Airplane prices soaring?

[MIm20c]

Just now, Hank said:

Used car prices are up some. Used pickup prices are way up!

Just because they all need a computer chip that's in short supply, blamed on COVID, and many auto makers have "paused" production . . . .

Supposedly even the Garmin g3x display is halting sales until August because of chip shortage. Glad we picked up a new one ton last year before everything went crazy.  

[A64Pilot]

Pretty much all of the shortages, wood, computer chips etc. can be blamed on Covid, but in fact it’s really that the demand for “stuff” was seriously underestimated so manufacturers didn’t order enough parts and especially the just in time guys are hurting.

‘Had they known that the cheap money would create such a demand they would be sitting pretty, and some in fact are, the ones that kept a healthy inventory, having been stung by shortages in the past.

[carusoam]

Cool...

We scored a real economist at MS!   

Chips are an interesting shortage... automotive companies are discussing weeks of delays and shortages as the reason...

Chip manufacturing equipment  is flying out of the manufacturer’s factories...

Housing companies are seeing wood prices have increased 10s of percentage points... as well...

JPowell has been recorded while saying he wants to let the economy run hot for a while...   and the overnight interest rate is held as low as it can be without going negative...

@cbarry  what are the chances of seeing negative interest rates in the US? (Any insight?)

Best regards,

-a- 

[aviatoreb]

I’ve read recently that people want to travel more by car than by public means.  Pandemic social isolation mode of transportation.  Maybe that could be a factor too for demand.  And to ga planes too?

[cbarry]

7 hours ago, carusoam said:

Cool...

We scored a real economist at MS!   

Chips are an interesting shortage... automotive companies are discussing weeks of delays and shortages as the reason...

Chip manufacturing equipment  is flying out of the manufacturer’s factories...

Housing companies are seeing wood prices have increased 10s of percentage points... as well...

JPowell has been recorded while saying he wants to let the economy run hot for a while...   and the overnight interest rate is held as low as it can be without going negative...

@cbarry  what are the chances of seeing negative interest rates in the US? (Any insight?)

Best regards,

-a- 

Possibility of  Negative Interest Rates:  Actually, in late March of 2020 the short term treasuries (1&3 month) went negative for a brief time.  Currently, with the rise in the 10yr. to be on par with the average S&P dividend yield, we are somewhat at an inflection point again regarding interest rates—but this time with a steepening curve between 1 & 10 and it slows its climb out to 30 (kind of looks like a max climb to clear an obstable on departure...) There’s still a good possibility of going negative on the short end if we some sort of a “shock” event resulting in a flight to safety (debatable regarding the level safety) with short term yields at an ultra low setting. 

[A64Pilot]

Got this as an email this morning 

https://www.ronsellsthebeach.com/blog/median-home-sales-price-skyrocketed/

Edited May 3, 2021 by A64Pilot

[flyboy0681]

22 minutes ago, A64Pilot said:

Got this as an email this morning 

https://www.ronsellsthebeach.com/blog/median-home-sales-price-skyrocketed/

This makes the third housing bubble of my adult life. But you know, this time it's different.

[aviatoreb]

9 minutes ago, flyboy0681 said:

This makes the third housing bubble of my adult life. But you know, this time it's different.

This housing bubble seems different as it involves houses, vs just generally property, as I understand it.  It is in part not just economics but psychology of pandemic and lockdown as I understand it - E.g. fancy exclusive flats in big cities are flat or loosing value, while suburb and further afield houses with lawns to stretch your legs in lockdown, are booming.

[cliffy]

My neighbor is a commercial property developer  and was told last week by his steel supplier that if he orders this week delivery will be next February!

He was told Longshoremen are in short supply to unload all the ships sitting outside Long Beach CA harbor

They won't come to work because unemployment is paying them more

Maybe its just a rumor 

I was told by a hangar builder at Sun n Fun that she checks steel prices with every order now because the price goes up so fast

Edited May 3, 2021 by cliffy
added text

[A64Pilot]

Read today that there will be a gasoline shortage that Summer, due to not enough qualified truck drivers.

