Ode to the Auto Feo, Part II – Optimism and Desperation are Poor Bedfellows

8/24/2011 Portland, Oregon – Pop in your mints…

Today we will continue the saga of the auto feo.  If you missed part I, please click here to get up to speed.  It shouldn’t be difficult as the auto feo is currently at a dead stop.

But first, a quick look at the markets.  At this point in the day, everything appears to be literally on hold until the FED chairman Ben Bernanke speaks at Jackson Hole.  What will he say?  Our guess is not much.  Perhaps some dribble about standing prepared with all necessary tools to fight deflation.  If He were truly to use his post for something useful, He would encourage Congress to recapitalize US households, not banks.

Speaking of banks, Bank of America seems intent on claiming that they are in no need of capital even as they sit on $2 Triilion in assets of an imploding economy.  B of A made perhaps the worst choices of all time when they paid a premium for Countrywide and Merrill Lynch.  They may not have had much choice in the matter given the carte blanche that regulators had during the panic of 2007-2008.  Whatever the case, they are now choking on the sewage of the above mentioned entities.

Citigroup, on the other hand, may need another reverse split sooner than they think.  With that said, we return to our personal story of a bad acquisition.

We left our story yesterday arriving at our rendezvous with the then owner of what would soon become our next “Auto Feo.”  As we pulled into the parking lot of a large supermarket, nature called.  Not seeing the vehicle which we were to inspect, we entered the supermarket to tend to our personal needs.  As we were exiting the supermarket, we received a call from the owner, announcing his arrival.

Our pulse quickened.

We exited and there it was!  A black beauty of an SUV.  At that moment, as the sun began to set over the horizon, the 1993 Isuzu looked like a late model BMW X5.  We were about to make the bargain of the century.

Astute readers will note that what we saw that evening was a mirage, born out of the dangerous mix of optimism and desperation that was moving in our body to inhibit our ability to make an informed decision.  We can only assume the same was true when B of A was looking over Countrywide Financial in late 2007.

We met the man, an Iranian, who promptly handed us the keys as we hopped in for a test drive.  As the engine roared to life, we were able to overlook the cracks in the windshield and somewhat soiled interior.  After all, it is a ’93, we thought.

As we proceeded around the block, never exceeding 40mph, we were impressed.  “This is a solid vehicle,” we complimented the owner.

A Solid Vehicle Indeed!

“Yes,” he replied, “we purchased it from a family friend and it has been our family car for five years.  We have maintained it and most recently replaced the clutch.  It was very expensive.  In Iran, a clutch costs you $200, here, $800.  We have a better car now.”

A new clutch!  We thought.  What a steal.  We bonded with the man as we spoke of our children and family life.  This was no longer a negotiation, it became a matter of honor.  As we parked the vehicle, there was only one hope for us.

The spousal veto.

For those of you who have never been married, this is commonly known as “running the idea by our wife,” which in most cases can save one from making a bad decision or fending off persistent salesmen.

Excusing ourselves, for it seemed an unnecessary step when we were obviously getting a BMW X5 for a mere $1,350, we made the call. 

Our wife was predictably skeptical. 

“Don’t you want to see other options?” 

We assured her that this was the best deal out there. 

“It’s not that urgent, come home and sleep on it and see how you feel about it in the morning.” 

Out of the question, I did not want to waste another trip to Vancouver or Gladstone just to pass on a car.

Again, astute readers will recognize this last objection as the sunk cost fallacy.  We, of course, did not.

“Well, if you are sure…”

And with that, our loving, ever supportive wife relenting gave her approval of the purchase and the deal was done.

We went back to the Iranian and, with an unintentional pause before speaking, extracted a $50 reduction in the vehicle’s price.

At $1,300, the deal was done.  And almost immediately, our problems began…

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for August 24, 2011

Copper Price per Lb: $4.01
Oil Price per Barrel:  $85.72

Corn Price per Bushel:  $7.31  
10 Yr US Treasury Bond:  2.25%


Gold Price Per Ounce:  $1,753 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%  EASIEST MONEY EVER COMING IN JAN 2012!!!
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.5%!!!   UP 0.7% IN ONE MONTH, 8.4% ANNUALLY AT THIS PACE!!!
Dow Jones Industrial Average:  11,232  TO THE MOON!!!

M1 Monetary Base:  $2,033,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,478,200,000,000 YIKES!!!!!!!