Automakers Are Having a Record Year, but Here’s a Trend that Should Worry Them
U.S. auto sales closed out the summer on a positive note, topping estimates and casting some rosy light on the health of the American consumer. Recording its best August since 2003, the auto industry is on pace to sell 17.8 vehicles in 2015, well ahead of expectations of 17.3 million. If the numbers hold up, 2015 will be the best year ever for U.S. auto sales, beating the 17.4 million mark set in 2000.
The general consensus is that auto industry is in pretty good shape these days. Gas prices and interest rates are low, boosting the market for cars and light trucks. More than 2 million jobs were added to the U.S. economy in the past year, and more jobs is usually good news for auto sales. The unemployment rate has been trending lower for five years, sitting at a relatively healthy 5.3 percent in July.
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As with any statistic, though, there’s more than one way to look at the situation. Sure, auto sales are climbing as the economy gets stronger and more Americans hit their local car dealers’ lots. At least to some degree, though, higher auto sales should be expected just as a result of U.S. population growth. And those rising monthly sales figures are masking a continuing trend that is more worrisome for the auto industry: per capita auto sales are still in a long-term decline, even including the solid growth the industry has seen since the end of the recession. Doug Short at Advisor Perspectives did the math and made a graph:
According to Short’s analysis, the peak year for per capita auto sales in the U.S. was 1978. As the red line in the graph shows, the trend is negative since then.
In the graph, per capita auto sales in January, 1976, were defined as 100; the readings in the index since then are relative to that 1976 sales level. As you can see, the index moves higher until August of 1978, when per capita auto sales were up nearly 20 percent over 1976. Since then, per capita auto sales have fallen, reaching a low in 2009 that was nearly 50 percent lower than 1976. Since 2009, per capita auto sales have risen nicely, but are still more than 15 percent below peak.
What could explain the negative trend? Two factors come to mind. First, demographics. It has been widely reported that the millennial generation is less interested in owning cars for a variety of reasons, ranging from a weak economy to a cultural shift away from suburban life. However, the data on millennial car purchases is ambiguous; recently, millennials have started buying cars in volumes that look a lot like their elders. And even if millennials are less interested in buying cars, their preferences can’t explain a shift that began in the 1970s, before they were born.
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The other factor that may explain the trend is income inequality. A study of car ownership by the Carnegie Foundation found that countries with higher income inequality have fewer cars per capita. The logic is simple: As more income is claimed by the wealthy, there’s less to go around for everyone else. And that means there’s less money for middle and lower income groups to buy and maintain automobiles, among other things.
Here’s a chart of the Gini index for the U.S. since 1947. (The Gini Index is a widely-used measure of income inequality. A higher Gini number means higher inequality.) Note that the Gini reading started climbing in the late ‘70s – the same time when per capita car ownership in the U.S. began to fall.
This chart tells us, not for the first time, that the U.S. has experienced more income inequality since the 1970s. Combined with the per capita auto sales data above, it suggests that as the rich have gotten richer and everyone else has struggled to keep up, car ownership has suffered. Although this is by no means proof of the relationship between income inequality and per capita car ownership over the last 40 years, it hints at an interesting theory – and suggests that the auto industry has good reason to be concerned about growing inequality in the U.S.
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One Woman Gets Revenge on Unrelenting Telemarketers
We all hate telemarketers, just as much as we hate cable companies. Put them together and it’s a lethal combination. One woman got her revenge from both yesterday when a judge ordered Time Warner Cable to pay her $229,500 after the company harassed her with 153 computer-controlled “robocalls.”
Even after Texas resident Araceli King requested and then demanded that the company stop contacting her, she received 74 more calls from Time Warner in less than a year. The company was actually leaving messages for Luiz Perez, an individual who once had her same phone number. But even after she explained her identity to a company representative the calls kept coming and King filed the lawsuit. The calls began in the summer of 2013 and King filed her lawsuit in March 2014.
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U.S. District Judge Alvin Hellerstein ruled that Time Warner Cable violated the Telephone Consumer Protection Act of 1991, which stipulates that consumers can sue for $500 for every unwanted call received. The judge tripled the penalty to $1,500 in this case because of the enormous number of calls.
Time Warner Cable countered that since the company believed it was calling Perez, who had consented to the calls, it was not responsible to King under the Act.
According to a telemarketer, before the National Do Not Call Registry came into effect in 2004 as an amendment to the Act, more than 137 annual calls were directed – on average -- at a single individual.
And as we all know, they usually came at dinner time or early on a Saturday morning when all you wanted to do was sleep.
One Woman’s $229,000 Revenge on Unrelenting Telemarketers
We all loathe telemarketers, probably even more than we hate cable companies. Put them together, though, and you reach a whole new level of consumer fustration. But one woman got a little bit of vindication from both entities when a judge on Wednesday ordered Time Warner Cable to pay $229,500 after the company harassed her with 153 computer-controlled “robocalls.”
Even after Texas resident Araceli King requested that the company stop contacting her, she received 74 more calls from Time Warner Cable in less than a year. The company was leaving messages for Luiz Perez, an individual who once had her same phone number, even after she explained her identity to a company representative and filed the lawsuit. The calls began in the summer of 2013 and King filed her lawsuit in March 2014.
