Ford (F) Revving Up for a Run
by Houghton and Atkeson 03/05/09
Ford Motor Co. (F) is trading below $2 per share. But, so far, of the 'Big Three' automakers, Ford has had the strongest balance sheet and the best chances of reaching the other side of this recession with all of its parts still attached and running.
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In the options market, it appears investors may be betting that Ford might really put the pedal to the metal and run above $7.50 by the Jan. 15, 2010 expiration. We are seeing more than 25,000 January 2010 Long-term Equity Anticipation Securities (LEAPS) contracts trade today at the $7.50 strike.
Ford may be the counter bet to General Motors (GM).
If GM goes bankrupt, consumers who want to "buy American" may turn to Ford, giving the company a sales boost in the midst of a broader industry slowdown. GM is down 18% today, while Ford was up slightly during a day when the market is in full on melt-down mode.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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