The Car Wash Indicator (Scariest of All)

    New Jaguar Owner Changes His Own Oil – A “Sign” Of Things To Come

    When I was in law school in the late 1980s, I went to an auto parts store to get a part for my Nissan and ran into a young developer I knew.

    We exchanged pleasantries and I would have thought nothing of the meeting but for the fact that he had a nearly new Jaguar (the “cool car” at the time) and he was changing his own oil to save maybe $15.

    I would not have even noticed that but for the fact that he was acting so self-conscious and sheepish.

    He was acting oddly because he was conspicuously on top of the world a few months earlier, like so many other young developers in AZ at the time.

    They were all doing the same thing… locking up land in development paths and often reselling it before they even closed on their own deals.

    They all confused “a bull market with brains” (Andy Kessler’s phrase), thought they were genius business moguls, and lived like rockstars – until it all came crashing down with the late 1980s real estate crash and S&L crisis.

    I share this story because I ran into the young developer before the crash and all the headlines hit, but I probably should have seen it coming because of the “self-oil-change” indicator. 😊

    Car Wash Indicator

    There is a car wash in Danville, CA that I have been going to off and on (when I am not in Texas) for over 25 years now, and it may be the best recession indicator there is, given that Danville has always been ground zero for conspicuous consumption and real estate busts.

    It is a large, multi-lane assembly line car wash with a viewing area that allows all of the customers to watch the cars get their finishing touches – and successful young men have always seemed to love the show of walking out to their expensive cars in front of everyone.

    Dotcommers In 2000

    Prior to the dotcom bust of 2001, the car wash had two big screen TVs blaring CNBC stock reports to a bunch of young guys, who had nothing to do with the actual dotcom world, discussing net worths, “exit strategies,” “leverage plays,” “the new economy,” and much else loudly enough to ensure everyone could hear.

    In any case, sometime in 2000, I started to see fewer and fewer of these rock stars, and sure enough – everything crashed in a huge fireball in 2001. And all those “dotcommers” (mortgage brokers, real estate agents, car detailers, and middle managers from a nearby corporate park) had to go back to real work.

    Mortgage Guys In 2006

    I saw all this repeat starting around 2004, but mostly with house-flippers and mortgage guys.

    The mortgage guys were the most amusing because many wore fancy suits (for no reason other than to pretend they were executives) and drove the highest-end Mercedes, BMWs, and Porches that would embarrass or simply stress out most of us.

    They used to make a huge show of getting into their cars too, by pointing out little spots the poor car wash guys missed (before driving off the lot and going through a puddle that made 2,000 more little spots), and by pulling out a wad of bills so they could garishly peel off a $20 for a tip.

    Anyway – I stopped seeing these guys as early as 2006 – two full years before the worst of the crash came.

    Moms In 2022

    I share the above stories because the last two times I have been to that car wash, I have only seen parents with SUVs and Minivans getting their cars cleaned for the first time in months, to remove the old french fries, drink stains, dog fur, vacation dirt, and food wrappers. 😊

    They were all polite, friendly, busy, oblivious to anyone watching – and not the least bit conspicuous with anything they owned or did.

    There were no 600-horsepower SUVs or Teslas to be seen.

    Interestingly, the one remaining big screen TV was thankfully turned off too.

    Given the accuracy of the past car wash indicators, I think we are in for a doozy of a recession.

    So, buckle up (and get ready to refi).

    I might also remind everyone, as I did in this blog, that housing usually performs well during recessions (2008 was an anomaly).

    Jay Voorhees
    Founder | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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