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Automotive News & Views How does gas at $4 and higher impact you?
2183 messages, Last post on Nov 21, 2009 at 5:13 PM
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Not sure how you're heading home from Colorado, but gas in Utah is more expensive than it is in Colorado. ' Hope you saw Garden of the Gods and Seven Veils Falls while you were in the Springs. You sure picked a good time of year to come visit!
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Replying to: michaell (Oct 18, 2008 11:01 am) |
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Gut-wrenching declines in the stock market, a financial panic that some have compared to the Great Depression and the realization that the U.S. may be headed to its worst recession in over a generation have trumped what should otherwise be good news: The return of $3-a-gallon gas. Better yet, with 401(k) statements arriving in the mail and families worried about keeping their homes, has anyone even noticed? A gallon of regular gasoline fell .049 cents overnight to a new national average of $2.991, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices have not been below $3 nationally since Feb. 16. Saturday's price is slightly above the national average price of $2.81 a year ago, but 27 percent lower than the all-time high of $4.114 reached July 17. Before Saturday, gas prices already were below $3 in 23 states, according to AAA.
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Replying to: lemko (Oct 18, 2008 3:19 pm) I sold all my stock in 2007. One of my jobs has a defined benefit pension so I'm OK. Built my own house so I never had a mortgage. Still haven't figured out how to make my car run without gas so I'm real glad prices have dropped. Still too high though. I'd like to see it down to about 2002-03 levels of about $1.55 for RUG. "I cursed the fact that I had no shoe until I met a man who had no feet...then I was jealous because the lucky bum didn't have to spend the money on shoes." 
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This just out, thought you guys would like the explanation this veteran banker gives on the causes of the economic crisis: Earlier this week I interviewed a veteran banker at a major Wall Street investment firm, seeking an insider's view on what caused the current economic crisis, what life is like for people on Wall Street, and what's ahead for the economy. On condition of anonymity, the banker provided a blunt assessment of the risks taken, mistakes made, and the toll of the financial destruction. Here are the highlights: Q: What's the cause of the economic crisis from your perspective? A: There is an awful lot of blame to go around on Wall Street, in Washington, and in the irresponsible behavior of individuals. But stepping back, the critical error was that everyone [thought] there would not be a substantial, nationwide decrease in real estate prices. The whole subprime debacle was predicated on the fact that people said, "Well, this borrower is not really credit worthy and can't afford the house, but in four years it will be up 20 percent or more." It was widely believed that if you had bad mortgages from different geographic areas that all those [real estate markets] weren't going to go down together. You had a pool of 100 bad mortgages from borrowers with low income or bad credit, that were each a piece of [expletive]. The idea was you put them together and now it's not a piece of [expletive]. People believed that through geographic diversification you can diversify risk. That was what undergirded the entire breakdown, and this was not a 3-year phenomenon, it was building for 10 years. Fannie Mae and Freddie Mac were absurdities; those firms were recklessly and incompetently run. Q: What role did the rating agencies play? A: The rating agencies facilitated this by giving investment-grade ratings to the securities. In the stretch for yield, you could [buy] AA-rated corporate bonds and earn 50 basis points over Treasuries, but if you bought AA-rated mortgage-backed securities you'd get 150 basis points. From the buy side, there was a real breakdown in their fiduciary obligation, because they overly relied on ratings agencies and didn't do their own research. Rating agencies are incredibly powerful; you can't do debt financing without them. You have to play by their rules. They hold themselves out as these objective providers of ratings advice, but they are human beings, and [rating structured finance deals] was a higher-margin profit [center] for them. But I think [the bad ratings] were more due to sheer incompetence than being bribed. Q: But weren't these the so-called "smartest guys in the room"? A: These are not the smartest guys in the room. The ratings agencies don't pay as well, so people working there are using it as platform to get on the Street, or they work there because they're tired after a career on the Street, or they couldn't get hired on the Street. Q: But wasn't leverage the real problem? Lehman was leveraged about 30 to 1 when it collapsed. A: The investment banks were imprudently leveraged, but what killed Lehman and Bear was they had bad assets. You can survive a painful downturn -- and believe me, de-leveraging has been painful for everyone, but you can survive. Wachovia was only levered ten times, but had terrible exposure [to bad mortgages] and therefore couldn't raise capital. In hindsight Lehman shouldn't have been leveraged 30 times, but in a bull market having [a leverage ratio] of 25 times is not necessarily crazy. The real issue is asset quality. Q: What's your view of the government's $700 billion-plus bailout? A: I think Paulson was well intentioned around the notion of moral hazard, but he was wrong. I think if he could redo it, he would have saved Lehman. The devastation of Lehman failing -- the implication of their failure is hard to predict. I think you're seeing it play out in the stock market and the credit markets; I think you're going to see some hedge funds go out of business. Some of it has already been made public and some will come soon, but there are a lot of implications of Lehman reflected in the capital markets. |
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Chrysler may be bought by GM. That, once this happens, they will discontinue production of all models except Jeep and Minivans. This is a dark day my friends...They say 66.000 employees including dealerships will be cut or merged if this happens. They also say for every autoworker that is laid-off, 5 other people lose their jobs since they feed those automotive plants parts or rely on automotive business to come in such as doctors, hospitals, schools, whole communities like Ann Arbor, Detroit, the whole state of Michigan will be affected. I hope it does not happen. And just when we thought a turn around would occur with the new generation of electric cars coming for these ailing automakers. 
