So, with the cash for clunkers program increased now to 5 billion, have we just created a new short term bubble which will wreck auto makers and dealers across the country? 5 Billion divided by 4500 is approx 1 million cars which have been scrapped and new cars bought.
However, out of those 1 million car sales, how many of them were scrapped and upgraded before the normal useful life of the car? I mean say you have a person who normally would have used his car for another year, yet due to the pressure of getting into the money available right away, he scraps it for a new car now. The car still had a useful year left on it but it's going to be scrapped.
Also a huge number of people maybe a half a million, who would have likley bought a car next year, now won't be. AND add to that, if you didn't participate in the cash for clunkers program, likley your car is not a clunker and has more than a years worth of reliable life to it, so you won't be buying a new car next year either.
I see the dealerships and the automakers hitting a high note this fall with thier earnings and profits and then tanking ALL of next year, AFTER they ramp up production, hire new people, etc... Basically, I think that what this program will do to an already beaten down industry, is finally put the death blow on the majority of it. Buy auto maker stock right now, it will see a bump, and then this winter, Short the hell out of it.