Economic/Market Highlights 11/10
By Larry Doyle on November 11, 2008 at 2:30 PM in American Consumers, Banking Institutions, Barack Obama, China, Credit Card Companies, Current Affairs, Dubai, Economic Stimulus, Economy, Mortgage Crisis, Real Estate, Retail Businesses, Workers
I will admit that, given the current dynamics at work in the economy and the markets, I have become somewhat numbed as to the magnitude of some of the developments. Many of the highlights that I will offer from yesterday’s news would be enormous stories in and of themselves. Taken collectively, they do become overwhelming if we let them.
The markets are down 5-6% on the month. Given the stream of negative news, one might think that the market could be even lower. The fact that markets aren’t even lower is testament to the trillions of dollars that have been put to work by governments around the world.
Let’s review the major stories of November 10, 2008:
1. China implemented a $563bln economic stimulus plan primarily to further develop infrastructure in the country. That figure represents 1/5th of their total GDP. I was surprised to hear that, but it also indicates to me how much growth potential that country possesses. This package had an immediate impact on our equity markets this morning when our markets were up 3%. This package also supported commodities, especially copper which bounced about 5% on the day. Aside from infrastructure, China directed this stimulus package to an area that was badly damaged in a recent earthquake. Last but not least, China offered “tax deductions” on the purchase of certain hard assets. (Are you listening, Barack??)
This stimulus package though indicates to me that it is not likely that many of our domestic companies will likely be receiving capital injections from sovereign wealth funds. With oil at $60, oil producing countries (such as Dubai) may need to support the real estate developers and exporters in their own countries.
2. Fannie Mae reported a loss of $29bln (I’m not going to say earnings when companies lose money) which equates to $12.96 a share vs an expected loss of $1.40 a share. (How can Wall St. analysts maintain credibility when they miss a call by almost 1000%?).
It is amazing how Fannie can rack up losses like this when their own incentive bonuses are not on the line and when collectively Uncle Sam owns them. Aside from this loss, Fannie did announce that they expect losses to continue and to increase into 2009. This to me means they see foreclosures increasing over the next 6 months. More than likely Fannie will have a negative net worth by the end of 2008 requiring an increased capital injection by the U.S. taxpayer. Where does it end!!
Again, this model is broken. The American consumer who is able to get a mortgage is being subsidized at the expense of the taxpayers. Let the private market set the mortgage rates and if the housing market re-prices, so be it. Enough socialized housing finance.
3. AIG has already been covered on a separate thread so we do not need to repeat that pain here. Suffice it to say, though, that if they effectively burned through $100bln dollars, give or take, in the course of 6 months, the price tag for this entity could possibly be upwards of $300-500 bln dollars with pressure on a wide array of assets owned by other entities in the process.
4. How about the auto analyst at Deutsche Bank coming out with a sell rating on GM? The stock is down 90% on the year and now he tells us to sell … in any event, the stock was down 23% on the day to close at 3.25. The Deutsche analyst is bold enough to say the stock is going to “0″ !! Look for heavy political posturing between BO/Dems vs the Bush administration as to added bailout funds, terms, timing for the auto industry.
In today’s WSJ editorial section, they write, “[I]f our politicians can’t avoid throwing taxpayer cash at Detroit, then they should at least do so in a way that really protects taxpayers. That means handing a receiver the power to replace current management, zero out current shareholders, and especially to rewrite labor and other contracts. Anything less is merely a payoff to Michigan politicians and their union allies. ”
High time somebody stands up for capitalism!! … Gentlemen … (one of the great movies ever made…)
5. Recession plays in the form of General Mills, Campbell’s Soup, McDonalds, and Wal-Mart continue to out-perform.
6. Google trades down sharply today on anticipation of slowing in internet advertising.
7. Goldman Sachs (the boy wonders of Wall St.) also trade down sharply (down 8% on the day, 70% on the year and down a full 40% from just 6 weeks ago when Warren Buffett made a 5bln equity investment … a cool $2bln loss for Warren). Concerns about Goldman center on their private equity investments with their own capital.
8. Speaking of Warren Buffett, Berkshire Hathaway announced earnings after Friday’s close and they were down 77%. Berkshire Hathaway is still only down app 23% on the year so as a stock it has handily outperformed the market.
