On my subscription site JubakAM.com I added Step #7 to my Special Report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb today. And my advice was to sell Ford and General Motors sometime between now and before the December 13 meeting of the Federal Reserve. Here’s what I wrote in that Special Report.
Step #7: Sell “once-removed” interest-rate sensitive stocks into any short-term bounce but certainly before the December 13 Fed meeting. In Step #5 I recommended selling utility stocks out of your portfolio because thee dividend yield favorites face tough going with bond yields are high and rising. I’d call utilities stocks “first order interest rate sensitive stocks.” But higher interest rates, led upwards by rising Treasury yields at the moment (the 10-year Treasury yield was 4.83% on October 27), affect more than utility stocks. Competition with higher rates leads me o see utilities, but recent evidence says that higher interest rate are cutting into consumers’ purchases of big ticket items. One of the most striking facts about the recent strong third quarter GDP report and the September Personal Consumption Expenditures report is that they both point to “softness” in purchase of big ticket items such as recreational vehicles, boats, and cars. Most importantly cars. That “softness” has been reported too by automakers from Tesla (TSLA) to General Motors (GM) to Ford (F). The big splurge in consumer spending that led to the 4.9% annual growth rate GDP surprise largely skipped these categories of goods. And I think your portfolio should lighten up on them as well. That’s even though I think the long-term story for electric vehicles remains compelling. And I would look to rebuy in 2024 if the macro picture proves. But I just don’t see these stocks climbing in the short-term against the interest rate trend and the possibility that a debt bomb explosion would make the economic environment even worse. I think it’s worth taking Ford’s $1.3 billon dollar loss from its electric vehicle unit very seriously, and the comments from CEO Jim Farley: Customers interested in TVs, he said are “unwilling” to pay the vehicles’ premium prices. Especially when interest rates on auto loans average 6.63% with buyers with low credit scores pay 14.2%. So I will be selling Ford and General Motors out of my Jubak Picks Portfolio. On October 27, the position in Ford showed a 36.3% loss since I initiated it on June 9, 2021. On October 30, the position in General Motors was down 23.9% since initiation on October 4, 2022. Now a word on timing. I think there’s a good chance of a market bounce this week after all that selling last week and after the Fed announces its almost universally expected “no change’ call on interest rates on Wednesday, November 1. In my opinion any bounce would be a “dead cat” bounce in reaction to fast week’s selling and therefore unlikely to hold for long. I’d use any bounce to sell these and other “big ticket” stocks. And I’d certainly want to be out of these names before the Fed meets on December 13 and scares the market with language that indicates it’s still not done with interest rate hikes. Maybe.