The Stupid Money sells off (F) Smart Money Buys it After
Ok.. (F) Ford took a dive almost back to where it was last week Tuesday. Does this spell the leg back down to $6.XX or even $5.XX where it was before the Q2 earnings report? Is this the end of the (F) Ford rally?
Well, if the reason for the sell off / profit taking / shorting of (F) Ford today was due to the end of Cash for Clunkers then NO.
What happens after Cash for Clunkers is the following scenario (which obviously is being completely ignored by the Mainstream Media and Wallstreeters today):
1) All Dealerships are sitting on the sidelines for quite awhile waiting for their Rebate money to arrive from the Government.
2) Once the Dealerships start to get their rebate cash, they will have to immediately pay their Payroll. It's a cash flow business. Payroll has to be paid.
3) Next, many of the Dealerships have little to no CARS left on their lots.
4) Gee... What's step #4?? What happens next after Payroll is paid...and Rebate $$$ is finally coming in...hmm.. Oh I know... The Dealerships have to RE-STOCK!
So guess what?? We are going to have a September RE-STOCKING Bull Run for all Auto companys.
Those predicting DOOM and GLOOM for September when Cash for Clunkers is gone are forgetting
about RE-STOCKING of INVENTORY. That could take the whole month or longer to do!
It could take ALL of the rest of this year for Dealerships to start RE-STOCKING their inventories...
We could have on our hands an Inventory Restocking Rally straight through for MONTHs!!!
Ultimately, it is about how long it takes these Dealerships to get their Rebate Money from the FEDs and in what condition they are after taking care of their Payroll and Expenses.
Dealerships have to start RE-STOCKING for January 2010 starting in September. Because of this we can no longer Trade (F) Ford based on what we think happens in Q3 or Q4. We are now trading on it based on what happens in 2010. September through December sales are going to be very meaningless as RE-STOCKING offsets any Month to Month dips in sales.
Wall Street won't really care then... about anything except Next Year.
Will Next Year be better than this year was? You don't sell-off (F) Ford in anticipation of a miserable Q1 2010 until February 1st or whenever it is we get January's Sales Numbers.
So there's no reason here NOT to still be a buyer of FORD... Not until February!