9. The top-rated bank analyst on Wall St. is Meredith Whitney at Oppenheimer. She is beholden to nobody and truly tells it like it is. She was quoted recently as saying that she is particularly pessimistic about the U.S. government’s historic actions to bail out banks with massive capital injections. Such plans have little hope of improving core fundamentals.
Again, in the face of this massive flow of bad news, the market was only down 1-2% on the day. That said, the real economy is going to get worse before it gets better so be cautious about putting money to work in situations that are dependent on borrowed financing.
Heck, even my neighbor who runs a family business (guessing 3-5mm in annual earnings with significant real estate holdings) that has existed for 75 years and is an institution in our town, was turned down for a modest-sized loan by a money center bank to settle an estate.
That, to me, is the definition of a “credit crunch.”
Last but not least, I want to comment on a story that has been making the rounds about the “lack of transparency” in some of the government programs that have been put to work in the markets.
Specifically, the program in question focuses on the Fed backstopping the short-term lending markets. The Fed has provided $2 trillion in money/loans to a wide array of banks and has not provided info on just which banks have participated.
I can understand that the taxpayers want to know, but you have to understand that in the market if other players (dealers, hedge funds, et al) find out which entities are borrowing, then it is very likely that that info will be used against those borrowers. Their stocks and bonds trading in the market will likely get punished.
By not sharing this info, the Fed is actually protecting the banks and the taxpayers at the same time. Think of it from the standpoint of a card game. if you know what somebody else is holding, you can obviously change the way you play your own hand.
10. I almost forgot to post that Circuit City folded for Chapter 11 on Monday. Retail, especially any form of higher end retail, is going to be in for a very tough time. Shopping malls will lose some key tenants as well.
11. I also almost forgot to post that American Express filed to become a bank holding company (just like Morgan Stanley and Goldman Sachs) in order to receive a cheaper source of funding. This indicates that they know their credit card delinquencies and defaults are getting ready to move higher very quickly!! Pay off your credit cards !!
In summary, it is truly amazing when I review these 11 highlighted stories. (Of those, each of the 10 would provide enough ammo for a full-blown front-page article all by itself.)
I hope that people can fully appreciate the gravity of the current situation. This turmoil will not turn around soon. Nothing is served by being alarmist but nothing is served by not treating this fiasco with the respect it deserves.
I wish you all the best.
LD
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Code Pink decided to test Obama’s “anti-war”ness
http://edgeoforever.wordpress.com/2008/11/11/anti-war-fairy-tale-or-not/
This is going to be SUCH fun…Oh God. I’m loving this. We tried to tell them, but did they listen? Noooooooooo. Shut up Code Pink and get under the bus with the rest of us.
the code pink folks will probably be first to experience blowhard’s re-education camps.
Thanks for the summmary, LD. It’s hard to take all of this news in.
Hard times are upon us for sure. It’s a pity that Obama and his team are not prepared for the challenges ahead. The people who need help the most are not going to get it.
The only thing i see is corrupt politicans giving tax payers money to business.
You really shouldn’t call it government stimulus plans. They are in reality, governments giving its people’s money to businesses.
Think about that for a second. The 10’s of thousands of dollars you gave to the government last year went to big businesses in America. Its as simple as that.
Thanks LD for another excellent (if not happy) analysis. You really do help us understand our serious problems.
Good summary. Do you have a link to the article for the numbers on China? Just curious as to what they are using. Nominal GDP for China is 6.9 trillion so a bailout of 586 billion is .8% of GDP.
China needs growth above 9% to account for new jobs. Here’s an interesting article I read last week..http://www.forbes.com/opinions/2008/11/05/china-recession-roubini-oped-cx_nr_1106roubini.html
[[Thus, there is a growing risk of a hard landing in China. Let us be clear what we mean by that. In a country with the potential growth of China, a hard landing would occur if the growth rate of the economy were to slow down to 5% to 6%, as China needs a growth rate of 9% to 10% to absorb about 24 million folks joining the labor force every year--it also needs to move about 12 million to 14 million poor rural farmers every year to the modern industrial and manufacturing urban sector.]]
You’ve peaked my interest. Would also be interesting to see how govt spending in China (as % of GDP) compares to US govt spending as % of GDP. Off to do some research….
waldenpond….i heard that 20% number on bloomberg news yesterday. it does sound too high.
