Monthly Updates

Financial, Economic and Social Mood Update (May 1, 2019) In the April 2019 monthly blog we looked at how the modern day automotive industry (the core of global manufacturing) is consolidating by country, by region, by brand and above all by automotive group or alliance.  To recap, the largest global players in terms of unit market share by group or alliance are 1) Volkswagen of Germany (29 percent), 2) Geely of China (19 percent), Honda of Japan (14 percent), Peugeot of France (updated and raised to 12 percent compared to the last analysis due to Peugeot’s motorcycle manufacturing relationships with both Yamaha and Mahindra), Toyota of Japan (10 percent), Hyundai of Korea (7 percent) and General Motors of the USA (7 percent). The largest global vehicle market today is China, and the Volkswagen brand name has been number one in China for 30 years and counting – since 1989.  50 percent of all Volkswagen brand vehicles are sold in China (the Volkswagen brand name being the largest marque within the even larger Volkswagen Group).  The Volkswagen Group recently launched a brand new entry level marque specifically for the Chinese market under the name “Jetta.”  The Volkswagen “Jetta” is of course the sedan version of the Volkswagen “Golf” hatchback – the Volkswagen “Golf” being the modern day successor of the original and venerable Volkswagen “Beetle” economy car.  The new “Jetta” brand name is targeted and younger, first time car buyers in the large Chinese market and will include 3 models – one sedan (the “Jetta” itself) plus two SUVs (sport utility vehicles).  The “Jetta” brand will be manufactured by the Volkswagen-FAW (First Automotive Works) joint venture in China.  There will be 200 brand new retail dealerships across China by December 31, 2019 and these retail outlets will be concentrated in digital…

Financial, Economic and Social Mood Update (April 2, 2019) In the March 2019 blog we discussed more important topics about the global vehicle manufacturing industry, about valid worldwide environmental quality concerns which need to be addressed and about the pitfalls of succumbing to the highly destructive ideology of socialism. Global new vehicle sales peaked at 95.2 million units in 2017 and declined to 94.2 million in 2018.  Much the same happened in the USA, which is the second largest national market after mainland China.  The makeup of this market has changed dramatically over time.  The dominance of the American companies reached a peak in 1947, when they held 92 percent of global unit sales (50 percent belonged to General Motors alone).  How things have changed in the 72 years since then!  Today, companies headquartered in Asia have 56 percent of the global market.  European companies have 37 percent and US companies have a mere 7 percent.  Automotive companies are divided into “groups” (which describes equity ownership) and sometimes into “alliances” which describes cooperation in the areas of manufacturing, sharing of common platforms & parts, and in marketing agreements for various parts of the world market.  The largest player today both in terms of unit sales / market share and in terms of capital is the Volkswagen Group (and an alliance above and beyond just the group).  The Volkswagen Group (headquartered in Wolfsburg, Lower Saxony, Germany) owns the active brand names of Volkswagen, Audi, SEAT, Skoda, Bentley, Lamborghini, Bugatti, Porsche, Scania, MAN, NEOMAN Ducati, CUPRA and Italdesign Giugiaro as well as the Karmann coachbuilding company.  VW is also the major joint venture partner of SAIC Motor of China (Shanghai Automotive Industry Corporation).  The VW Group manufactures 10.8 million vehicles per year.  SAIC is number one in China, with annual sales of…

Financial, Economic and Social Mood Update (March 1, 2019) In February’s blog we discussed the fact that electric vehicle sales are set to increase at a very rapid pace due to worldwide governmental legislation and the related commitment from the motor vehicle (automotive) industry to reach this goal.  Even if people from multiple sides of the political spectrum do not agree on the issue of “climate change” or “global warming,” everyone can agree that environmental pollution is serious enough to warrant a switch from the burning of fossil fuels (crude oil, natural gas and coal) to something much cleaner, safer, healthier, more environmentally responsible and ultimately more affordable – “green” energy sources and ultimately nuclear fusion energy (note – this is NOT nuclear fission energy).  The US State of California has long led not just the USA but the entire world in legislation related to the environment and related to motor vehicle safety.  In other words, what California has enacted into environmental and automotive industry law has eventually found its way to the rest of the USA and ultimately to the rest of the world.  In spite of this progressive environmental and automotive safety trend, California will not (by its own admission) meet its environmental goals of reducing tailpipe emissions.  Why is this so? Much of it has to do with the fact that California is home to very large metropolitan regions (Los Angeles – San Diego in the south and the San Francisco – San Jose / Silicon Valley in the north) where millions of people make long daily commutes to and from their homes and places of employment.  In other words, far too many vehicles on road getting far too much daily use.  Another issue (more in the rest of the USA compared to California) is the type…

