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Showing posts from April, 2017

Is There a Bear in the Auto Industry?

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A fresh new set of auto sales data has come out in the beginning of August detailing the past month's activity in the buying and selling of motor vehicles. As expected, auto stocks traded lower when the disappointing results were revealed. According to Reuters, shares of General Motor (GM), Fiat Chrysler (FCHA), and Ford (F) traded more that 3 percent lower last week. Reports of March light vehicle sales at about 16.6 million where analyst expectations had drifted slightly above 17 million. Since the financial crisis, automakers have enjoyed a steep expansion in auto sales, but in the past couple of months, that expansion has stopped.

In 2011, a global auto industry exchange traded fund (CARZ) was created to follow the price movement of some of the largest automobile companies in the world. GM and Ford account for over 15 percent of the fund's holdings with Toyota and Honda (both of which rely on U.S. demand) making the ETF very sensitive to auto sales in the United States. Af…

The Federal Reserve Decides to Diet

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In a press conference on April 5th, 2017, Federal Reserve officials announced their desire to start reducing the size of the Federal Reserve's balance sheet this year. Since the financial crisis in 2008, the size balance sheet has grown to $4.5 trillion worth of bonds and other assets bought up during the period of quantitative easing following the crash of the financial system. In the latest Fed minutes voiced this idea saying, "Provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee's reinvestment policy would likely be appropriate later this year." Since 2009, the members of the Federal Reserve have used various techniques to maintain loose policy as the economy reflated. Lately, though, these mouthpieces have been used to institute a "normalization" policy that will allow interest rates to rise while keeping i…