I typically get most of my info from the wsj…speaking of which here is a very interesting article on the state of labor in China…fairly daunting…
According to Chinese news papers, it’s 4 trillion Yuan which is about 40% of the total government revenue. It’s a massive package for China.
Also, there are 40k failed private enterprise in china this year but with 70k new private enterprise at the same time.
waldenpond….i heard that 20% number on bloomberg news yesterday. it does sound too high.
I typically get most of my info from the wsj…speaking of which here is a very interesting article on the state of labor in China…fairly daunting…
http://online.wsj.com/article/SB122627144171511961.html
The projected growth for 2008 will be 9% according to official figure this week. They also projected their GDP will surpass German this year to become 3rd in the world.
The 600 bil is actually massive for that country since everything over there cost about 1/7 of what’s here. The fact that they even cut capital gain is good news(they had been communist in name only for the past 20 years). I think it will help the economic situation around the global because it will help export from the US. Their new middle class like American goods.
The lowering cost of oil will also help them as well as us in consumer spending(at least prevent it from getting a lot worst).
American Express? A bank holding company. wow this is crazy. I mentioned awhile back I have taken the much maligned position of being over 80% in cash..yeah, yeah.. I know my $$$$$ won’t keep up with inflation…but I freaked & liquidated, anyway to make a long story have a point: I’m trying to set up a series of laddered CDs (as a result I’m now with numerous banks) to my amazement most banks are now running credit checks on depositors! Recently one bank used a program called Eqifax Mortgage Credit Solutions. Needless to say I did not get a mortgage (cause I wasn’t applying for one.) Now Equifax is lowering my score aledgeing I’m applying for too much credit.I’m NOT applying for any credit! Damn! Called EQUIFAX in India=no resolution. Called Governor’s Office of Consumer Affairs= no help+ tells me to call FTC. FTC says “There are no laws governing how the credit agencies report credit, but the FBI is reviewing complaints” Woof. FTC says call your Congressman/Senator/lobby for regulation. Fool that I am I’ve actually tried. Have to try again after the Inauguration as all offices are currently overwhelmed with requests for tickets. My Senators seem afraid of Equifax as one staffer told me they called to try & help one person & Equifax fought back with charges of undo influence. I’m developing a complex. I feel screwed.
Check this out…viable lawsuit hits the Supreme Court:
http://www.democratic-disaster.com//index.php?topic=286
Thank you for this very informative post. I must say this: “By not sharing this info, the Fed is actually protecting the banks and the taxpayers at the same time. Think of it from the standpoint of a card game. if you know what somebody else is holding, you can obviously change the way you play your own hand”
well, that just pisses me off. There seems to be one excuse after another as to why the American public is not allowed information. I am really sick of hearing it is for our own good, because frankly I have lost faith in our governmental servants. At this point, I say tough – so many of them will have a hand in the till they will all get used to it and no one will be punished. We should demand transparency!
Type….I understand your frustration but look at it from this standpoint. Bank ABC borrows money from the government through this program and borrows a lot of money. If their identity is made public, other traders in the market are going to view ABC as being cash strapped and thus in a weak financial position. In turn, ABC’s outstanding equity and bonds will egt hammered and then they either go out of biz, default, or come back for more dough. It is a bit of a vicious cycle.
Maintaining anonymity is truly in our collective best interests at this juncture. That said, i would not go out and buy the stock of most of these banks with my own money right now.
Oy, that is just counterintuitive to market principles. That is what transparency is for… so that investors and consumers can make informed decisions about the viability of the company.
Non-transparency resolved with non-transparency because the Govt and their corporacratic shills think it’s ‘good for us’? Open you window, you can hear me scream from here.
My belief? Screw the paternalistic view in this country that issues are just too complicated for the morons of main street to understand so govt is going to take care of it for us. Dump the data.. the experts always digest it and put it into terms people at every level can understand.
People shouldn’t invest in banks that are participating in loans with crap for collateral, but investors aren’t allowed to know which banks? Won’t investors be compelled to ignore the industry as a whole thus negating the mis-guided efforts of our Govt? If I was a non-participating bank I would be shouting it from the rooftops for my shareholders but would I be surprised the corporacrats have agreed to secrecy at the expense of their shareholders? No.
You have hit the nail right on the head. While on the one hand the governemtn does not want transparency in this particular program to protect the specific banks and the taxpayers, on th eother hand the governemtn will not share with the taxpayers the extent of the problem because that would increase the level of anxiety. You are spot on.
