The Times piece is an depth piece on how Toyota has dragged it's feet and denied any issues with past safety issues. With this newest article in one of the most widely read papers in the world on a Sunday means you can look for further media attention to this issue.
http://www.nytimes.com/2010/02/07/business/global/07toyota.html?ref=todayspaperBeing that Ford is the only U.S. car manufacturer currently not in Bankruptcy, being supported by you the taxpayer and not trading as pink sheet stock it leaves a wide open door in my opinion for some buying. Being that it also has a heavy short position that creates a classic short squeeze.
A short is when an investor believes the stock price will go down and borrows shares to sell it "short". A long is just the opposite it's when he or she believes the price of the stock is going to go up and buys shares in that company.
A short squeeze is when the price is running up and the shorts buy back the stock they do not own or what's known as covering the short. That pressure from all the buying creates what's known a squeeze play. Generally a very powerful move. Currently as of 1/15/10 Ford has 193.40 Million shares short or a little over 8% of the total shares outstanding.
The NY Post yesterday ran two pieces on Toyota one about the depth of the bow that Aiko Toyoda presented at the press conference and another about how the Auto insurers were already looking at some of their claims from their cars.
The Japanese culture is all about saving face as previously explained. The depth of your bow represents your level of regret. Mr. Toyoda's bow was seen as insufficient by the Japanese press and the fact that he is the grandson of the founder of Toyota implies an air of elitism. It would not surprise me if he was forced to step down.
The Auto insurer's hate paying out claims and love collecting premiums. If they can find a way to find someone else to pay for anything they will. No question to me that any Auto insurer who had claims with Toyota's will start looking at every claim in an effort to get Toyota to pay for it.
Current estimates are that this will cost TM about $2 billion. What is the cost of additional loss of sales, insurance claims, Government fines/penalties and civil lawsuits? I don't know but that's one big Meatball.
If you read at the top of my Blog what I look for in taking control of your portfolio it's a combination of four basic elements. Fundamentals, Techinicals, Politics and Sentiment.
To me sentiment is the strongest factor since perceptions are everything. They become reality regardless of the facts. That is what I believe we have here which creates a domino affect.
Chances are I will buy additional puts on Toyota and get longer on Ford sometime this week. I'm still treading carefully on the long side of this market but I do believe with the buy in on Friday afternoon we will a move up on Monday or Tuesday. If you have been following this market carefully you will notice that the traders are selling into the strength getting short and covering quickly. They are watching the Technical levels carefully and they have traded pretty much right on the money. Meaning as they hit the buy and sell levels that the charts show they should be the stocks and the overall markets trade with them.
On a longer term perspective Ford is something I believe should be a part of a diversified portfolio. The day to day movement is not really much of a concern at this point and it's clear they have everything going in the right direction.
Here's a couple more idea's for periodicals. One on Fundamental's and the other on Candlestick charts. In order to run you have to walk first and put in the work. You won't understand everything but the way I approach study is that if you can grasp a few key aspects and put them in your arsenal of information it gives you a much better chance of booking profits.
Remember: Pigs get fat, Hogs get slaughtered. Be a Pig.
Mastering Candlestick Charts I
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