01/25/2006
We started the trading week with a major announcement from Ford Motor detailing some of their plans to find a "Way Forward." That's the name they gave to their bad news. The restructuring of the nation's second-largest auto manufacturer contains some very strong medicine and some disappointing news for a full one-fourth of their entire workforce.
About 30,000 Ford employees will receive pink slips in the next two years in an attempt to rein in expenses, mostly created by promises of big pensions that were made long before the Honda Odyssey outsold the Windstar and the Toyota Camry knocked the Taurus out of the number 1 selling spot.
This latest move shows just how hard the U.S. auto manufacturers have to work to return to profitability. It also demonstrates, with abundant clarity, the fact that even titans can get toppled. This shift didn't happen overnight. The Japanese entered into the U.S. auto market nearly three decades ago. They started out with cars that everyone just giggled at: "Don't look at it too long or you'll dent it." But they were patient and they were diligent. They were great observers of demand and desire. And now Japan has walked away with the prize of the U.S. auto market as GM, Ford and Chrysler shrink in an attempt to eke out a profit.
This is a big problem for the U.S. economy. Our major manufacturers, the ones that employ tens if not hundreds of thousands of Americans are retrenching. But it's worse than even a retrenchment because we are not just losing jobs, we are sending our money outside the country as we ever increase our trade deficit with each passing day.
What's now looming on the horizon is the Geely -— if you haven't heard of it, I promise you will. This is China's emergence in the U.S. auto arena and it starts at under $10K. It's my guess that it won't take China three decades to get up to speed in the U.S. market.
China's foray into the U.S. auto market will surely crowd an already fiercely competitive environment where the U.S. has clearly lost market share. The negative trend will simply continue.
Last week's wild ride in the stock market proved the importance of a strong sell discipline. Last Wednesday's tumble in Japan and the spillover effect we witnessed here in our own markets had us selling our international positions right at the starting gate in that day's session. Once again the prudence of the Successful Investing plan paid off, as we protected double-digit gains in a couple of those positions before Friday's bloodletting, which sank the Dow in its biggest one-day loss since 2003.
While last Wednesday's drop was attributed to the negative sentiment and suspicions in Japanese equities, Friday's slide had everything to do with the fact that oil prices hit a three-month high, plus investors' skittish sentiments about earnings.
Buyers have not re-entered the market in earnest yet, but we also haven't seen any dramatic selling activity since Friday's blow. As a result I advise everyone to just sit tight and watch their positions carefully. Successful Investing subscribers are advised to stay vigilant to their email right now as I may be issuing a "Special Bulletin" at any time.
"Special Bulletins" inform my subscribers the moment I issue a "buy" or a "sell" recommendation. The most valuable part of being a Successful Investing subscriber, the Special Bulletin advises immediate action, much like last week's Special Bulletin that advised immediate selling activity in the international arena to protect those gains I told you about. And it worked like a charm as we avoided ugly profit erosion and banked some serious cash.
Subscribers are now in Alert mode, which means they are advised to hold onto their money and pay attention to their email because I may send them a signal at any time. Would you like to be in on that action? For just 50 cents a day, you can. Find out how right here:
http://www.fabianssuccessfulinvesting.com/order.php?offer=12
The news from Ford is just the latest reminder that there are ebbs and flows for economies, even ours, and marketplace behemoths don't rule forever as the mighty can and do fall. Dynasties eventually end and fortunes will erode when proper investor vigilance is abandoned or replaced with complacency.
Complacency is a hideous beast. It destroys reason, it destroys thought and it denies common sense while it feeds inertia. The most dangerous place for an investor to be is in a state of inertia because they just stop. They stop reading the signs, they stop paying attention to their plan, they become inactive and then reactive rather than simply maintaining a proactive approach to their investments.
Inactive and reactive investors stay in too long. They get burned, they flee, and then they stay out too long. It takes a monumental shift to drive a burned buy and holder back into the market, just at the time everyone else starts to sell. And the cycle repeats itself over and over.
Are you prepared for investing in a shifting market? Do you have:
An appropriate allocation to the sectors that look like this year's hands-down favorites for investing in a shifting market - including international ETFs, healthcare, natural resources and large cap growth?
A strategy that you will confidently implement to profit or protect in the event of a sudden drop in equity markets? (just like the one we saw last week).
A plan that you can believe in for investing in a shifting market with your serious money for growth, income and bear market protection?
My dear friends, it is my philosophy that the most significant element of our lives is the constant rush of change. Our own lives are constantly evolving. It is no different when it comes to investing. As the world evolves, so too do new opportunities, making previous opportunities fade. Armed with that knowledge and a rock solid plan, you will live a more abundant life... in every respect.
"Capitalize on change."
--Conway Twitty