Fear of falling governs outlook
Times Online - In January 2007 housing-market bears had gone into hibernation. Now they’re enjoying a picnic. Sterling was flavour of the month 12 months ago and about to hit its highest level for more than 20 years. Now it is every forecaster’s fall guy. Oil

This modern life
Observer - One of the most interesting aspects of the current gloom in the housing market is how many people - owning a home or not - are announcing it a desirable thing. At bus stops, dinner parties and pubs, some enjoy nothing superior than declaring the

Your pound in a pickle
Times Online - I’ve said before that the Bank of England’s job is not to worry about housing bubbles nor to fuss about stock markets and the economy as a whole but to keep inflation low. However, governments and central banks tend not to have cores of steel in

Slowdown may see interest rate drop
Daily Telegraph - Economists said this was further evidence that the housing market slowdown is intensifying. Alan Clarke, UK economist at BNP Paribas, said: “In the context of next week’s MPC meeting, this makes for a much closer finish than we would have hoped for.

At least the chickens have Jamie Oliver
Observer - If citizens are scandalised by chickens existing in a space the size of a sheet of A4 paper, then government representatives might be expected to be less upbeat about housing two human beings in a room roughly the size of a disabled lavatory. In 1997

Extremism flourished as UK lost Christianity
Daily Telegraph - At last it seems the Government may be waking up to the situation; to the importance of English as a means of communication, to greater integration in housing, schools, and leisure pursuits and in citizenship education. But none of this will be of

Bulldozers ready to destroy Deepcut Barracks
Daily Telegraph - The training base, where four young recruits were found shot dead, is likely to make way for a housing estate of up to 5,000 homes. The closure of Deepcut Barracks is prone to be staggered, with some training carrying on in the short term It has

James Moore: Even the bookies can’t decide on interest rates
The Independent - The very real prospect of a sharp increase in repossessions bodes ill not only for the increasingly torpid housing market, but for the wider economy too. Then there is the oil price. As we report on page 3, economists are beginning to fear that the

Deepcut Barracks To Be Destroyed
Sky.com - It is likely the base in Surrey, which is the main training centre for the Royal Logistics Corps, will be bulldozed to make way for a housing estate containing up to 5,000 homes, according to the Sunday Telegraph. Michael Gove, Conservative MP for

As Public Works Languish, Private Dollars Set Agenda
New York Times - every other department is a beneficiary, too, and all of the 12 residential colleges are being renovated. To keep this work going year-round, Yale built a four-story brick dorm, almost huge enough to fill a city block, as temporary student housing.

Pet subjects
Daily Telegraph - Many owners now set up more elaborate housing for their pets, with hidey-holes, tunnels and multiple storeys connected by ladders. See www.guineapigcages.com for some ways of providing interesting housing. I know one person who has used the space

Britain has changed but its values must last
Daily Telegraph - We believe that the root of the problems that have been caused, or at least exacerbated, by rapid mass immigration - including stresses and strains on the availability of publicly-funded goods, such as education, health and council housing - is less

Living My Prayer
NPR News - So I packed my stuff and moved into a noisy, violent housing project in an African-American neighborhood in New Orleans. I saw the suffering and I let myself feel it: the sound of gunshots in the night, mothers calling out for their kids. I saw

Goldman, JP Morgan see Fed slicing 50 bps in January
Reuters - The Fed already has cut the fed funds rate by a full percentage point since mid-September as policy-makers aimed to soften the blow to the U.S. economy of a slumping housing sector and a global tightening of credit conditions. (Reporting by Tamawa

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Filed under: Other issues, Columns, Housing

Anyone with any money invested in U.S. stocks must check out a current Financial Times (UK) piece about the United States economy.

“At the heart of the problems is the bursting of the housing bubble that helped to power American growth since this economic cycle started six years ago. The end of the bubble has brought a brutal slide in home construction, home price falls that threaten to undermine household wealth and consumer spending, and turmoil in the credit markets that are used to finance housing.”

Indeed, the housing market’s collapse had serious ramifications outside of the weakening homebuilders. Subprime mortgages have shaken the credit markets into nearly complete fear of providing credit, especially to real estate loans. Consumer spending has been suffering as a result of adjustable rate mortgages (ARMs) and an inability to cash out of real estate.

