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Detroit peers into the void
Commentary: Investor exodus accelerates ahead of June sales data
By MarketWatch
Last update: 3:05 p.m. EDT June 30, 2008SAN FRANCISCO (MarketWatch) -- Delirium tremens hit the auto industry.
After living high on promises of a turnaround, auto investors' confidence has reached a new low. Monday's opening sell-off showed just how close they are to tumbling into despair.
After living high on promises of a turnaround, auto investors' confidence has reached a new low. Monday's opening sell-off showed just how close they are to tumbling into despair.
Shares of Ford Motor Co. fell as much as 10% at the open and General Motors shares dropped 8% to a 53-year low.
Over the past 12 months, Ford's share price is down 50% and GM's is down a whopping 71%. Which raises a basic question: With the industry beaten down so badly, is it time to start bottom-fishing and reap the rewards when the sun again shines on Detroit?
Unless the bet is pure gambling, buying stock in either company hinges on a level of confidence that home prices have bottomed and oil prices have peaked. It also would be helpful to know that consumer confidence is about to rebound from its current 28-year low.
None of that is evident in today's market. Quite the opposite: Oil prices hit a record $143 a barrel, and nothing seems to damage consumer confidence as much as high oil prices.
This elevates the risk level facing the auto industry and extends its recovery time. Which means car companies remain the purview of investors with deep pockets and plenty of patience -- and a willingness to accept that this could end badly.
It also means overseas investors taking advantage of a weak dollar increasingly are the ones most likely to see an opportunity in Detroit's financial carnage. Not only are Ford and GM under heavy pressure to continue moving operations offshore, but they are more vulnerable to takeover bids from abroad.
The pendulum never swings in exactly the same way twice, but it's more tempting all the time to draw parallels between Detroit and what happened to Britain's once-thriving auto industry. Bear in mind that the legendary English marques Jaguar and Land Rover, after a stint under Ford ownership, have landed in the hands of India's Tata Motors.
More here: http://www.marketwatch.com/news/sto...28D-DC1E-4751-BD6F-211CCD6C3D51}&siteid=yhoof
Commentary: Investor exodus accelerates ahead of June sales data
By MarketWatch
Last update: 3:05 p.m. EDT June 30, 2008SAN FRANCISCO (MarketWatch) -- Delirium tremens hit the auto industry.
After living high on promises of a turnaround, auto investors' confidence has reached a new low. Monday's opening sell-off showed just how close they are to tumbling into despair.
After living high on promises of a turnaround, auto investors' confidence has reached a new low. Monday's opening sell-off showed just how close they are to tumbling into despair.
Shares of Ford Motor Co. fell as much as 10% at the open and General Motors shares dropped 8% to a 53-year low.
Over the past 12 months, Ford's share price is down 50% and GM's is down a whopping 71%. Which raises a basic question: With the industry beaten down so badly, is it time to start bottom-fishing and reap the rewards when the sun again shines on Detroit?
Unless the bet is pure gambling, buying stock in either company hinges on a level of confidence that home prices have bottomed and oil prices have peaked. It also would be helpful to know that consumer confidence is about to rebound from its current 28-year low.
None of that is evident in today's market. Quite the opposite: Oil prices hit a record $143 a barrel, and nothing seems to damage consumer confidence as much as high oil prices.
This elevates the risk level facing the auto industry and extends its recovery time. Which means car companies remain the purview of investors with deep pockets and plenty of patience -- and a willingness to accept that this could end badly.
It also means overseas investors taking advantage of a weak dollar increasingly are the ones most likely to see an opportunity in Detroit's financial carnage. Not only are Ford and GM under heavy pressure to continue moving operations offshore, but they are more vulnerable to takeover bids from abroad.
The pendulum never swings in exactly the same way twice, but it's more tempting all the time to draw parallels between Detroit and what happened to Britain's once-thriving auto industry. Bear in mind that the legendary English marques Jaguar and Land Rover, after a stint under Ford ownership, have landed in the hands of India's Tata Motors.
More here: http://www.marketwatch.com/news/sto...28D-DC1E-4751-BD6F-211CCD6C3D51}&siteid=yhoof
