June 9, 2016

The automobile market

Last summer, Warren Buffett acquired one of the biggest used car dealerships in the United States.  His contemporaries wondered about him, but all he is doing is following the money.  He is not a genius, he is just practical.

So anyway, what am I doing talking about investor's actions?  For good reason.  I am in the business of repairing used vehicles.  I figured, that since he had a good idea the market would shift to buying used cars, a surge of repairs would hit the spring of this year.  And that is what is happening. At least it appears to be at this time.

Yes, the new car dealers are having trouble selling new vehicles.  A lot of us are fixing up what we have because to buy a new one, means taking a mortgage out on our house.  We might as well buy a small house and get into the renting business than buy a new vehicle.  And, if you are a contractor or business, it is quite difficult to get your moneys worth out of a $50,000 pick-up.  Not much usefulness in that.  So, I am seeing those who might have bought new, in lots of different sectors, buy used and have it fixed up for a 5th of the cost of a new vehicle.

So then, the cost of used vehicles will go up as well because there will be more of a demand for them.

We will see if this plays out true over the summer into the fall.  Warren Buffett is a smart man, but he is no smarter than you or I.  He just doesn't get excited about the market like most of us do, and makes better judgments as a result.

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