“One sector that looks particularly vulnerable to any pullback in credit is commercial property, which has boomed over the past year, helping offset the decline in residential investment and keep building workers in employment. Housing construction continues to plunge, while the rate of decline in home prices seems to be accelerating, with some experts forecasting falls of 20 per cent or more in real terms over a number of years.”

This is a very valid point which briefly explains why I think it’s too early to be jumping into high-dividend commercial real estate REITs. I think 2008 is going to be the year investors realize “nonresidential” doesn’t mean safe.

“Ultimately, however, the fate of the U.S. economy lies with the consumer. ‘The consumer so far is hanging in there but is not in great shape,’ says Mr Feldstein.”

I agree that the consumer isn’t in great shape and I think that explains the powerful weakness displayed by most retailers in recent days. Money managers don’t want exposure to retailers when the consumer will be slicing spending. Especially hard hit: those with high levels of debt-to-EBITDA.

I believe the concerns surrounding the stock market and economy as a whole are very valid. I wouldn’t go as far as to say a recession is imminent; however, I think the chances of a slowdown in the economy affecting stock prices this year are very good. How should you play in this environment? If you’re trading, don’t try and call bottoms until strength is being displayed, and don’t be afraid to bet against stocks that are already down significantly. If you’re a longer-term investor, you need to focus on companies with strong balance sheets (ideally tiny debt) and a lack of exposure to real estate and mortgage markets. Toward the middle of this year, I think investors are going to receive a mouth-watering long-term buying opportunity in financials.

Be careful…“This economy is vulnerable.”

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Filed under: International markets, Bad news, Products and services, Management, Industry, Consumer experience, Competitive strategy, Ford Motor (F), General Motors (GM), Marketing and advertising, Toyota Motor Corp. (TM)

Troubled vehicle maker Ford Motor (NYSE: F) today saw its stock fall to lows not seen since way back in 1986, as traders continue to express concerns over the company’s capability to compete with its rival Toyota Motor (NYSE: TM).

Yesterday, Wall Street got the bad news that many of us had been expecting but hoped never to hear: for the first time since 1931, Ford lost its grip on the number two ranking for U.S. auto sales in 2007. The company showed a massive 12 percent drop for the year, and has been replaced by Toyota as the second best-selling auto maker in the United Says. Shares have tumbled, hitting an intraday low of $6.00 a share, which is the lowest the stock has traded in more than 20 years.

Just how hard has the company’s market value degraded over the past decade? Think about this… in 1998 the company boasted a $68 billion market value, compared with its current value of “only” $13 billion. This is definitely a tough time for the car maker which less than a decade ago was responsible for 25 percent of all new automobiles sold in the nation.

Ford, which has historically relied on the strength of its truck division, is definitely struggling to get back on top as even its truck sales seem to be in free fall. During 2007 alone, sales of its top line of trucks, the F-Series pickups fell by 13 percent as tougher competition in the car niche continues to mount.

The struggling Detroit auto maker is still looking to return to profitability in 2009, but you really have to wonder just how feasible this goal is considering the difficulty the once strong auto company has keeping up with the rest of the pack.

While it is definitely shocking to see a foreign car maker surpassing the American Ford Motor, it really should not be too surprising. It seemed like only a matter of time before this became the inevitable event we’ve all been waiting for. If you look at worldwide auto sales, Toyota has held the number two position since back in 2003.

If you ask me, America’s other major auto maker, General Motors (NYSE: GM) had better keep a close eye on Toyota. Toyota is definitely a force to be reckoned with, and if GM isn’t careful, it could be giving up its coveted top spot before long.

During 2007, GM still was able to outsell Toyota by over a million vehicles, but its share was down six percent. GM sold 3.82 million vehicles, to Toyota’s 2.62 million (48,226 more than Ford). Worldwide, General Motors is in danger of falling to number two during 2007, but we’ll not get Toyota’s worldwide figures until later in the month.

What do you think? Is GM in danger of falling victim to Toyota? If you were in the vehicle market this day, what dealer lot would you visit first? Ford, GM, Toyota? Let us hear what you think.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer

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