Why You Need To Avoid Auto Manufacturer Stocks

I am always surprised about the stupid things people do. From crooks who videotape their crimes towards the way some celebrities act, I am always amazed. Think Paris Hilton, Britney Spears, and Michael Jackson simply to name a couple of. Let me believe that the corporate world differs . . . however it is not.

It’s really no secret that i’m no particular fan from the Air travel industry. The whole industry battles with extensive government oversight, aggressive competition, and significant contact with volatile oil prices. I find it difficult to observe how these businesses survive. Not to mention earn money.

Yesterday my buddy sent us a news article that simply further reinforces my thinking.

That which was this news? It had been simply jaw shedding. Apparently an air travel named Flybe gave new intending to low-cost airfare. They’re really having to pay individuals to fly. You heard right. Flybe (sorry, I still can’t overcome that absurd name) is really providing cold income to numerous passengers simply to fly between Dublin and Norwich. They’re having to pay their passengers between $60 and $80 $ $ $ $ plus all they are able to drink.

This really is insane. It’s another illustration of how messed up the air travel market is.

See, Flybe is not carrying this out for entertainment. There is a cope with Norwich airport terminal to satisfy a target of delivering 15,000 passengers towards the airport terminal. When they deliver, they obtain a bonus in excess of $500,000.

Now, I’ll admit it’s smart from the air travel to complete whatever needs doing to achieve their set goals. However ,, who’d sign an agreement like this? And what sort of government bureaucrat in the airport terminal invented an added bonus structure like this?

However they aren’t the only person.

The only real industry I dislike greater than airlines may be the auto industry. Previously the car industry helped build our great nation. With decades of poor management and questionable business decisions the is within a volitile manner it might never get over.

I do not recommend you purchase the automotive industry. Ought to be fact, a lengthy term “buy and hold” strategy with automotive stocks might be a dying sentence for the investment portfolio.

Without a doubt why.

First, the car industry has got the burden of presidency regulation. Now don’t misunderstand me . . . point about this is required and important. The amount of lives saved by government mandated safety advancements is incalculable. Seatbelts and airbags save lives.

But, the opportunity to pass on the price of these government mandated products is fixed. Every call through the government to alter the car industry as well as their vehicles costs a lot of money. Money which frequently can not be recouped through the industry.

A Damaged Model?

Second, the automotive business design is damaged. The expense within the auto industry are unmanageable. Their income are thin at the best, and charges are rising. Fundamental materials, like steel and plastics, constitute a substantial part of a car’s cost. Some estimates put the price of steel between 15% and 25% for that average vehicle.

Have you ever seen the cost of steel recently? The price of plastics expires. Remember plastic is made of oil. The cost of platinum utilized in catalytic converters expires. I possibly could continue however, you understand. The price to fabricate a vehicle goes up but competition along with a poor economy are keeping purchase prices lower.

Economic Exposure

Which brings me towards the third reason the car market is condemned. Contact with the economy. Consider it. The economy is slowing and people’s tasks are in risk. The final factor they are considering is purchasing a new vehicle.

Oil costs are near in history highs. That is causing gas prices to achieve levels we have never witnessed before in america. People can not afford they are driving the cars they previously own. To increase the discomfort, the less a vehicle is driven, the less deterioration it suffers. So the interest in replacing worn-out vehicles is falling.

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