This is a cornerstone of the Fed, a true shibboleth (Google that one). But one of the first set of bonds the Fed bought under the TALF program were bonds backed by motorcycle loans made by Harley-Davidson (HOG) to its customers.
The Fed program was designed to provide loans and capital to businesses that were shut out of frozen credit markets, which is a good thing. But loans to Harley made to boost the sale of motorcycles to people who could not get loans elsewhere?
C'mon, Dr. Bernanke, you should know better.
Lesson for investors in 2010: The Fed will not continue to pursue this nonsense (who needs a hog in a recession, anyway?), and Harley has $5 billion in debt on its balance sheet that will become very expensive in the coming quarters. Take a look at put options on this little piggy, as they are quite liquid.
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Reader Comments (Page 1 of 1)
12-28-2009 @ 10:54AM
ray said...
Is this person a Hedge fund operator that has shorted this stock? Why pick Harely in this example? The Fed is buying bonds from all companies that qualify to sell them. Auto loans are also included. Does a person need to buy a new car in a recession? This writer knows nothing about consumer spending and ending the recession. He should thank Ben Bernanke for helping vis a vie, any method at all to get consumers to spend. Economics 101