Then read also today that US manufacturing is hurting, particularly for skilled workers like welders, but in fact they can’t get even unskilled workers

[Davidv]

6 minutes ago, A64Pilot said:

Read today that there will be a gasoline shortage that Summer, due to not enough qualified truck drivers.

Then read also today that US manufacturing is hurting, particularly for skilled workers like welders, but in fact they can’t get even unskilled workers

When restaurants are closing due to lack of workers and every chain store has a help wanted sign (with unemployment at 6%) I think it becomes abundantly clear which governmental policies work and which don’t.

[Hank]

40 minutes ago, Davidv said:

When restaurants are closing due to lack of workers and every chain store has a help wanted sign (with unemployment at 6%) I think it becomes abundantly clear which governmental policies work and which don’t.

Obviously the extra unemployment money and greatly extended benefits are helping many people live comfortably and buy lots of stuff without the hassle of actually working . . . . Does that count as government policy "working"?

[Davidv]

6 minutes ago, Hank said:

Obviously the extra unemployment money and greatly extended benefits are helping many people live comfortably and buy lots of stuff without the hassle of actually working . . . . Does that count as government policy "working"?

I was thinking along the lines of not working.  Without getting too political here, I’m just trying to say that while some level of assistance is always needed for people it’s pretty clear they’ve gone a little too far. 

[Skates97]

On 5/1/2021 at 8:29 PM, Hank said:

Used car prices are up some. Used pickup prices are way up!

Just because they all need a computer chip that's in short supply, blamed on COVID, and many auto makers have "paused" production . . . .

Used prices are definitely up. We try to get all the inventory we can through taking in trades and have been offering more at our three stores recently than we normally would just to get inventory. Trying to buy at the auctions right now is a fools errand and you will spend much more than just stretching on the value of a trade. New car inventories are extremely low, we are at about 20-25% of our normal inventory levels right now and sell them as fast as we can get them. The flip side is everyone is in the same position and nobody is cutting prices, why sell something for a discount when you only have a limited number and someone will be by tomorrow and pay sticker?

17 minutes ago, Hank said:

Obviously the extra unemployment money and greatly extended benefits are helping many people live comfortably and buy lots of stuff without the hassle of actually working . . . . Does that count as government policy "working"?

As with most we made cuts in March 2020 right at the very beginning. Later in 2020 when we tried to hire some of them back we were unsuccessful, between the Federal and State benefits they were making more not working than when they were working.

[tigers2007]

The Burger King behind my house starts people off at $12/hr. They close down at around 5PM due to zero available staff. This is at a busy exit along I-39 which cuts through the center of Wisconsin. I just got a flyer in the mail yesterday that a local milk production facility is starting unskilled labor at $16/hr plus shift premium and a $2000 signing bonus. Minimum wage in 1996 was $4.25 which is $7 in today's money. These high school kids are certainly in a good spot. I just think of the countless hours I worked in high school to make a peasants wage by today's standard. I believe Micky-D's and BK both have college tuition reimbursement plans too yet nobody wants to work!  A month ago my brother lets me know that his engineering firm (automotive) let a huge group of staff go. He is laughing it up collecting $23/hr equivalent unemployment benefits (state + federal boost). He is like "why go back now?" He is very familiar with electric vehicle propulsion and says he has a dozen firms wanting him but he is taking the "free paid time off" to investigate how fish get onto a hook and how buoyancy works. This is the same guy who was laid off during the '08 collapse and the new President paid for his MBA... he's always been at the right place at the right time...

[jetdriven]

6 minutes ago, tigers2007 said:

 He is laughing it up collecting $23/hr equivalent unemployment benefits (state + federal boost). He is like "why go back now?" He is very familiar with electric vehicle propulsion and says he has a dozen firms wanting him but he is taking the "free paid time off" to investigate how fish get onto a hook and how buoyancy works. This is the same guy who was laid off during the '08 collapse and the new President paid for his MBA... he's always been at the right place at the right time...

if he is satisfied collecting 3900$ gross a month, for a few more months then I guess he is happy with that. It still seems significantly higher than real world.  But its not real wages, and I dont think its why aircraft prices are rising. 3% aircraft loans may be a causal factor. 

