August 6, 2014

Kass examines the Auto Industry and if its peaked

Growing evidence suggests that the automobile industry is about to pause/peak, just like the housing market did 12 to 18 months ago. Few observers are currently focused on this risk.

After turning bullish on the U.S. housing market in 2010, I turned bearish in 2012.

This proved correct as the residential real estate market has fizzled out over the past year based principally on a drop in affordability -- home prices have been artificially buoyed by new-era institutional investors at a time when real incomes have foundered -- and more stringent mortgage credit standards. Surprising many industry observers, these two factors dwarfed the salutary impact of lower mortgage rates.

The automobile industry, too, will hit a brick wall shortly.

In terms of the bigger picture, an extended pause in U.S. housing coupled with a peak in automobile demand will continue to weigh on domestic economic growth and raise questions as to whether the U.S. recovery has reached escape velocity.

Bottom line: I am no longer interested in buying Ford (F) and/or General Motors (GM) on weakness, and I would avoid the shares over the balance of 2014.



Read the detailed reasons for factors contributing to a stall in the auto industry sales at http://www.thestreet.com/story/12826220/1/has-the-auto-industry-peaked.html

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