elroy

Auto Stocks: Value Investments Gone Wrong?

Debt = risk.

Risk is rewarded with potentially higher returns.

In and of itself, debt doesn't make it a bad investment. Back in 2004, the truck business was still running at flank speed. Whether debt is bad or not depends upon the three intertwined cycles -- overall market, industry and company. Back in 2004, all three were favourable. Now, the first two are unfavourable for all, but the company perspective -- products, etc. -- are very favourable for Toyota and Honda.

Why are Toyota/Honda so debt free? Good management? Good products? The answer is yes -- but that's not the whole story.
The Japanese protect their industries and the companies based there have a profitable home market from which to build a world market.

Korea is even worse.

If the US is to ever become an industrial power again, it must have the same trading rules as it's partners -- whether it be Japan, Korea or China. This should be a major issue in the presidential elections, but obviously no candidate understands it.