Cash for …

Was “Cash for Clunkers” a clunker?

A couple months ago I took some heat when I suggested that the cash-for-clunkers program might not be borrowing sales from the future, but might actually encourage consumers to make up for their abysmal sales of the past. Naw, people commented. Most of those sales were taken away from the rest of the year. Once the government program is over, sales will go right back into the cellar. In fact, many thought, they’d probably be a lot lower than before

Well it didn’t work out that way. Sales in September did indeed fall back below 10 million per year, as expected. But October’s sales numbers recovered. And there’s a lot of discrimination by car-maker. While total sales were unchanged from a year ago, GM’s were up 4%, Ford’s were up 3%, Toyota was flat, and Chrysler was down. Lest anyone think this was a “buy American” boom-let, Hyundai sales were up 50%.

There are a lot of reasons for sales to move higher, but the biggest one is this: after a year of financial turmoil, consumers are ready to make up for lost time. We scrap some 9 million cars per year. With a million new households formed each year, we haven’t been keeping up with demand. Cash-for-clunkers may have been an awkward program and poorly run, but it got people spending again. By this measure, cash-for-clunkers was a coup.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T13:42:03+00:00 November 3rd, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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