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Wednesday, 18 October 2017

Upbeat news on US and Detroit Motor Show, but aesthetics lacking

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Anthony Peters, SwissInvest Strategist

Tuesday saw another punchy session in both equities and credit supported by some more optimistic economic releases coming from the US and the UK.

Whether these prove to have been a flash in the pan on the back of consumers having saved up all their fire-power for the festive season or whether there is a sustainable turnround in the way Joe SixPack sees the more immediate future has to be seen.

I admit to having taken the November US Consumer Credit numbers – they were huge – at face value but it has been pointed out to me that the bulk of the US$20bn was in student loans and that the underlying numbers were nothing to write home about.

Nevertheless, there appears to be something of a spring in consumers’ steps. The Detroit Motor Show is a case in point. Following several months of strong sales growth in the States and a slowing of growth in China, you’d have to think, at least if based on the rhetoric of industry leaders, that the good old days are back just like when Chrysler drove a stampede of cattle down Washington Boulevard.

In terms of launches, however, this year’s Detroit is right up there. In terms of aesthetics, on the other hand, designers seem to be scraping the barrel although I was struck by the highly publicised 2013 Ford Fusion model which looks as though it has used a grille which might have been left over from Ford’s ownership of Aston Martin.

BMW, another old friend of mine, appears to have crossed the Mini – it was named “Mini” by Sir Alec Issigonis in 1959 because it was so very small and neat – with its other UK investment, Rolls Royce, and has given birth to a very fat, and in my view rather ugly baby. Perhaps it should be renamed the “Chunky” or the “Jumbo” or do you think it would end up turning into a psychopathic criminal because it had been discriminated against on grounds of its appearance?

Anyhow, what cars American are buying is interesting, but in a way irrelevant – the important thing is that they are buying again. Since the “cash for clunkers” programme, there has been little to shout about and that in itself was not constructive as it brought auto purchases forward without creating new demand and it was followed by a long vacuum. Now we are seeing a gradual replacement of the existing stock of vehicles – the average age of cars on US roads is, if you believe the stats, 11 years – and even if 8.6% of Americans are unemployed, 91.4% do have jobs and need their wheels.

US Household debt peaked in June 2008 at US$13.896trn and has been steadily declining since. The last reported quarterly figure was for September 2011 when it stood at US$13,207trn. Rumour has it that American banks are beginning to ease up on the provision of consumer credit and it will be interesting to see what is to be reported for the end of December 2011 when those numbers are finally released.

China outsourcing game

All the while, I have heard some encouraging news, as far as American industry is concerned. An automotive executive I spoke to pointed out that the sharp rise in wages in China is beginning to make the outsourcing game less compelling. Quality control has always been the teddy bear in the woodpile when dealing with Chinese manufacturing but the price advantage has more than compensated for this. As the price differential is beginning to melt away – we should not forget that the price elasticity of the US labour force is substantially higher that of the European one – American manufacturers will begin to pick up the sort of contracts again which they have been losing to China for more than a decade.

From ’Not the Nine O’clock News’: “If God had wanted democracy, he would have produced sufficient candidates”

Gingrich, Romney and the Tea Party

All the same and irrespective of how flexible Americans are as a whole, the powers that be in Washington remain mired in their century-old game of self-indulgent navel gazing. The New Hampshire primary went clearly to Mitt Romney but he is far from home and dry as the next contest is in South Carolina where the Tea Party bunch and other fiscal conservatives will be hoping for a strong comeback.

Don’t write off Newt Gingrich yet as he is an established politician with a proper track record but also a standard bearer of the right. Early leads in the primaries count for nothing. I did have to giggle this morning as an old English banker friend of mine reminded me of an old line from “Not the Nine O’Clock News” – starring among others one Rowan Atkinson when he was still funny – that if God had wanted democracy, he would have produced sufficient candidates. I like it.                                

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