If there’s anything a speculator can count on, it’s the mismanagement and demise of American car manufacturers. Never has being bearish felt so right. Therefore, place an order for a July Finish Low Fixed Return Option (FRO) on General Motors (GM) and take advantage.In a Master Card spending poll gasoline demand dipped 4.7 percent last week compared to one year ago. How has this affected the auto market? Adjusted for number of selling days, General Motors saw its May sales figures plummet more than 30 percent with competitors Ford and Chrysler sustaining sales blows of 19.1 and 28.2 percent respectively.
In contrast, Toyota’s sales decrease was a manageable 6.3 percent and came from the Lexus luxury brand side of the business. Borrowing shouldn’t be getting any cheaper for those looking to take out a car loan as the Federal Reserve Chairman Ben Bernanke came out this week and indicated the federal funds rate will not be cut again, staying constant at 2 percent. Bernanke also stated a joint effort with the Treasury to strengthen the U.S. dollar and hinted towards monetary policy that would place first priority on curbing consumer price inflation as opposed to liquidity in financial markets.The Associated Press announced that GM will close four truck and sport utility vehicle plants and trim the 8,350 employees from these plants to rewrite a failed business model. Talks of selling the Hummer brand have surfaced as well.As consumers battle increases in food, gas, and energy costs, don’t expect car manufacturers to benefit. Some analysts argue that the continued circulation of stimulus checks will help keep retail sales afloat in the short run but don’t expect that to translate into new car purchases. As GM looks to more fuel-efficient vehicles to resurrect their business, the stock will perform poorly. A July Finish Low FRO on General Motors should be a winner.
Written by Ryan Swift
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2 responses so far ↓
1 Ben // Jun 8, 2008 at 2:40 am
There are no FRO’s currently available for GM…
2 Ryan // Jun 10, 2008 at 7:56 pm
Thanks for pointing this out. I looked up the GM symbol on the AMEX website directly under the list of FRO’s available. I thought I was searching under a FRO chain but I wasn’t; the list given must be the complete list of available FRO’s. The logic still holds for puts!
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