Tuesday, August 2, 2016

Child Support: America's New Growth Industry

From the reader who sent me the link to the following article I stole in its entirety from the Wall Street Journal to explain to you why the Greensboro-Randolph Megasite will never attract an automaker-- not even a large sized manufacturer of OEM automotive parts:

"From this morning's Wall Street Journal.....I used to be in automotive finance, for 20 years actually....had lunch last week with a former coworker and boss....the business is slowing, delinquent loan rates are rising....and child support doesn't pay well but it is a growth business and I never worry about a layoff....The car plant ain't coming.....but they just haven't figured it out yet...."

Interestingly enough, before I show you the WSJ article I'd like to point out that EzGreensboro's own Abner Doon has previous posted dozens of articles to this website confirming what the WSJ has to say. Only Abner beet them by months-- again.

"America’s Booming Auto Market Is Showing Its Age

July auto sales likely won’t get car stocks back into high gear

By Steven Russolillo

Switch on your hazard lights.

Ford Motor Co. last week jolted the U.S. auto industry, saying industry sales have peaked following six straight years of growth. It projected lower sales industrywide through the second half of the year and said 2017 would be even tougher for it and its rivals.

The warning reverberated across the market. Ford’s stock slid 8%, its worst one-day drop in five years. General Motors Co. and Fiat Chrysler Automobiles NV fell in sympathy.

Yet data out Tuesday might look benign. Analysts at Edmunds expect that U.S. car sales totaled 1.52 million units in July. That would mark a 0.8% increase from a year earlier and the best July since 2005.

Kelley Blue Book analysts are also optimistic for July, projecting sales at a seasonally adjusted annual rate of 17.5 million, matching last year’s rate. But they are more cautious for the remainder of the year. They say the new-car market is close to peaking.

But it is one thing to look at relatively healthy numbers and another to question what lies behind them. The cyclical nature of the auto business suggests this period of strength, fueled in part by cheap credit and low gas prices, is getting strained. Easy lending conditions might have pulled future demand forward, proving beneficial in the short term but problematic over the long run.

There are structural concerns, too. More new vehicles were leased in the first six months of 2016 than during the first half of any other year, according to Edmunds. The number of vehicles leased has doubled in the past five years. Off-lease vehicles compete with new ones about three years after delivery.

That explains why auto-maker stocks appear to be so cheap. Ford fetches six times projected earnings 12 months out. GM trades at five times forward earnings. Both valuations were about twice as high a few years ago.

The question now is how much bad news is actually priced in. Downside might be limited, particularly for Ford which has lost a quarter of its value in two years. But a peaking auto market means it will be tough to find a catalyst that gets these stocks back into high gear.

Write to Steven Russolillo at steven.russolillo@wsj.com "

And you still want the current Greensboro City Council leading us? Read how I plan to do it.