The unemployment numbers released today show some sign that just maybe we may be beginning to see a bit of a turnaround. Certainly the DOW Jones Industrial Average, and frankly all of the indices, have been on fire. The DOW has seen record highs.
This leads to one other thing we know. Auto sales have lagged both in the United States, and big time in Europe. All indicators point to a trend in the United States over the past 5-8 years that says that Americans in particular have been keeping their cars for longer periods of time.
When the economy stinks, who the heck can take the chance to buy a new car? Just drive what you have and run with it.
In fact, if you'd have invested in many of the auto parts companies like O'Reilly, for example, you'd have seen some pretty nice gains. People keeping their cars longer means they'll need parts to keep them running in tip top shape.
Which brings me back to the automakers. If and when, and I really think it is more a matter of when than if, the economy really starts to get some of its legs back, I think the very first thing the average American is going to do is replace their old car.
Sure, houses are nice, and the housing market has been having a pretty good run as well lately. But cars are still at the heart of every single American that drives. A new car is a treat. And if jobs numbers begin to improve, and people feel more secure in the jobs they have, and especially if the economy begins to provide less uncertainty as to where it's headed, Americans will park a shiny new car in their driveway.
It's a high ticket item, but it's not as high a ticket item as a house is. And the interest rates are still running relatively low, making any deal at the dealership even more enticing.
I am focusing on American automakers as well in this idea. I like Ford a lot. Mostly because Ford is the smaller of the Big Three US automakers, and because they have streamlined their business massively, and I think they have the most to gain with market share. Not to mention they are making some pretty nice cars.
And that's why I think the automakers are good buy right now.
Full disclosure: Jim Bauer currently has stock in the Ford Motor Company.
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