Monday, July 10, 2006
Recreational vehicles are an endangered species this year.
It's not all that surprising really... with gasoline over $3.00 per gallon, motor homes have been noticeably absent from the highway.
I hadn't really thought about it until recently, when I was filling up the gas tank on my wife's SUV. I mumbled to myself something about how ridiculous it was that the gas pump automatically shut off at $75.00, and that wasn't even enough to fill the tank.
I must have mumbled a little louder than I thought, because the gentleman on the other side of the pump poked his head around and told me about how he had to use four different credit cards each time he ventured to fill up the gas tank on his vehicle – the Winnebago Journey.
He told me about how he purchased his motor home two summers ago when gasoline was “just” $2.20 per gallon.
“It was expensive back then,” he said. “But now $300 doesn't even get me to Yosemite.”
Not surprisingly, this is a very cyclical industry. Sales of recreational vehicles (RVs) are subject to volatile swings depending upon consumer confidence, interest rates, and of course... gas prices.
RV sales are strongest early in the economic cycle, when interest rates are low and consumer confidence is improving. Sales suffer later in the economic cycle as interest rates rise and consumer confidence drops.
That's exactly where we are now... so make sure your portfolio is clean of the RV industry. And if you're a trader, this is an attractive industry to look for short sales...
Best Regards & Good Trading,
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Investor's Intelligence advisory sentiment: Highest bearish reading since October 2002.