I personally think and have tried to highlight here that there are upwards of $1 tillion in embedded losses in our banking system over and above the app 500-600million that has already been recognized.
The losses in the insurance companies and hedge funds could be of a similar magnitude.
Thus we are facing another 2-3trillion in losses.
No, you will not hear that from the powers that be. Again , they believe that they are doing us all a service by protecting us from that info because it would cause further panic in the markets and the economy but that’s the reality.
Oh goody…. AIG just had a $343,000 party. Open your window, here come’s another scream.
Sh!t.
This is what happens nearly every time government is placed in control of anything. O yes, the left jab we haven’t felt quite yet is that the public never gets it back again once it goes into Federal control. This is one instance where i want so hard for the government to prove me wrong in how this stewardship will be implemented in the long term.
LD–your market summaries are fascinating. Thanks very much. In item #4 you talk about GM. By chance, my sis called me today and said that she just bought 2,000 shares of GM at $3.00. She is a poor person, and this purchase is very uncharacteristic of her. Have you looked into your crystal ball as to what’s ahead for GM? Do you foresee a buyout? Will the government help them out?
We were teetering on the edge of the cliff a year or a year and a half ago, we are free falling now, there’s no way to go but down. How hard we hit always depends on the leadership and his or her policies; well, now that the abomination has been chosen the United States is going to suffer massive economic damage.
Remember, the big money is gone, it’s gone and all of the bailouts are band-aids to buy confidence a month at a time. My sister and her husband own a samll diner in the city here in Virginia, they thought about selling over a year ago but were undecided. Now that they’ve put it on the market for 7 months they can’t get a bite and this has been a successful business. They missed the last window of opportunity. With jobs dwindling, retail cannot survive, with retail businesses closing the era of consumerism is coming to a close. What will happen? Not one economist can predict that but without good, solid leadership we will all be reeling. Start growing your own food and learning survival techniques. Oh, and let’s not forget “put air in your tires and spread your change around.”
Thanks for the info, LD.
I’m very unsophisticated about big finance, but why I think it will be rocky for everyone is that I see no growth industry at all.
Nada.
AnninCA:
The privately owned/managed prison and detention industry appears to be booming, but I can’t say that I’m at all happy about that development.
As complicated as this financial mess appears to be, I still have very strong misgivings about its timing. This whole business has apparently been brewing at least since Alan Greenspan took over the Federal Reserve with what some people in the know claim is his Ayn Rand laissez-faire nihilistic philosophy. Why did the dam break just after the Republican and Democratic conventions…just in time to prop-up Obamessiah and squeeze the life out of John McCain? I have the same sort of misgivings about 9/11…so convenient that it occurred within 9 months of a change of administration. These don’t seem like random occurences to me and I simply don’t accept them at face value.
If the financial markets were just starting to crash now or within the first 9 months of a new administration…I would call that random because the occurences would not serve the purposes of the people in power. Obama does not have to accept responsibility for this mess and he probably will be given a blank check to do the shock routine on the American economy.
I also apply this skepticism to what Joe Biden said about Obama being challenged on the international scene within 6 months. A foreign rival might actually want to test a new president, but by the same token, a president as calculating as Obama has proven himself to be, might want to do some challenging himself and it’s always better to give himself at least 1 1/2 yrs of leeway to the midterm elections.
There were a few responsible persons who saw disaster in the making and nobody listened to them. Why not?
Oowawa…I would not have recommended that purchase. GM is cash strapped and does not have access to liquidity other than from the government. Even if the governemtn makes a capital injection there is a strong possibility that equity holders will get totally diluted and thus the equity value goes to zero.
Buying GM right now is a total gamble. One can not make a rational case that there is value. They have 45bln in outstanding debt and a markt capitalization (stock price times number of outstanding shares) of only a few billion dollars. They are burning through 2-3bln dollars per month. On their own they would be likely to be totally bankrupt sometime within the next 2-4 months.
I don’t think Warren Buffet is a fool. He didn’t buy up GE preferreds at 10%, a nuclear plant in upstate NY,and that stake in Goldman Saks thinking that in the long run, he wouldn’t come out smelling like roses.
I am merely pointing out that he is not perfect. I am not so foolish to think that he is a fool. Merely highlighting that even he is human and yes, he could have made those investments at much cheaper levels.
