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Thursday, March 28, 2024

Monday Mop-Up

That was a very disappointing finish.

Chrysler announced production cuts, shutting down a minvan plant and cutting back production at a truck plant in St. Louis later this year.  Tomorrow is the June sales reports and Citibank is projecting vehicle sales will drop to 12.8M for the year, down from 16.3M last year (21%).  Chrysler is down 14% this year, well ahead of F and GM and, unlike "the big 2" they remain cash-flow positive.

Chrysler is still in a tight financial situation, however, and must spend billions to develop new models and start a union-operated fund to cover retiree health-care costs. "The market is at a fairly slow point," Chrysler Vice Chairman Jim Press said in a conference call on Monday. If "we want to continue to meet or exceed our financial targets, we have to move responsibly."

Just before the announcement, at 1:20, one of the members asked me about steel stocks in general and I had said: "I’ve been staying away.  High input costs and a global slowdown not a good combo for them.  Also, aren’t all the auto companies cutting back production.  I’m not sure what’s keeping them up this high really."  In light of the announcement, I think X may make a pretty good short again.  They have been a great long put to sell front-month puts again and are a little more affected by auto sales than others.  I think they would have fallen already but they were added to the GS conviction buy list on the 24th but even that didn't stop them from falling $10 since.  MT may also be a fun put play as they are already looking to test weak support at $97.50.

Here is a great article on what follows bad one-month declines.  I doubt it will help us feel better but at least statistics are on our side!  Bloggers are most bearish in 12 months.  This is how negative sentiment reinforces itself.  I read Barry, the WSJ guy reads me, 100 people who show up on TV read the WSJ and there's barely an original thought in the whole process…  Interestingly, bearish blogs reduced 15% from last month AND bullish went down 3% – neutral made the 18% gain.

 

I have a fairly encouraging Fibonacci view of the S&P but there is a quote from the WSJ that made me question my premise that Q2 would be good: "The sudden shift in demand toward smaller, more-fuel-efficient vehicle has caught U.S. auto makers flat-footed."  WOW!  Really???  Is it really possible that people who run major corporations are actually that dumb AND is it possible that people who write for the Wall Street Journal and their editor can make such a statement without knowing that this is the SAME EXACT THING that led to the rise of foreign car makers 30 years ago? 

"Caught them flat-footed"?  That's a COL (Cry Out Loud) if ever I heard one.  I suppose that's what our media wants us to accept – the auto makers didn't see it coming, the oil companies didn't see it coming, Cheney's Presidential Task Force on Energy didn't see it coming, Bodman didn't see it coming, Bush didn't see it coming….  Only Al Gore saw it coming and that guy's considered a nut by this crew – what the hell have we let this country become?

As if the dollar wasn't falling enough on it's own, Bush spent another $162Bn today for another year of war.  This pushes the "official" cost of the war to $650Bn. The Democratic majority in Congress has tried, unsuccessfully, to force troop withdrawals and other limits on Mr. Bush's ability to conduct the war. Mr. Bush said the bill will allow troops to prevail in Iraq and Afghanistan. "I appreciate that Republicans and Democrats in Congress agreed to provide these vital funds without tying the hands of our commanders and without an artificial timetable of withdrawal from Iraq," Bush said.

Bush also tossed tens of Billions more on the fire as he used Congress's recess to buy some votes by freezing a scheduled 10% fee cut to doctors who treat Medicare patients despite the fact that the House approved this legislation last Tuesday by 355-59 and the Senate voted 129-59 in favor.

This year majority Democrats homed in on cutting the Medicare Advantage program, which is an ideological issue for both parties. The Bush administration and Republicans like Medicare Advantage because it lets the elderly and disabled choose to get their health benefits through private insurers rather than through traditional Medicare. Democrats successfully argued that government payments to the insurers are too generous but, as our President often says: "Don't confuse me with your facts."

203 days to go!

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