S&P 500 on Feb 3, 2019 It looks like we may be in a bear market.  The Dow Jones 30 Industrial Index is down by 7 percent from its record high.  The corresponding decline in the S&P 500 Index is 8 percent and for the NASDAQ Composite Index it is already a 11 percent loss (in late December this was a 24 percent loss).  The NASDAQ is by far the most “representative” of the 3 major indices because it contains 95 percent of all publicly traded companies in the USA.  An even more ominous sign is the rise of the acceptance of the concept of “socialism” in the USA.  Dangerous proposals for massive increases in taxation (which is already sky high) and the implementation of a so-called “wealth tax” on one’s net worth foretell the event of an eventual “debt jubilee” or the write down of financial assets and liquid wealth (i.e. US Dollar denominated bank accounts, retirement savings, pension plans, life insurance contracts and the like) – an eventual global currency reset or “global economic reset” which will bring the US Dollar back down to earth.  The leader of the future is clearly China and the continent of Asia – not America or Europe. New auto sales in the USA reached 17,334,481 new units in 2018.  The Volkswagen Group had a record year worldwide, in China and in the USA (the 2 largest national global auto markets, respectively).  The VW Group is the largest and best capitalized vehicle group on earth.  Their record performance in the US market is due to their large number of brands which now include Volkswagen (the mass market brand from Germany), Audi (a luxury brand from Germany), Porsche (a luxury and a sports car brand from Germany), Navistar (a commercial truck brand based in…

Financial, Economic and Social Mood Update (January 1, 2019) Happy New Year to all – may 2019 be a good and better year for each and every one of us, with no exceptions. I would like to follow up on some of the topics from the December 2018 blog. It looks like we’ve finally entered a bear market. The Dow Jones 30 Industrial Index is down by 14 percent from its record high. The corresponding decline in the S&P 500 Index is 15 percent and for the NASDAQ Composite Index it is already a 19 percent loss (just a few days ago this was a 24 percent loss). The NASDAQ is by far the most “representative” of the 3 major indices because it contains 95 percent of all publicly traded companies in the USA. Even more importantly, the US Dollar value of all global debt has declined by 26 percent in the last 12 months – from USD $247 TRILLION down to USD $184 TRILLION. This means that we should soon see clear signs of asset price deflation and of financial company failures – such as banks, credit unions, brokerage houses, mortgage companies and insurance companies. The value of global financial derivatives (“contingent liabilities” which are basically very risky bets taken by commercial money center banks) has collapsed by a Fibonacci-near 63 percent in the last 2 years – down from USD $4 QUADRILLION to USD $1.5 QUADRILLION. Bankruptcies should follow in close order among major pension plans and among the unfunded liabilities of the major socialist welfare states in the industrialized countries of North America (USA and Canada), Japan and the European Union. BEV (batter electric vehicle) sales increased at an even faster pace during the first 11 months of 2018 and even more so during November 2018. As…

Financial, Economic and Social Mood Update (December 1, 2018) Is a stock market top finally in place? Perhaps – all of the major indices have fallen somewhat. The NASDAQ Composite Index has fallen the most, by a net 11 percent since August 30, 2018 (it had been down by as much as 16 percent). The bond market has been in a visible decline for about 4 years. One can already find retail US Dollar CD rates as high as 3 percent per annum in “brick and mortar” bank branches (not merely at Internet banks). Commodities are also in a definite bear market – the “black gold” known as crude oil has fallen by more than 30 percent in 2 months. The US Dollar remains artificially very high, but much of the rest of the world continues to move away from US Dollar denominated international trade. Both the Ford Motor Company and General Motors (GM) have announced substantial job cuts, factory closures and model terminations which represent about 15 percent of their total size. General Electric (GE), once one of the most respected and valuable Fortune 500 companies in the USA, is moving ever closer toward bankruptcy – a future which may also be in store for the United States of America. This month’s blog deals with huge macro-economic topics confronting today’s global economy. The biggest monetary investment to date is the “One Belt, one Road” (OBOR) project originating in mainland China. The Chinese and their 67 global partners (67 other countries) are investing up to USD $8 TRILLION in massive infrastructure projects which will eventually be a 21st century copy of the ancient Chinese “silk road” which linked China to much of the rest of the world through trade and finance. The 68 countries partaking in the OBOR project comprise…

Financial, Economic and Social Mood Update (November 1, 2018) I skipped the monthly update blog for October, but we are now back in business in November. I took a much needed vacation to the San Francisco, California Bay Area in the second half of September. It was a trip down “memory lane” for me as I grew up in the East Bay from 1967 to 1987 – Elementary School, First Communion, Middle School, Confirmation, High School and finally my undergraduate studies at UC Berkeley (Class of 1984). The stock market remains relatively robust, but it appears that we may (perhaps) have hit the top of the price-value bubble. The Dow Jones 30 Industrials Index hit a new nominal record on October 3, 2018 (26,852) and had lost 7 percent by November 1. The NASDAQ Composite Index (this one has the largest number of publicly listed companies) hit a new nominal record on August 30 (8,133) had lost 10 percent by the close of trade on November 1 (10 percent or more is the usual threshold into a bear market). The S&P 500 “Blue Chip” Index hit a new nominal record high on September 21 (2,940) and had lost 8 percent by November 1. The Dow Jones Wilshire 5000 “Total Market” Index (this index includes all of the publicly listed companies in the USA) hit a new nominal record high on September 20 (30,500) and had lost 8 percent by November 1. As I’ve said many times before, the most difficult thing to estimate in any market is timing. Nothing ever moves in a straight line forever, so obviously the stock market will have its up and downs just like everything else in life. A “crash” will happen, but the question is when. Falling stocks mean your investments (especially your retirement…