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I enjoyed your piece on automobile styles. I have my own story on automobiles. I think you might find it amusing. Merrill Lynch has the largest number of brokers in Jackson, and I use used to overlook their parking lot when I as at Paine Webber. Throughout history when their parking lot held a high percentage of Mercedes Benz automobiles we were at or very near a major downturn in stocks. It worked in the fall of 1987 and early in 2000. Out of curiosity, I went downtown in late April to view their parking lot since I have moved my office to the burbs. You guessed it, their parking contained nine exotic cars including Porches, BMWs and, of course, Mercedes. I told my business partner a top was at hand in mid-April and then you called the May turn. Keep up the good work, and give me more car stories.
--RB

Here’s an interesting one on the left that suggests the luxury car demand is already starting to cool in conjunction with the downturn. It should be the first of many such reports. Glad you enjoyed The July issue of the The Elliott Wave Theorist, “Social Mood and Automobile Styling,” by Mark Galasiewski. Mark does an excellent job of showing how bull and bear markets in social mood come to inhabit all aspects of car stylings, from color to shape to the strength of passengers’ craving to be out of the elements while cruising down the road. The excerpt in the Additional References section below should give you an idea of what’s ahead in the market for convertibles. Part 2 of Mark’s report will appear in an upcoming issue of the Theorist.

July 2006, The Elliott Wave Theorist
Roof Style: Convertible Roofs vs. Hardtops
In the early years of the automobile industry, all cars were open cars, reflecting their evolution from buggies and bicycles. But particularly after the introduction of Edward Budd’s all-steel body in the bear-market year of 1914, enclosed cars increasingly became the standard. Closed-body vehicles outsold open vehicles for the first time in 1925. In 1927, though, no less than nine manufacturers (Buick, Cadillac, Chrysler, duPont, LaSalle, Lincoln, Stearns, Whippet and Willys) introduced the first true “convertible” roofs. The innovation was a response to the demand for adventure and flash that accompanied the 1920s mania. The market peaked in 1929, the year that saw the release of the most luxurious convertibles ever—including those made by Auburn, Cadillac, Chrysler, Cord, Duesenberg, Marmon and Packard.

Demand for convertibles declined during the bear market years of 1929-1949 but re-emerged with the rise in social mood during the 1950s. Convertibles reached about 5% of the market in 1957 and peaked at around 6% at the inflation-adjusted high stock prices in 1966. The subsequent decline in social mood devastated convertible sales, which plummeted to about 1% by 1970. In 1976, Cadillac even advertised its Eldorado as “the last convertible in America.” Car analysts give many reasons for the decline of the convertible in the 1970s, but the real reason is lost on most. One journalist who got it right is Canadian automotive journalist Bill Vance:
There were several reasons cited for the demise of the North American convertible in the ’70s. Some claimed it was due to impending roll-over legislation, which never came. And sun/moon roofs offered a type of open air motoring without the convertible’s disadvantages. It was even said that the three-point seatbelt wouldn’t function in them, which we now know is not true. What really happened was that American manufacturers quit building convertibles because the public stopped buying them. They were merely heeding what the market told them.

But only a socionomist knows why the public stopped buying them. In 1982, the dour social mood responsible for Americans’ waning interest in convertibles came to an end, signaled by the end of a 16-year corrective pattern in the DJIA. In that year, Chrysler sold 23,000 convertible LeBarons, an unexpected sales success that prompted other manufacturers to begin making convertibles again. By the late 1990s, convertibles recovered to their present level of around 3% of U.S. new car registrations, still short of their postwar highs. This observation is consistent with the personality of 5th waves identified by Frost and Prechter in their 1978 book The Elliott Wave Principle: “Fifth waves in stocks are always less dynamic than third waves in terms of breadth.” The fact that convertibles, although popular, were not as popular as they were in the late ’60s is to Elliott wave analysts, another confirmation that the 1980s and 1990s’ boom period was the last in a five-wave, multi-decade growth pattern.