermarket product expansion is solely based on an increase in aftermarket product use per vehicle in operation.”

Jim Lang

Near Historic Mileage Downturn For 2011

Mileage by all types of vehicles on U.S. roads will suffer at least a 1.3% decline, with car and light truck mileage down even more. This will be the second largest U.S. mileage plunge in more than 55 years (since WW II).

Traditional Growth Drivers Absent

Aftermarket car and light truck growth in the U.S. traditionally has been propelled by two factors: an increasing number of light vehicles on U.S. roads, and more miles driven by cars and light trucks.

During 2011, neither of these two growth factors was in play.

More Product Use Per Vehicle

Car and light truck 2011 aftermarket growth, which Lang Marketing expects to total approximately 3%, has been driven solely by a substantial increase in aftermarket product use per car and light truck in the U.S.

Aging Vehicles Use More Products Per Mile

Aftermarket product use generated by mileage varies significantly with vehicle age. As Lang Marketing has pointed out in earlier Aftermarket Insight issues, not all miles driven are equal when it comes to aftermarket product wear.

When consumers drive older vehicles, more aftermarket product use is generated per mile than when newer vehicles are driven.

With the plunge in new vehicle volume beginning in 2008, Lang Marketing estimates as many as 28 million vehicles will not be sold between 2008 and 2014 compared to the 17 million new cars and light trucks annually sold between 1999 and 2007.

During 2011, the typical car and light truck increased its aftermarket product consumption approximately $13, enough to boost aftermarket product volume an estimated $3 billion during the year.

 

Welcome to the new economy of cash only. People buy parts with cash not bank loans. Without more credit available it is hard to see American racing out to buy cars: the process feeds on itself. The decline in vehicle miles traveled is unprecedented. It is also likely a consequence of declining employment as the out-of-work do not commute.

Half of the economy wants to ‘recover’ and the fix is in:

 

 

Figure 1: Light vehicle sales on an annual basis. Note the level of sales prior to the end of the real estate bubble were approximately 4 million units per year higher than currently. Here is credit availability: before the bust, consumers borrowed against home equity to buy newer, fancier and more wasteful automobiles. Now?

For the very short period after the oil price spike in 2008, sales of guzzlers such as SUVs and pickup trucks declined. The Federal government far-sighted response was the ‘Cash for Clunkers’ program which is indicated by the spike in sales in 2009.

– This looks to be the last Christmas of property bubbles anywhere in the world. Property prices in China are collapsing which looks to wipe out the life savings of tens of millions of Chinese savers along with local governments and others dependent upon land sales and new construction.

– The declines are being met with unrest and increasing public disturbances.

– Property prices in Australia — a country dependent upon sales of raw material to China — are starting to plummet. Keep in mind that no property bubble anywhere, at any time, has been reduced without great economic hardship. Look no farther than the United States, Ireland, Spain and Japan. The Japanese property bubble burst in 1989 and prices have declined steadily since.

– Look for bubbles to burst in Canada, UK and Netherlands. Without a surge in new credit there is nothing to support high prices for any good. This includes petroleum.

Merry …