Used car dealers are the new masters of the universe

This is Bloomberg Opinion Today, the certified pre-owned roundup of Bloomberg Opinion’s opinions. Sign up here. Inflation is mellowing out. [Bloomberg]( This is Bloomberg Opinion Today, the certified pre-owned roundup of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - Inflation is [mellowing out](. - The economy [still matters](in elections. - Target is [under attack](again (this time from Tom Cotton). - The Nasdaq just [kneecapped]( megacap stocks. The Used Car Economy The used car business tends to evoke images of dodgy salesmen in goofy plaid sports coats, the kind of thing portrayed in 1980’s Used Cars (Kurt Russell) or 1990’s Cadillac Man (Tim Robbins, Robin Williams), in which Robbins’s character takes a dealership hostage. Used car lots are seen as icky vestiges of a simpler, sleazier time in American capitalism. I’m here to tell you that used car lots are, in fact, much more than that in the modern US economy. They may well be the center of economic and political power. That’s one takeaway from Wednesday’s data drop, anyway. The Bureau of Labor Statistics published its latest consumer price index report, and inflation measured year-over-year fell to just 3%. Digging into the details, the contraction in used car prices played a sizable role in bringing down inflation, and that could have far-reaching consequences. Stocks rallied. Bond yields plunged. And there’s a chance that the Federal Reserve, the most powerful policymaking institution in global finance, may finally call it quits on its interest rate hikes. Used cars weren’t the only category that’s seen major moderation, but they were a big part of the latest swing. “Thanks to a large decline in the prices of used cars and trucks in June,” Yours Truly [writes]( in our monthly inflation roundup, “core goods inflation measured year-over-year clocked in at 1.3%.” The uber-specific category that nerds call “supercore” — essentially core inflation without housing — is also looking more like a moderating force, which is likely to make Fed Chair Jerome Powell superhappy. You know who else must be super pleased? President Joe Biden. The moderation in US inflation comes just in time to brighten his reelection prospects. There’s been some research lately suggesting that the economy is diminishing in importance for voters, but Jonathan Bernstein [isn’t really having it](: “As long as marginal voters still react to the economy, either by switching their votes or by changing their turnout patterns, the economy remains an important factor in election results.” According to Jonathan, there’s often a “perception gap” between the time the economy improves and when voters actually get the memo. But if inflation continues to moderate in the way it has in June (and if the US can dodge a recession), Biden should have plenty of time to get his story across — and he can partially thank used cars for his change of fortune. One last note on the auto theme: Liam Denning writes that Toyota may be [on the cusp]( of a major breakthrough in solid-state lithium ion batteries, which could dramatically improve range and erase hang-ups about refueling time and safety. The rub? Resale values of existing EVs may take a hit when (and if) the new technology arrives. “Our existing EVs would suddenly look like maybe-not-quite dinosaurs but at least like early mammals not destined to thrive under Darwinism,” Liam writes. Bonus CPI Day Content: I got together with Cox Automotive chief economist Jonathan Smoke and StoneX chief market strategist Kathryn Rooney Vera for a [live reaction]( to the numbers. Target Is a (Political) Target Values matter in the modern retail landscape. But sometimes it’s not enough to simply say the right things when it’s politically and financially easy; you also have to defend your corporate values when they come under attack and profits are at stake. Target is no stranger to conservative backlash. Earlier this year, the company’s Pride month collection was singled out by right-wing commenters. As Leticia Miranda writes, the company fumbled its response to that episode by essentially backing down and announcing the removal of certain items and the relocation (to the back of some stores) of others. Now, Target is being tested again after Republican Senator Tom Cotton of Arkansas called on the retailer to end its workforce and vendor diversification efforts. Leticia says the company needs to hold its ground this time. “Whatever side you fall on with this issue,” Miranda writes, “you can’t dispute that retail relies on workers of color, and attempts by lawmakers such as Cotton to end practices to attract those workers would leave stores even more desperate than they already are to find employees while further limiting one of the few career paths available to people of color.” From the perspective of the employees, the issue is also critical. Leticia says retail is one of only a few sectors where workers without college degrees can make a steady living and get health benefits. “Cutting back on diversity programs will make retail work even more challenging than it already is by further squeezing the thin representation of people of color in the upper echelons of management,” she said. Read the whole thing. Telltale Charts Stock indexes are supposed to give you a snapshot of the broad market. That’s kinda the point. But increasingly, a lot of them have become more concentrated among just a handful of megacaps. Those behemoths have rallied so relentlessly this year that they’ve taken over the Nasdaq 100. Isabelle Lee [writes](, that’s why the Nasdaq 100 had to kneecap the index’s Big Six. As she notes, the “special rebalance” announced late last week, while very rare, has some precedent. In 2011, the Nasdaq 100 pared Apple stock to about 12% of the index from 20%, and in 1998, the index moved from a pure market-capitalization weighting scheme to a modified market-capitalization one. “Now, yet again, the tendency for the big to get bigger has forced a change,” Isabelle writes. With all the confusing noise in the global economy data these days, it’s hard to tell what’s what. But if you want to gain insight into who is getting ahead, Tyler Cowen [suggests]( looking at developments on savings and human capital. “Countries that have high rates of saving will reap compound returns,” Tyler writers. He says that Singapore and Norway are top examples — and Germany is up there too. The US is rather far down the list, but there’s a wrinkle: “Human capital is another form of saving and storing wealth — and one country that does very well in the human capital department is the US, albeit with a high variance of outcomes,” Tyler says. Further Reading The planet needs to [come together]( on a climate Marshall Plan. — David Fickling The ruble is at its lowest since March 2022, but Russia remains economically [resilient](. — Leonid Bershidsky Older Brits who had to leave the workforce are struggling. — Stuart Trow The [search for a Twitter alternative]( continues. — Dave Lee It's [easy]( to make oil companies ESG. — Matt Levine The US and China may be close to a fragile new [frenemy relationship](. — Minxin Pei ICYMI Texas is [Prime phishing]( country. An IHOP magnate is fighting a [Revolutionary War](. Is it “[game over](” at the BBC? The Supreme Court [takes Venmo](. (h/t Ale Lampietti) Kickers Who [needs a nose](?  (h/t Andrea Felsted) Not [this ghost](. He can coach but he really [can’t cook](. [Sharks attacks]( are good for you. Notes: Please send perfectly grilled brisket and feedback to Jonathan Levin at jlevin20@bloomberg.net. 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