A lot of memorable events happened in the year 2000... Most investors know the dot-com bubble burst that March. Thousands of Internet-made millionaires turned into paupers almost overnight.
The U.S. Car Industry Could Be in Trouble for a Long Time
By Vic Lederman, editorial director, Chaikin Analytics
A lot of memorable events happened in the year 2000...
Most investors know the dot-com bubble burst that March. Thousands of Internet-made millionaires turned into paupers almost overnight.
That January, U.S. businessman Mark Cuban bought a majority stake in the NBA's Dallas Mavericks. He paid $285 million. He just sold his controlling stake last year for $3.5 billion.
In the fall of 2000, the U.S. won the Summer Olympics in Sydney, Australia.
Finally, that year, total vehicle sales in the U.S. peaked at almost 18 million.
A year later, sales of "lightweight" vehicles (cars and small trucks) also topped out.
In other words, the U.S. auto market hasn't meaningfully grown in two-plus decades...
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That's a big reason why traditional U.S. carmakers have struggled over this period...
For example, if you bought shares of General Motors (GM) at the start of 2000, you would've followed the company into bankruptcy nine years later. And if you bought Ford Motor (F) at the same time, you would've lost money as well.
Tesla (TSLA) is different, of course.
It's far from a traditional carmaker. It all but created the U.S. electric-car market itself.
But even with Tesla's meteoric rise in sales, the total U.S. car market hasn't meaningfully hit a new high. And it's stuck in this long struggle for one reason...
Inflation.
I don't mean the kind of inflation you're always hearing about in the news.
Rather, I'm talking about the soaring prices of new cars in recent years. That's putting car affordability beyond the reach of tens of millions of Americans.
The average price of a new car was around $30,000 in 2012. Last year, it was almost $48,000.
That's 60% inflation. Ouch.
The problem is twofold...
We've rarely had enough supply of new cars rolling off the factory floors. Plus, carmakers have introduced a lot of more expensive models in recent years...
If your budget is $20,000, you can only really afford a subcompact sedan today. I'm talking about a car that's smaller than a Honda Civic or a Toyota Corolla.
We also need to consider our current interest-rate environment...
If you have good credit, the current rate for a new-car loan is about 7.2%. So a $20,000 car loan stretched over five years would cost the buyer about $400 per month.
That's a key number...
According to industry giant Cox Automotive, only half of U.S. households can afford a $400 monthly car payment these days.
Americans are already saddled with a record of nearly $1.6 trillion in outstanding car loans. So it's getting harder every year to entice more buyers into the market.
Folks, my point is simple...
The outlook for the U.S. car industry is bleak.
Don't get me wrong...
Millions of Americans will still buy new cars every year. After all, a car is an essential for most folks nowadays.
But I don't expect new car sales to suddenly take off anytime soon.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.68%
8
19
3
S&P 500
+0.63%
133
300
63
Nasdaq
+0.61%
33
50
16
Small Caps
+1.17%
578
1003
308
Bonds
+0.38%
Consumer Discretionary
+1.31%
13
31
8
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Real Estate
+4.41%
Utilities
+3.94%
Materials
+2.99%
Health Care
+2.67%
Industrials
+2.44%
Financial
+2.0%
Discretionary
+1.16%
Energy
+0.49%
Information Technology
+0.4%
Staples
+0.09%
Communication
-1.65%
* * * *
Industry Focus
Homebuilders Services
19
14
2
Over the past 6 months, the Homebuilders subsector (XHB) has underperformed the S&P 500 by -2.50%. However, its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #5 of 21 subsectors and has moved up 9 slots over the past week.
Top Stocks
OC
Owens Corning
AOS
A. O. Smith Corporat
MHO
M/I Homes, Inc.
* * * *
Top Movers
Gainers
ENPH
+6.88%
BK
+5.24%
ACN
+4.24%
F
+4.16%
BLDR
+3.98%
Losers
WFC
-6.02%
ALGN
-5.33%
WST
-3.1%
DAL
-3.05%
BIIB
-2.85%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
GS
BLK
No earnings reporting today.
Earnings Surprises
C Citigroup Inc.
Q2
$1.57
Beat by $0.18
BK The Bank of New York Mellon Corporation
Q2
$1.51
Beat by $0.08
WFC Wells Fargo & Company
Q2
$1.34
Beat by $0.06
JPM JPMorgan Chase & Co.
Q2
$4.40
Missed by $-0.11
FAST Fastenal Company
Q2
$0.51
Met estimate
* * * *
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