The U.S. Government's 'Cash for Clunkers' program ends today. It won't be clear for some time whether the program was successful or not in stimulating the auto industry but it was certainly popular with buyers. As the program ends, will the rally in auto retailing stocks also come to a close?Interestingly, although the program runs through the end of business on today, some dealers stopped using the rebate program on Friday the 21st. For example, AutoNation, Inc. (NYSE: AN) is a publicly owned auto retailer that stopped offering the program to buyers on Friday. Perhaps management has concerns about the government being willing to pay the rebates on time.
Some auto stocks including AutoNation, Inc. (NYSE: AN) and Sonic Automotive, Inc. (NYSE: SAH) were consolidating from April through June and popped up in price following the launch of the 'Clunkers' program. However, these stocks stopped moving up as the program started coming to an end. I wonder if investors also have concerns about the government's ability to pay auto retailers quickly.
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Investors should note that the price action of the two auto-retailing firms I have mentioned in this article have been declining since the beginning of August, while the broad market indexes have rallied despite the popularity of the 'Clunkers' program. This is a great example of the old trader adage; "buy the rumor - sell the news." Once the program went into effect, the move in the stock was over. Traders have always been more interested in what could be than in what is.
John Jagerson is a co-founder of Learning Markets, LLC. Learning Markets offers daily articles, videos and investing guides about everything from investing in stocks and options to trading currencies and more.
Learn more about how traders use the news here.
Investors should note that the price action of the two auto-retailing firms I have mentioned in this article have been declining since the beginning of August, while the broad market indexes have rallied despite the popularity of the 'Clunkers' program. This is a great example of the old trader adage; "buy the rumor - sell the news." Once the program went into effect, the move in the stock was over. Traders have always been more interested in what could be than in what is.
John Jagerson is a co-founder of Learning Markets, LLC. Learning Markets offers daily articles, videos and investing guides about everything from investing in stocks and options to trading currencies and more.
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Reader Comments (Page 1 of 1)
8-24-2009 @ 5:25PM
MJ said...
While auto dealers saw an uptick in sales from the cash for clunkers sales, what impact will a possible late payment from the government have on their bottom line? I still fail to see how this is really helping the US economy when several dealers around the country reported that they were selling mostly foreign cars. Aren't we making the Big 3 more obsolete through cash for clunkers?
http://www.newsy.com/videos/cash_for_clunkers_was_it_worth_it
8-24-2009 @ 6:32PM
Lauren said...
I agree with ya MJ... ive never seen a federal program get so much hype and air time, but now we have to deal with the consequences of people buying foreign cars with better mileage.. http://www.newsy.com/videos/cash_for_clunkers_was_it_worth_it