The US Auto Industry is about to Implode as told by Michael Alkin
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20 Year Hedge Fund Analyst Michael Alkin talks about inflection points and specifically how they relate to the current auto industry.

And how history repeats itself in cyclical industries.

The US Auto Industry is nearly 5% of the United States workforce and represents nearly 3% GDP and over half the companies in the DOW Jones Industrial rely upon the US Auto Industry.

Since the 2009 recession, the auto industry has experienced double-digit car growth on an annualized run rate and average vehicle prices have soared over 27% from $28,243 to $36,113 in the last 10 years alone.

Driven by jobs, rising wages, low gas, and low interest has contributed to this massive increase in the auto industry.

But what really drives the US auto market?
*Used Cars and the pricing of used cars.

As the recession of 2009 happened there were fewer used cars which resulted in higher used car pricing. This created higher used car equity which leads to higher used car residual values.

And with low-interest rates, you get lower monthly payments. With low monthly payments, there were a lot of car sales and a ton of used car trade-ins.

All these factors combined, and the US car-buying market decided that leasing cars was the best deal (over financing).

This created a huge surge in auto leasing. Lease penetration rates for big car manufacturers were up hundreds of percentages from 2009 because of this.

Now that many of these leases are up, millions of cars are coming to the used car network. And the prices of used cars is rolling over hard.

The auto lenders and banks are cutting back because of record leases, more used cars coming back and subprime customers make up nearly 1/3 of customers.

The autocycle margins have peaked and with the problems in the consumer sector, this will lead to a massive decline in auto sales, margins, and a complete implosion of the US Auto Industry.

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