Lazy? Yes….but for today, I’m back.
Although I’ve taken some time away from my borderline obsession with the financial markets, I continue to think about opportunities…or potential opportunities. The automotive industry has intrigued me of late as the story just seems a little tired. Whether your perspective is offensive (you want to short or buy some puts) or defensive (you own a pile of automotive stocks) in nature, I think this is well worth considering. As I suggest at all times, think it through for yourself.
First, I am early in my attention to this theme. It may have already played out and therefore may not present the trading potential I see at a glance. Here’s what I’d suggest when beginning this exercise:
1. Listen to what’s going on in your neck of the woods and think about it. Generally speaking, how is Joe 6 Pack doing? Alan Mullally said just this week that Ford’s success depends largely upon a solid middle class. I’m not suggesting this is cutting edge information, but the guy’s commentary carries some weight. I’m not going to waste a lot of time here, but the middle class in this country is a freaking brontosaurus…not going to pretend to know the exact dates, but it’s a one way ticket to the history books. If you see it differently, you better become very active very quickly.
2. Look at the charts. Maybe they’re all about to bounce, but the auto charts look particularly poor. I have not studied every sector from this angle, but I can tell you that some of the key auto related stocks look a little weak: f, gm, gntx, jci, bwa…to name a few that I looked at.
3. Do a little research into channel stuffing, maybe gm channel stuffing (although I don’t think gm is the only culprit). I think you can even find some interesting info out there regarding china channel stuffing. Again, follow this reading with some thinking.
4. Think about how much of the actual (aka: legit) auto sales are coming via low rate financing to buyers with little to nothing down. Ask yourself if this is sustainable. Trust me, I realize there are people out there who feel the plates will continue to spin like some sort of perpetual motion machine oblivious to fact induced gravity. Everyone has an opinion and some are more conducive to a good nights sleep than others…totally cool with that.
Actually have to run back to work, but I think there’s something here. I will do a little more digging, but thought I’d share this. Given the global backdrop, I continue to be very skeptical of what exactly is going on behind the curtain. I can tell you that it certainly has a poor scent.
Good luck and I’ll try to hit back soon.
TD
Z Koolaid 