How solid are car companies?

16494098365_d13200e818_o.jpgRecord low interest rates have fueled asset bubbles in pretty much every sector. Since 2010, auto sales have benefited from low interest rates as well. As of late last year, nearly 1 in 5 subprime auto loan borrowers are at least 60 days behind on payments (S&P).

Ford recently announced softer auto sales and is trying to make the move away from lower margin fleet sales. With net income of $4.6bn and massive annual investment of nearly $38bn a year (which has been consistent the last few years), Ford is making some big bets on the future of automotive. As self-driving technology ramps up, the number of vehicle sales may drop quite substantially. Will Ford, GM and Fiat Chrysler be able to compete with Tesla? I wouldn’t necessarily short the auto companies with the strong dollar/Trump effects, but I wouldn’t go long either.