Jack Tortolani
2022-11-20
The Company I am researching is Grappone Automotive Group, they were founded in 1925 and since then has ammassed a total of 99 Employees. Amanda Grappone leads the company as CEO, with Larry Haynes as President and James Snedeker as Business Manager. The company last reported annual revenue was $24,000,000. They make most of their revenue from new and used car sales and from automotive servicing as well across there five dealerships throughout New Hamsphire which include Hyundai, Mazda, Toyota, Honda and Ford.
If you look at the US Treasury Yield Spread between the 10 Year Note and the 3 Month Bill and it’s correlation to a recession is when ever it drops below 0 there as always been a recession with in 2 years of that mark. When looking at Consumer sentiment this the first time the data has been collected (1982) that it has dropped more than 15% year over year percent change and we’ve not been in a recession which is very interesting when you think about it. The Consumer Price index has we wary you could say about the economy because it has risen so much so quickly year over year the last few years and we’ve not seen anything like it in the last 40 years so my prediction with that is it’ll certainly have a correction and start to decrease with you may want to account for 3 out of the last 4 recessions had a CPI higher than 5.4% right before or during the beginning of it and we are at 8.3%. But given all the information the Treasury Yield Spread data and Consumer Sentiment is just to powerful to not ignore, so going off this I do believe we going to be in a recession very shortly.
Survey of Professional Forecasters
Use the latest November report, which is scheduled to be released on 11/14/2022 at 10 AM.
Looking at new data released by the fed on November 14th it highlights that the economy looks weaker than it did 3 months ago, they expect the economy to expand at an annual rate of just 1.0% down from 1.2%. The Real GDP for Q1 of 2023 has dropped from 1.1% growth down to just 0.2% growth. Meanwhile the Mean Probabilities for Unemployment rates 0-3.9% annual average has decreased meanwhile the mean probabilities for unemployment rates 4.0% and up annual average has risen. Forecasters also expect to see an increase in CPI inflation of 5.4 percent at an annual rate up from 4.3 percent last quarter. PCE inflation is also slightly higher. Also the risk of a negative quarter for Q1 2023 is up from 38.0% to now 47.2%
Great what does this does mean for Grappone and our economy, well to be quite honest I believe we now just at the start of a recession or going to be very soon, I say this because for every quarter in 2023 is an almost 50% chance we have a negative quarter, and that’s never good seeing it rise that much from being in the mid 30’s last quarter as prediction. Along with the data from the previous question the Treasury Yield Spread and how it has dropped by below 0. If I was Grappone, I would make sure new car orders get filled, I understand the chip shortage is starting to settle down now. We know the used car market has started to slow down from being on fire. Also you might want to hold off on doing any large expansions or big projects unless necessary for the business to survive or grow. What I mean by that I understand Ford wants it’s Dealers to pay $1.2 Million if they want to sell their electric vehicles if I was them I would make that investment, a lot more people are buying them than before but again every market is slightly different. However I would start hoarding cash, this might be a good time in up coming months to buy a struggling competitor who bit off a bit more than could choose and maybe in financial trouble. Thus expand your business for the long term. You never pay the lowest price for something when the market is hot.
Looking back at the national New automobile industry the growth compared the USD GPD it is slightly ahead to same time of it looking back the previous data from 2008. But also the industry is a lot more volatile so it has more ups and downs than the US GDP. So just because the growth in the New car industry has decreased doesn’t mean the us GDP will necessarily decrease by looking at this data. But with that being said looking at this data and seeing how the last 2 years of the car industry have been like pendulum swing on both sides of increase and decrease of growth they really have to pay alot of attention to this in order to know to have the right amount of inventory. I don’t know this looks different than previous cases these last two years so it seems interesting, but previous it recovered slightly ahead to same time of the national GDP. They got to make sure they have
The status of the New Hampshire economy by the look of nonfarm employees is that it looks as if it’s correcting itself. Why I say this is because we just had some numbers that really shot up with nonfarm employees but now that number has started to correct itself and the last few months in has been trendy with previous recessions we’ve had in the past and looks like one is almost around the corner as job growth is slowing it’s above zero but it’s headed there I feel. The New Hampshire economy similar to the national economy the only difference is that once in 1980 when the United States fell into a recession New Hampshire did not, but that was only one time. With timing however when looking at the 2008 and 2001 recession we lagged the United States. Our job growth started to decline half way through each recession, we were still expanding in the beginning of both of them.
Assess the company’s vulnerability to recession Sketch out Contingency Plan Build Flexibility Develope an early warning system to help identify coming down turns Protect Cash Look for opportunities when the market is weak.