Market Overview

Michigan Recovering as Fast as the Cars

Detroit, for so long the butt of jokes nationwide due to the levels of poverty and dilapidation on display to any visitors, is making a speedy return to the pinnacle of America's manufacturing industry.

The good feeling around Michigan is practically tangible. We should know – Benzinga is based in the state. While the Tigers had a good baseball season and things are looking good for the Lions too, Bloomberg is reporting that Michigan's economy is recovering from the recession at the second fastest pace, thanks to an upturn in the auto-industry.

Frankly, it is great to see that the rest of the country is catching on to what Detroiters already know – there is no better place to be in America. Hell, in the world. The greatest music ever produced comes or came out of Detroit, the sports is fantastic, the art scene is second to none (and this writer has been to Paris, Barcelona and Rome), and now the manufacturing industry is on the rise again. This is, after all, the Motor City.

Only North Dakota, with it's impressive oil boom, is above Michigan in the recovery charts. California, Massachusetts and Illinois are directly below Michigan in the top five. Michigan is recovering faster than California. Who would have thought it?

According to the article, “Fifteen states are showing signs of economic stress, even after the 18-month recession ended in June 2009, according to BEES data comparing the 12 months ended June 30 with the year- earlier period. In New Jersey, which ranked 48th, mortgage delinquency rose by the most in the nation; Bank of America Corp.'s stock price is weighing on North Carolina, the index's worst performer; and New Mexico is being buffeted by falling home prices in eight of the past nine quarters.”

To be fair, the state had nowhere to go but up in terms of unemployment. It ranked last in the BEES index throughout 2010. Still, Patrick Anderson, CEO of Anderson Economic Group in East Lansing, Michigan, told Bloomberg that Michigan has been in a lost decade. ““Michigan is emerging from, basically, a lost decade,” he said. “I sense a very cautious optimism in my home state.”

Cautious optimism is right. While Michiganders have been through far too much to be at all gung-ho, the smell of recovery is impossible to ignore. “Seventy percent of Michigan employers said they expected the state's economic outlook to improve over the next 18 months, while only 46 percent expected such gains for the national economy, according to a survey released last month by Business Leaders for Michigan. Mortgage delinquencies dropped at the fourth-fastest pace in the U.S., and personal income and employment growth ranked in the top third, according to data compiled by Bloomberg.”

All of which just goes to show – you can not keep a great city down.

ACTION ITEMS:

Bullish:
Traders who believe that the auto industry in Michigan will continue to rise might want to consider the following trades:

  • "The General Motors (NYSE: GM) Chevrolet Cruze compact has taken market share from Japanese competitors such as Toyota Motor Corp.'s Corolla and Honda Motor Co.'s Civic. It was the best-selling car in the U.S. in June and has an 11 percent share of the small-car segment through October, up from the 5.9 percent held by the model it replaced last year, according to Autodata Corp. Last week, Ford Motor Co. reported quarterly profit of $1.65 billion and Chrysler raised its forecast for its first annual profit to $600 million. The new United Auto Workers contract with Chrysler, Ford and GM boosts starting pay and provides signing bonuses to employees."

Bearish:
Traders who believe that Detroit is destined to remain in financial distress may consider alternate positions:

  • Michigan only looks good now because it looked so bad before. The state had nowhere to go but up.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Detroit michiganPolitics Economics Success Stories Markets General Best of Benzinga

 

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