Posts Tagged ‘interest rates’
Auto sales in the U.S. economy look solid on the surface. According to Autodata, in November, the annual rate of auto sales in the U.S. economy was 16.41 million units. In October, the annual rate of auto sales was reported to be 15.23 million and in the same period a year ago (November 2012), it was 15.32 million. (Source: Autodata web site, last accessed December 10, 2013.) Cleary, auto sales are increasing.
By looking at the auto sales numbers, one could be easily tempted to suggest consumer spending is increasing. But this is not the case. A deeper look at the numbers reveals a large increase in subprime lending to finance consumer auto purchases.
According to Experian, an information services company, loans issued for new vehicles to nonprime, subprime, and deep subprime borrowers made up 26.04% of all auto loans in the third quarter of this year. In the same period a year ago, this number was 24.84%. For used vehicles, loans issued to nonprime, subprime, and deep subprime borrowers made up an astonishing 54.95% of all auto loans in the third quarter. (Source: Experian, December 4, 2013.)
But this is not all. We are also seeing more and more consumers interested in buying vehicles on credit. For example, in its “Household Debt and Credit Developments” report for the third quarter of 2013, the Federal Reserve Bank of New York reported that in the third quarter, 168 million inquires for auto loans were made. In the second quarter of 2012, that number was only 159 million. (Source: Federal Reserve Bank of New York, November 2013.)
All of this shouldn’t be … Read More
There are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.
Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.
Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.
Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.
Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)
So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More
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