A funny thing happened on the way to the end of the first quarter on Friday, March 30.

After leading the stock market for most of the quarter, cyclical stocks started to lag the Standard & Poor’s 500 Stock Index.

Is this a sign of what we can expect in the second quarter as worries about economic growth take the steam out of profits linked to the economic cycle? I’d say, Yes. I think we’re seeing the first signs that the pendulum, which swung to optimism and drove this rally, is swinging in the other direction.

Let’s start with some numbers. Read more

Ford’s new engine announcement shows direction of auto industry

Better gas mileage and enough power to keep customers happy.

You can see where the global auto industry is headed in Ford Motor’s (F) announcement that it will build its first three-cylinder engine.

The small engine—the smallest Ford has even used—will go into global car lines such as the Fiesta and Focus. By shrinking the size of the engine and using direct-fuel-injection technology Ford hopes to get up to a 20% improvement in gas mileage from these engines over its current smallest four-cylinder engines

And thanks to the addition of turbochargers, Ford thinks it will be able to get enough va-va-voom from its three cylinder engine to make up for their smaller displacement.

Ford hasn’t identified which auto supplier will provide the turbochargers for the three-cylinder engine. Read more

Read their balance sheets to see why you’d rather own Lynas than Ford

Follow the money.

Great advice whether you’re trying to unravel political skullduggery or separate stock market winners from wannabees.

Too many investors, though, think that the money they should be following is earnings, the most familiar but also most easily manipulated of financial measures. The great financial crisis, which still has the world economy in its grip, should have taught us that companies can continue to generate fabulous earnings growth even as they rot from the inside.

No, if you want to follow the real money concentrate on balance sheets, the best single source of information about a company’s health.

Right now, as so many companies are still recovering from their near death experience in the land of debt and leverage, watching balance sheets for the moment when a company goes from intensive care to the recovery room is one of the best ways to look for bargain-priced stocks that are on the mend.

 Let’s take Ford Motor (F) and then Australian mining company Lynas (LYSCY.pk) as examples of what following the balance sheet can tell you about a company and about whether or not—and when—you want to buy its shares. Read more

Could the auto industry actually be on the mend? October’s numbers say Yes.

U.S. auto sales ran at an annualized rate of 10.5 million in October.

That may not impress you if you remember that annual U.S.auto sales ran at 16 million units for nine straight years ending in 2007.  That string came to an end in 2008 when auto sales ran at a 13.2 million units. The forecast for 2009 is an even grimmer 10 million units.

But the October’s number is a huge piece of good news if you are  looking for signs that the U.S. recovery from recession is actually going to produce real growth. Read more