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Replying to: flash11 (Oct 18, 2008 11:02 pm) IMO while it appears that 'GM is buying Chrysler' - or atleast the parts of Chrysler that it wants - it's Cerebus that seems to be pulling the strings with GM as the 'front man'. If it were to happen Chrysler/Dodge would essentially be wiped off the face of the earth. Cerebus is a group of ivory tower elite running numbers day after day. GM is on the street selling products to Joe the Plumber. It's GM that wll bear the heat for the effects of Chrysler/Dodge disappearing. One scenario that I've seen printed is that Cerebus has a gun to GM's head and they've said 'Move or Die'. What gun? It controls GMAC. In August GMAC decided not to offer leases any longer. Some GM stores were doing 80%+ of their business in subvented leases. When those customers came back in to 're-up' they were hit with stupid numbers to stay in a GM vehicle. Last week GMAC told the dealers "No contracts for anyone with less than a 700 beacon and debt to equity has to be in line and no massive negative equity roll-ins". Maybe as much as 50% of the potential buyers at GM stores are being sent packing 'Go see Toyota, they've got 0%." GMAC hold the floorplan paper for about two thirds of all GM dealers. "Do as we say or we pull the plug on these coma patients you call dealers" Cerebus wants 100% of GMAC because it's a financial services company. Cerebus doesnt want to run a sinkhole of an auto company. Cerebus has no feelings toward thousands, literally, of small businesses called auto retailers. If the entire Chrysler/Dodge network and 50% of the GM network were to go out of business that has no bearing on 'numbers'. It has no effect at all on Cerebus' bottom line - especially if it's GM in front taking the heat.
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Replying to: kdhspyder (Oct 19, 2008 6:23 am) What some of have to wonder is, if fuel prices were driven by supply and demand why did fuel prices drop as soon as the problem on wall street show up? Could it be that we were once again being played by wall street and big business. They pulled one over on us in the early 70s and they were pulling one over on us now but they got caught when the rest of the balloon popped. Getting back on subject $4.00 gas caused most of us to drive less if we could. To the working poor it made paying for what you had harder. If people were at their credit limit the strain had to show up somewhere and the economy of easy credit started to fall apart. I budgeted this vacation I am on for $4.00 gas. It looks like I will be buying $3.00 gas so when I get home I will have saved 25 percent on my gas bill. I for one would love to see $2.00 gas because I believe it will give our economy a shot in the arm. 7 to 800 billion doesn't seem to have done much except make sure high paying executives and foreign investors got a bail out. Does anyone here believe gas should have cost over $4.00 and the oil companies should have been bringing in the biggest profits ever? If our expenses in buying fuel were going shouldn't their expenses have been going up as well to offset the monster profits? I hope the fuel prices continue to fall. I can afford to travel more and see more of this country.
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Replying to: boaz47 (Oct 19, 2008 7:11 am) We agree more than disagree. I also believe the price of oil was driven by speculators. Not demand. Look to the big hedge funds for the culprits. I hope they all lose their shorts. I would guess oil to float around $65 for a while.
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Replying to: gagrice (Oct 19, 2008 12:56 pm) Like you I have a SUV and I drive it for what it was intended to do. It is by far more comfortable than my compact or any sub compact I have ever been in. But I am reasonable and do not tend to drive it around town unless I need to haul something. But those that wished high fuel prices so that we with SUVs would suffer for our decission to get one simply could not see the total effect it would have on our economy. Sure you can get twice the fuel mileage in a Fit but can you afford the food at the supermarket? But the real issue might be what about those of us that would rather not have to drive a Fit? I don't want a system like they have in Europe which is one of the reason I have never desired to live there. Yes we live in a car centric society but that is what we have always liked and I see no reason to desire what I consider a lesser lifestyle. I will do my part and like I said I would love a EV for driving around town. But I don't wish high fuel prices for those that have to work and can't afford a new fuel efficient vehicle. Give me lower fuel prices and I am a much happier consumer. For those who praise the concept of high fuel prices all I as is that they move to some place that offers them their desire I don't share that dream.
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