For those of you who have been following my strategy work since November's blog launch of MCM Macro, you're probably tired of my flashing the TM short call. We can get tired of things like this, as long as they keep working!
The thesis hasn't changed. The facts continue to play more and more into my hand and out of Toyota's. In their home market, Japanese economic trends have materially deteriorated in the past month - they look as bad as this TM chart. Domestically, I can argue forever and a day with the media and the sell side about why I don't care if and when TM overtakes GM as America's leading car salesman - why do I "have to own" a new car or either of these stocks anyway? Reality is that TM and GM are overspending to capture US consumer dollars that are being spent less and less on cars. In May GM was at 19% share and TM was at 18%. I don't buy shares of anything that's shrinking.
Europeans have one car basically per family. The Chinese have 1 child per family. The Japanese population of families is shrinking. What does all of this mean? I'll tell you what it doesn't mean - that Americans owning 2.2 vehicles per shrinking household of income isn't going to inspire a new car sales boom anytime soon, no matter how cool Toyota's used to be. Auto sales in the US are approximately 20% of the total retail sales number. The bulls eye on this line item in US Household spending budgets doesn’t say “yeah, but Toyota’s are different.”
If you're still with us on the TM short side, I'd cover some at $84.34, and re-short any strength back up to the $89-91 range. This one is macro, cyclical, and secular, all at once. I like 3's. Especially one's like these that come together like Toyota's short thesis.
KM
The thesis hasn't changed. The facts continue to play more and more into my hand and out of Toyota's. In their home market, Japanese economic trends have materially deteriorated in the past month - they look as bad as this TM chart. Domestically, I can argue forever and a day with the media and the sell side about why I don't care if and when TM overtakes GM as America's leading car salesman - why do I "have to own" a new car or either of these stocks anyway? Reality is that TM and GM are overspending to capture US consumer dollars that are being spent less and less on cars. In May GM was at 19% share and TM was at 18%. I don't buy shares of anything that's shrinking.
Europeans have one car basically per family. The Chinese have 1 child per family. The Japanese population of families is shrinking. What does all of this mean? I'll tell you what it doesn't mean - that Americans owning 2.2 vehicles per shrinking household of income isn't going to inspire a new car sales boom anytime soon, no matter how cool Toyota's used to be. Auto sales in the US are approximately 20% of the total retail sales number. The bulls eye on this line item in US Household spending budgets doesn’t say “yeah, but Toyota’s are different.”
If you're still with us on the TM short side, I'd cover some at $84.34, and re-short any strength back up to the $89-91 range. This one is macro, cyclical, and secular, all at once. I like 3's. Especially one's like these that come together like Toyota's short thesis.
KM
(chart courtesy of stockcharts.com)