Time Warner Cable countered that since the company believed it was calling Perez, who had consented to the calls, it was not responsible to King under the Telephone Consumer Protection Act of 1991, which stipulates that consumers can sue for $500 for every unwanted call received.
U.S. District Judge Alvin Hellerstein ruled that Time Warner Cable violated the Act. The judge tripled the penalty to $1,500 in this case because of the enormous number of calls.
The Hole Truth: Celebrating a Huge Day in Doughnut History
Whether you’re a Dunkin’ devotee or are crazy for Krispy Kremes, July 9 is a date you should celebrate.
On that date back in 1872, the doughnut took a big step toward becoming the billion-dollar business it is today: John F. Blondel of Thomaston, Maine received a patent for a “new and useful” improvement in doughnut-cutters that would speed the production and consumption of the humble pastry in the United States.
The device described in Patent No. 128,783 was intended to automate the process of cutting those dastardly doughnuts — holes and all — as efficiently as a hole punch. The desired edge could be plain or scalloped. This ingenious contraption would push the dough out of the center tube, leaving it free for making the next doughnut.
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But as Art Cashin — the director of floor operations for UBS Financial Services who regularly sprinkles historical tidbits into his commentary — pointed out in a note Wednesday, before you can talk about Blondel’s doughnut innovation, you have to know the story of one Hanson Crockett Gregory, the young genius who forever changed what you and I get when we order our plain, glazed or chocolate with sprinkles. While the history of the doughnut is disputed, Gregory claimed to have invented “the first doughnut hole ever seen by mortal eyes” as a 16-year-old sailor on a lime-trading ship and then taught the technique to his mother, Elizabeth Gregory.
In case you’re still hungry for more doughnut history, this Friday, July 10, Krispy Kreme is celebrating its 78th birthday by offering a sticky sweet deal at participating locations: Buy any dozen doughnuts at regular price and get a second dozen for 78 cents.
Oh, and if you want to purchase those pesky doughnut holes that get unceremoniously shoved from the middle? You can buy those, too. They’re simply called Doughnut Holes, and they can be bought by cup or box in assorted flavors of Original Glazed, Dipped Chocolate, Powdered, Chocolate Cake, Blueberry Cake and Plain Glazed Cake.
Hanson Crockett Gregory would no doubt be amazed.
Are Internet Ads Gender Biased?
In the most-watched soccer game in U.S. history, the U.S. trounced Japan in a 5-2 victory in the Women’s World Cup final. The U.S. team will receive $2 million from FIFA for the win. Last year, the German men’s team, which won the World Cup, collected a cool $35 million.
While FIFA is notorious for sexism among other dubious behaviors, a Carnegie Mellon University study confirms that other companies are also biased about women—especially when it comes to money. One troubling example: female job seekers on Google were less likely to be shown ads for high paying jobs than male job seekers.
Using an automated tool called AdFisher, researchers explored how Google’s automated ad server reacted when users with identical profiles--except for their gender--interacted with Google’s ads. The technology found that males were shown ads for a career coaching service for “$200k+” executive positions 1852 times, but the female group was shown those highly paid positions a mere 318 times. While the premier career coaching service ads were the top ads shown to males, the top ads shown to females were a regular job posting service and an auto dealer.
Google allows its advertisers to target a particular audience, so any company is allowed to promote different ads based on gender. In addition, the survey wasn’t able to pinpoint the source of the discrimination, whether it was Google, the advertiser, both of them, or the algorithm that was tracking the user behavior. Regardless of the cause, the research proves the inherent perils of customization and targeted ads.
The study was released just before a wave of criticism hit the tech industry, which was accused of gender bias in hiring practices. In general, at major companies like Facebook, Yahoo and Google, women hold few leadership posts and make up around 30 percent of employees.
To be fair, women have not exactly flocked to get degrees in computer science and related math and science areas. Those are the jobs tech companies value most since all new digital products require coding skills.
Two-Thirds of Parents Are Making This Big Financial Mistake
More than a third of Americans with young children don’t have any life insurance, and another third have policies with payouts of less than $100,000, according to a new analysis by Bankrate.com
The survey found that 42 percent of all Americans haven’t purchased life insurance, and about half of those with insurance have policies worth $100,000 or less, including 25 percent of those with a household income over $75,000.
Of course not everyone needs life insurance, but people who have family members depending on them financially should have a policy. The amount you need varies, depending on your future financial obligations, outstanding debts, and current assets.
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Part of the reason for inadequate coverage could be that people underestimate the benefits they’re receiving from work (which don’t roll over from job to job), or they’re failing to update their policy after major life changes like the birth of a child or the purchase of a home.
Another factor: They’re misinformed about the price of life insurance. Eight in 10 consumers have incorrect ideas about the price of life insurance, with millennials overestimating the cost by 213 percent and Gen Xers overestimating it by 119 percent, according insurer trade organization LIMRA.
In addition to your age and health, the price of life insurance could be impacted by your credit history, driving record, and lifestyle.
The LIMRA study found that 30 percent of Americans think they need more life insurance, but more than half said it was unlikely that they’d purchase a policy in the next year.