Big SUVs Aren’t the Half of It When It Comes to Big Profits
When I started Total Wealth, I promised you a look at the tips, tactics, and techniques needed to turn today’s headlines into profits. And we’ve done that very well over the years together.
Today, though, I want to go a step deeper by calling your attention to a headline that caught mine early Monday morning, and what it really says about how to line up your next profitable play.
You won’t find what I am about to say anywhere else, though.
It’s simply too uncomfortable to talk about, so the mainstream media ignores the problem or – if they do talk about it – discusses what’s happening in highly hedged terms, so as not to be accused of fat-shaming, skinny-shaming, or being politically, socially, or economically incorrect.
I don’t have that luxury.
My job as Chief Investment Strategist is to help you identify the world’s best profit potential, even if it means talking about stuff we find challenging.
According to the Wall Street Journal report I read in the wee hours Monday morning before an appearance on Fox Business Network, “SUVs are Bumper-to-Bumper on Dealer Lots, With More on the Way.”
The implication, of course, is that automakers are cutting their own throats by catering to American consumers who want a roomier ride. Only that’s not the half of it.
You see, SUVs are not the real story.
I could care less that the number of nameplates has risen from 70 in 2014 to 96 presently, according to a Bank of America report. Or, that the number will rise to a staggering 149 SUV models five years from now, as cited in the Wall Street Journal.
What gets my attention is why this is happening. That’s always where the real money is.
Americans don’t just want SUVs.
Many Americans can’t fit in smaller cars, even if they want to.
We need SUVs because our country has become a nation that wants dessert first and dinner in a pill.
Food companies have “scientifically” altered our foods for decades and the recipe is an unmitigated disaster. Hydrogenated oils, for example, are really restructured vegetable oil with high levels of trans-fats that raise your bad cholesterol while lowering your good cholesterol and simultaneously increasing your risk of diabetes, heart disease, and strokes. Added sugars screw up our metabolism while peaking insulin and causing massive changes in how our bodies utilize the food we eat.
In other words, the nasty stuff is deliberately engineered to be consumed more often and in huge portions. That’s why the average restaurant meal today, for example, is at least 4X larger than in the 1950s and has more calories.
It’s also why the unhealthiest stuff is also often the tastiest, cheapest, and most easily accessible. It’s not a coincidence that American companies spend billions advertising unhealthy snack foods, even going so far as to bill them as being “healthier” choices.
Not that it makes much difference.
Americans walk less than folks in any other industrialized nation. Our nation couldn’t “burn” this off if it tried.
Roughly 80% of folks do not get enough exercise or even physical activity according to the CDC, either at home or at work. Case in point, as recently as 1960, roughly 50% of jobs in this country required moderate physical activity but today that figure is less than 20% according to PLoS One.
One in three Americans is obese and that number is on trick to top 50% of all US adults aged 20-74 by 2030, a mere 11 years from now.
Which brings me to the point I want to make.
There is a direct link with large vehicles sales and it’s not just me saying so. That’s according to the Washington DC-based thinktank, Resources For the Future.
The situation is so graphic, in fact, that you can’t not see the trends.
But that’s the real reason SUVs are clogging up new vehicle sales lots and why they account for more than 47% of all new vehicle sales at a time when sedan sales have tumbled to only 30% from 50% as recently as 2012.
So, now what?
First, investing in car makers that are SUV-oriented isn’t a good idea. The margins are likely to collapse as “fat” gets commoditized. Alternative energy, though, remains viable and its platform indifferent.
Second, bigger people require more resources, and I mean that literally, not judgmentally. That means more space in retail establishments, but a decrease in sales per square foot. Not coincidentally, it also means a corresponding rise in net-based shopping with Amazon.com Inc. (NasdaqGS:AMZN) being best in class.
Third, medical companies engaged in obesity management and related diseases are a goldmine if they can come up with correspondingly savvy ways to manage the problem. One of my favorites over the years has been Becton, Dickenson and Co. (NYSE:BDX) and it’s still a great choice today. So, too for Apple Inc. (NasdaqGS:AAPL) as it gets into the health data business.
More immediately, though, I’ve recommended a nationwide fitness provider with the perfect cash flow model. Something on the order of 50% customers sign up then never visit yet pay anyway. I like that because it means the psychology driving big SUVs sales applies just as well.
It’s already up a healthy 29.74% since last February (versus only 6.79% from the S&P 500 over the same time frame) which means subscribers who are following along in our paid sister service, Money Map Report are enjoying the ride.
Pun absolutely intended.
Until next time,