Financial, Economic and Social Mood Update (February 1, 2025)
The automotive industry has been one of the leading industries worldwide for almost 140 years. It is now experiencing the biggest and most significant changes since then due to market over-saturation and excess production capacity (largely due to human demographic changes resulting in an ageing population and due to the over-use or abuse of credit financing) and due to the change into new technologies beyond the traditional internal combustion engine powered by crude oil products such as gasoline and diesel fuel.
Companies based in mainland China and those selling their retail automotive products in China now comprise 35 percent of the global market with Chinese companies manufacturing and selling 80 percent of all electric vehicles in the world. The entire global automotive market is forecast to contract (or shrink) by half in less than one decade or less than 10 years from today – perhaps as soon as just five (5) years from now. A channel on YouTube which reports on this daily is called “the Electric Viking.”
All of the so-called “legacy” automakers based in the USA, Japan, South Korea, Germany, France and Italy may not survive these changes. The largest automakers in the UK (formerly MG-Rover) and in Sweden (Volvo Cars) are already owned by Chinese companies – by SAIC (Shanghai Automotive Industrial Corporation) and by Geely, respectively.
This alarming phenomenon is not limited to the automotive industry and is also affecting major motorcycle manufacturers such as Kawasaki of Japan (down 23 percent in annual unit sales volume since their record year of 2019). Suzuki of Japan manufactures passenger cars & trucks plus motorcycles – they have also experienced a sales decline although not as severe (down 4 percent since 2018). Even one very large Chinese automaker has experienced a market sales decline – SAIC is down 18 percent since 2018. In addition to purchasing the former MG-Rover of the UK SAIC is known for major joint ventures with Volkswagen of Germany and with General Motors of the USA (the Wuling brand name). Two automakers bucking this downward trend are Geely of China (they own Volvo of Sweden, Proton of Malaysia, Smart of Germany and Lotus of the UK among their many brands) and Tata Motors of India. Tata owns Land Rover and Jaguar of the UK. The latter brand is doing very poorly, but their main Tata brand continues robust growth. Geely is also a major minority shareholder in Aston-Martin of the UK (17 percent of equity).
The remaining 13 global “legacy” automakers have already collapsed in annual unit sales volume from their respective record sales volumes:
- General Motors Corporation (USA): down by 73 percent
- Nissan Motor Corporation (Japan): down by 45 percent
- Groupe Renault (France): down by 44 percent
- Mitsubishi Motors Corporation (Japan): down by 34 percent
- Ford Motor Company (USA): down by 34 percent
- Honda Motor Company (Japan): down by 29 percent
- Stellantis NV (Italy-France-USA): down by 27 percent
- Mazda Motor Corporation (Japan): down by 23 percent
- Volkswagen Group (Germany): down by 22 percent
- Mercedes-Benz Group AG (Germany): down by 17 percent
- BMW AG (Germany): down by 17 percent
- Hyundai Motor Group (South Korea): down by 15 percent
- Toyota Group (Japan): down by 11 percent
The next topic I would like to discuss is that of real estate, banking and homeowner’s insurance – all very closely related and not only relevant to locations recently targeted with destructive fires such as Maui, Georgia, North Carolina or Malibu. The world (especially mainland China but even more so in the USA) finds itself in the most massive “everything asset bubble” in history – this must and will soon burst and crash to the ground. Commercial banks, investment banks and insurance companies (all of which use a very similar “business model”) now hold a tremendous amount of bad assets (non-performing or poorly performing loans on real estate, motor vehicles and more) which have yet to be acknowledged and written off as bad. Real property asset prices are so overly insane that a conventional insurance policy covers no more than 57 percent of current maximum “fair market value.” In other words, if you are struck with tragedy (the loss of your home) – even if you are insured – you are still screwed. You will have lost that which cannot be replaced (perhaps life, pets, and family treasures) and your policy will only cover a part of your rebuilding cost. New construction costs in the San Francisco, Bay Area of California now run from USD $589 to $1,276 per square foot. Mainstream news media outlets reported that rebuilding costs in and around the Malibu area average USD $1,000 per square foot. Prices in urban Virginia range from USD $209 to $704 per square foot. In metropolitan New York-New Jersey they go from USD $522 to $939 per square foot. Costs in urban Arizona range from USD $271 to $566 per square foot and in New Mexico from USD $425 to more than $1,000 per square foot. These prices are simply not sustainable – the overwhelming majority of people (even in the most affluent locations with the highest median or average incomes) cannot afford this.
Furthermore, real estate values are so sky high and insurance costs have gone so sky high (due to valid market circumstances) that fully 35 percent of homeowners today have NO HOMEOWNER’S INSURANCE. And then consider that 78 percent of Americans are now renters because they simply cannot afford to purchase or mortgage a home. In certain areas insurance is so bloody expensive that real estate prices are finally falling due to this fact – this is now the case in Florida, Louisiana and Texas. Many “real” insurance companies will no longer even sell policies in these areas and have stopped doing so in parts of southern California – which makes perfect sane sense. Local governments in some of these areas including Florida and California have “created” this horrific predicaments by controlling how much insurers can charge. This socialist insanity has resulted in insurers leaving these areas altogether and the insurer of last resort being – guess what – the government. And needless to say, the government product “sucks” compared to the real product.
Real estate prices need to come down a good 45 percent overnight just to try to approach any level of supposed sanity and when the entire “everything asset bubble” collapses in the very near future they must fall by a cumulative more than 95 percent.
Back in more sane times, the once great former company of Sears Roebuck sold “Sears Modern Homes” from their famous catalog from 1908 to 1942. These 70,000 factory built kit homes were and are entirely good & high quality products very much a part of Americana. The 370 different designs started at prices from USD $360 to $2,890 in 1908. By 2023 these prices had increased by 269-fold. Not because those same homes were 269 times better than they were in 1908 (the opposite is the case – they would need to be repaired and refurbished today) but because the purchasing power of modern money has gone down the drain…………………….thanks to the central banking system.
Next month’s blog will discuss the ongoing and necessary collapse of so-called liberal, left wing, socialist, woke and green political parties in the so-called western world.
