I am retired and take educated guesses on all things financial.

December 12, 2006

December 13, 2006: Buy a new car (next fall)

An interesting study published for clients by a well-respected research firm states that there continues to be negative news for pricing autos and homes into 2007.

New car prices are well into negative territory as lower inflation has caused the spread between overall CPI and new car CPI to narrow. And for the past two months, used car prices have also been in or near negative territory.

A consumer watch scorecard shows five factors for the auto industry deteriorating (income growth, unemployment, auto loan rates, new car prices and used car prices). Three factors are improving (auto purchasing sentiment,consumer sentiment and consumer debt).The negative trends are expected to continue into mid-2007, when a possible recession may even make them worse.

Investors are expected to shun domestic auto stocks. One issue I personally feel may be worthy of speculation is a new Ford convertible bond (unsecured) yielding 4% with a potential large upside in price appreciation.

GMAC is back in the market with SmartNotes. I have owned SmartNotes as stated in previous posts. I favor maturities of one year or less from existing notes,some of which on any given day are trading at a wholesale price.

Only consider these offerings with your "hedge" money to add spice to your diversified portfolio.

Looking ahead from a consumer standpoint, whereas now is a perfect time for a first time homebuyer to purchase a spec. home, I see next August and September as the perfect time to negotiate a superb deal on a new car. It is possible that all eight tracking devices above may favor the buyer at that time. And the way Ford is going, they may pay you to take a car off their lot.

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