Car sales are trending up. Interest rates stay down so the addictive financing remains attractive. The price of oil continues to drop much to the chagrin of Arab countries and terrorist clients. America is technically self-sufficient in energy supplies. Canada and Mexico stand by to ensure there are no hiccups. Iran continues to twist in the wind with so-called sanctions but maybe a deal which the Israelis don’t trust. [Can you blame them?]
Low gas prices or at least low hysteria about high gas prices are essential to automotive sales. So what’s a terrorist to do. They rely on petro dollars to fund their nefarious projects. Some states are outright supporters. Other sheiks and Princes pay protection money into shady Swiss Bank Accounts.
As the price of oil drops less revenue for terrorists. Simple business school theory dictates a new demand driver be introduced.
Oil pricing is geo-politically driven. When markets default their thinking to a commodity supply demand equation the geo-political snake appears and bites hard. The Middle East is a powder keg. Arab terrorists in a mafia thought process will identify geo-political targets and blow them up. I’m thinking the House of Saud. The whole Sunni vs. Shite conundrum not to mention Iran’s proxy in Hezbollah taking big casualties in Syria are all drawing in Saudi Arabia. Their fall or even going down on one knew has huge ramifications.
So the price of oil will spike sharply upwards. Interest rates are planned to start rising making debt more expensive or profitable depending on how you look at it. People stop affording cars and trucks and automotive manufacturers in the Western world become exceptionally unattractive.
And that boys and girls is the Black Swan awaiting in the car sector. It’s just waiting and hatching a few new eggs to help out in the future chaos.
Every investment has a bear narrative. This is part of the automotive story analysts ignore.
George Gutowski writes from a caveat emptor perspective.