Lets start the last month of the year reflecting on the big picture for a moment.
Here is the deal:
- CMS (Citizen Main Street) has been carrying the Canadian economy for a few years now. Its part of the New Reality from a few years ago.
- We all know that CMS has been empowered by "cheap credit". Agreed it facilitated Canada dodging the bullet of the "global recession", although a ton of pundits constantly made reference to the "recession" which never really existed in Canada.
- We all know that most companies are sitting on a ton of cash, withholding investments, and waiting for "something" (gotta wonder about that something).
- Auto sales powered by new product, but primarily cheap credit, and long term loans are literally through the roof in 2013.
- Real estate (construction, resale) powered by the same cheap credit is through the roof, and evolving into the main industry in Canada.
- CMS appetite for credit is over the top, and through the roof.
- Until Carney was cautionary the rest of the world was patient. Now that Poloz is saying that its normal, the rest of the world and some Canadian banks are pushing the "caution button".
- Obvious that CMS is close to the end of the road dealing cheap credit.
- Pundits have shared their thoughts from all directions since the beginning of the year, usually on the premise that its all normal, and part of a new reality.
- The Canadian dollar recently embarked on an inexorable downward slide, which will help most Canadian companies exporting (the ones that have not closed or moved).
The immediate horizon:
- For how long can vehicles be sold with long finance terms, to facilitate rolling over deficiencies?
- What happens when CMS reigns in the appetite for cheap credit? We are getting a glimpse.
- What happens as the "Bitumen Bubble" endures, and inexorably turns the Oil Sands into expensive oil?
- What happens as Gen Y wages/income continue to stagnate?
- What happens as the world continues to see Canada as a bubble on the cusp of bursting?
The immediate auto business:
- Manufacturers after a through the roof 2013 will soften the level of incentives going into 2014.
- Can CMS continue to budget $500/month for a vehicle, to do a deal?
- Will dealers finally understand the relation between "brick and mortar" and "digital" that we described in iDealer.
- It will be Plan A, Plan B, and even Plan C to navigate 2014.