Active Trader Update
The Virtuous Circle in Autos
Jim Cramer
02/15/07 - 07:47 AM EST
This column was originally published on RealMoney on Feb. 13 at 10:18 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
How do you get your auto stock up? Pretty simple, you fire people. And then you fire some more. You retreat. You become small. And you accept the fact that Toyota (TM Quote) is going to take over the world because it has no legacy costs and is non-union.
Ford (F Quote), General Motors (GM Quote) and DaimlerChrysler (DCX Quote) have done well because all of them have decided to go for profitability. They all have it in reach because they can buy out people and start over.
But they can't be big.
What's interesting is that the demand is there for cars. Amazingly there. In fact, the demand is more robust that anyone would think, given the need for people to finance cars and all of the problems we see in financing for the less-well-off.
These guys just can't keep losing money meeting the demand.
In reality, you have a virtuous circle going on: GM, Ford and Daimler cut production and go up; Toyota increases production, and its stock goes up.
Nice.
Random musings: The Fed is still prepping for a May cut. ... Goldman (GS Quote) breaking out to be pinned at $215. Sears (SHLD Quote) attempting to be pinned at $180. Altria (MO Quote) obviously at $85. Can IBM (IBM Quote) go to $100? Can GE (GE Quote) break out? I don't think so. ... Apple (AAPL Quote) trapped; AIG (AIG Quote) slated to go to $70 and Microsoft (MSFT Quote) to $30. ... Deere (DE Quote) puts being used to buy common, as the ag-as-oil trade keeps going. ... First Solar (FSLR Quote) actually makes money by manufacturing low and making solar economic; no wonder it is up so much.