Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.
Did I Mention I Think We're Seeing Peak Autos?
It has been nearly a year since I first delivered the then-unpopular message of Peak Autos.
Here is a summary of the core arguments for Peak Autos and why auto manufacturers' stocks like Ford (F) - Get Report and General Motors (GM) - Get Report still may be value traps despite their apparent low valuations:
1. Car companies are offering the largest incentives on price in years.
2. The automobile inventory-to-sales and days-to-turn-sales ratios are back to elevated 2008 levels.
3. Used-car prices (the Manheim Index) have steadily declined.
4. A record level of autos are going off lease and will return to and further depress the used-car market.
5. After years of subsidized, low-rate auto loans, the consumer is spent up, not pent up, as car sales have been pulled forward.
6. Subprime auto loan delinquencies are ratcheting higher, and some auto lenders are turning away from the market.
7. Managements have poorly prepared for the auto down cycle.
8. The risks of protectionism and trade wars have recently increased.
Originally published Aug. 2 at 7:26 a.m. EST.
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* Little happening (modest gain in the S&P Index), save the continued rotation mentioned this morning.
* Sentiment is that new Chief of Staff John Kelly will bring some order into a disorganized and dysfunctional White House.
* Busy morning for data. July ISM were in line -- but new orders and employment ticking lower.
* Construction and auto sales were weak.
* Personal income was light but spending in line.
* This data have produced a dovish reaction in bonds -- and a turnaround in yields (lower) from early this morning.
* Oil had its comeuppance -- down by -$1.40 a barrel -- snapping a six-day win streak. Though Bloomberg had a report that OPEC production increased in June (as expected) there is no proximate cause but OPEC has another compliance meeting next week.
* Industrial commodities (iron ore, copper, etc.) have weakened.
* Ag commodities are lower, led by corn and soybeans. Fertilizer stocks have followed in a southerly route.
* The powerful rally in financials continued Tuesday despite lower bond yields.
* Tech is rebounding. And so are telecoms, utilities and consumer non-durables.
* Autos are stinking up the joint.
* Earnings-driven rallies in International Game Technology (IGT) - Get Report , Archer-Daniels Midland (ADM) - Get Report , Owens-Illinois (OI) - Get Report , Simon Property Group (SPG) - Get Report , Trinet Group (TNET) - Get Report , Xylem (XYL) - Get Report .
* Earnings-driven declines in Pitney Bowes (PBI) - Get Report , Eaton (ETN) - Get Report , John Bean Technologies (JBT) - Get Report , Mosaic (MOS) - Get Report , Under Armour (UAA) - Get Report and Extended Stay America (STAY) .
Position: Long SDS large, short SPY.
Originally published Aug. 1 at 1:57 p.m. EST
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Doug Kass fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- How weird Friday was
- How Wells Fargo is looking at still more trouble
Click here for information on RealMoney, where you can see all the blogs, including Doug Kass'--and reader comments--in real time.