Edited May 5, 2021 by jetdriven

[tigers2007]

34 minutes ago, Skates97 said:

Used prices are definitely up. We try to get all the inventory we can through taking in trades and have been offering more at our three stores recently than we normally would just to get inventory. Trying to buy at the auctions right now is a fools errand and you will spend much more than just stretching on the value of a trade.

Richard my fiance just sold in her near perfect condition '17 Wrangler Unlimited to a local Jeep dealer for a grand over the highest KBB "dealer trade in" price. Its insane. Its more than what they could have paid at a Mannheim auction but they wanted the "bird in the hand". I sold her on the Teleworking from home = why have a $600/mo car payment? concept.

[LANCECASPER]

On 5/4/2021 at 10:03 PM, tigers2007 said:

Minimum wage in 1996 was $4.25 which is $7 in today's money. 

The online calculators show you are "correct". $4.25 in 1996 = $7.21 today and this calculates out to a 2.14% annual rate of inflation. That is the "official" figure.

Anyone who think thats $7.14 today buys what $4.25 bought 25 years ago hasn't been to the grocery store or a lot of other places.

[ArtVandelay]

The online calculators show you are "correct". $4.25 in 1996 = $7.21 today and this calculates out to a 2.14% annual rate of inflation. That is the "official" figure.
Anyone who think thats $7.14 today buys what $4.25 bought 25 years ago hasn't been to the grocery store or a lot of other places.

They don’t count energy or food because it’s too volatile...they assume the energy costs are included in other products or services. They don’t use the same metrics for unemployment they once used either. What’s the saying about statistics and lies...

[ArtVandelay]

On a related note, I need to sell and move to lightsport, but I depreciated the Mooney over a number of years through the company.  I also added a great deal of value to the plane with upgrades. Now with the higher value in the resale market, and new demands of “paying my fair share” through the pending capital gains tax increases, I am up against a potential whopping tax penalty from the sale. I do not need to make any large item equipment purchases this year.  Any clever suggestions on how to minimize the impact?

Sell it by end of year, I doubt the tax changes will take effect this year.

[Davidv]

3 minutes ago, pmccand said:

With the way things have been going, they will probably make it retroactive to the beginning of 2021.  They have pulled that trick before.

If the light sport is your forever plane just find a real expensive one and take accelerated depreciation .

[tigers2007]

On a related note, I need to sell and move to lightsport, but I depreciated the Mooney over a number of years through the company.  I also added a great deal of value to the plane with upgrades. Now with the higher value in the resale market, and new demands of “paying my fair share” through the pending capital gains tax increases, I am up against a potential whopping tax penalty from the sale. I do not need to make any large item equipment purchases this year.  Any clever suggestions on how to minimize the impact?

First, find a good CPA; many are pilots. Take advantage of the fast sale market, high prices, and pay the long-term cap gains over the recapture. Or sell it for cash and report it as “junked”...
You’re not paying a “tax penalty” if you depreciated it.

[ArtVandelay]

With the way things have been going, they will probably make it retroactive to the beginning of 2021.  They have pulled that trick before.

Maybe, it depends on if they can change the forms in time, they’re talking about changing corporate taxes too.

[LANCECASPER]

11 hours ago, pmccand said:

On a related note, I need to sell and move to lightsport, but I depreciated the Mooney over a number of years through the company.  I also added a great deal of value to the plane with upgrades. Now with the higher value in the resale market, and new demands of “paying my fair share” through the pending capital gains tax increases, I am up against a potential whopping tax penalty from the sale. I do not need to make any large item equipment purchases this year.  Any clever suggestions on how to minimize the impact?

If you had to pay 15% capital gains on the entire sale price (which you won't have to) and airplane prices are up 15-20% I'll think you'll come out ok.

What would stink is if airplane prices were way down and it took a long time to even get a low price and then you still had to pay 15% capital gains on that.