Thanks LD for the feedback.
o.k. so now even the progressives at The Nation are now wondering why no one ever told them Obama palled around w/ loser economists?
HELLO!!!
http://www.thenation.com/doc/20081124/ames
the shix is already hitting the fan
Summers is a Dem? (sarcasm)
Few were writing about Obama’s associates. Some of us were callng Obama Bush III from the beginning.
There was another article saying Obama had to pick Summers. Obama needs to give the little people on both sides something, but that he needs to pick people like Summers to send a clear message that he is putting the country first not any constituency (of course it was an article by a far-right conservative who feels Obama needs to give several good kicks in the teeth to the left)
An article by a Dem said Obama needed to pick Summers because he is the best the Dems have to offer and Obama needed to prove he would not consider ‘ideology’. If Summers personal beliefs are to be ignored, the far-right should be very reassured about Obama’s slant towards the Supreme Court.
Seems like we are on fast forward — LD thank you for this snap shot of what’s happening in the world & US markets — this is almost too much to take in. Each failure listed deserves a BOOK.
Could it be that the GOP deliberately threw the election? THEY don’t want to be blamed.
Then the stupid Dems elected a fragile male who needs “help” and really can’t manage on his own. He couldn’t “win” the election without the help from Clinton. Now we are being asked to “help” this fragile male — mostly because he is inexperienced and he just isn’t good at making decisions.
Screw him — give him room and let the dems and their choice sink themselves.
If all hell is breaking lose — perhaps it is best to let the crap flow (with a few strategic diversions) until it reaches it’s own level?
Basically the US will be leaderless for the next four years — there will be a projected illusion of a leader — but this is only an illusion. The dem’s selected candidate is far too lazy to comprehend what’s happening — he can’t see the big picture and he is unable to listen to a range of experts and come to a synthesis response to ANY crisis. The only thing that the dem’s choice can do is campaign — and that’s the only thing he seems to have been doing for the last decade and a half. He hasn’t DONE any of the political jobs he’s “won”. (This is a summary of what writers at NQ and other enlightened blogs have been saying as they’ve investigated O-zero).
Soros is supposed to be one of the powers behind the throne — but this guy isn’t a fixer (in the sense of economic solution) — Soros is a LOOTER.
Seems like there are two basic types — Fixers and Looters.
What concerns me is that many of Obama’s economic “advisers” are from the Chicago school of economics — and their guiding dogma is “free market”.
And we know that when these unregulated free market demons are unleashed on a Nation’s economy — that a few people get really really rich by looting the country’s wealthy (which should be held in common by the tax payers, since it was the tax payers/citizens who paid for the industry or resource). The majority of citizens in the now “free market” economy fall below the poverty line — the middle class is virtually wiped out. Unions are busted, Union leaders are jailed. (source: Naomi Kline, “Shock Doctrine”).
Unless I’m very wrong — it seems that Obama has surrounded himself with the economic Looters — they are the ones who apparently have funded his campaign. So I’m lead to the conclusion that the real object of the Obama presidency is to LOOT America.
To fix the broken economic system would take hard work — we know that Obama isn’t into the hard work stuff. He got out of the lawyer type work — because that involved work — and we don’t see any evidence that he produced any real work output (paper, written briefs etc.) as a lawyer. In the legislative branch — State level & Federal level — we don’t see any legislation of significance (Obama was GIVE the work of others in order to make him look good).
So Obama has surrounded himself with Freddy Mac etc. failures — his pick for Chief of Staff for example.
And the people who voted for Obama are expecting that their mortgages and gas bills (don’t forget the cheap bananas) are going to be paid by Obama?? (Play the cynical laugh tape here.)
All I see is a Broken Wall Street — from decades of pushing the envelope by looters — lots of people trying to see how much they could get away with.
Sorry for the free association rant — but I see a huge ship going through a narrow channel without a captain or a competent helmsperson.
We are so screw —
[And credit checks to deposit money????? WTF is that?]
OK LD, a little of track, but while I am in the middle of reading your Article,
Across the ticker goes a viewUG comment,
“We should nationalize the Auto industry…and turn it into a green….”
Just before that, “Pelosi “supports” and a “package” to the Auto-industry…”
The canyon between public opinion and what is the right thing to do, is of the magnitude of those canyons found on Mars.
Back to the future…and the rest of your post.
—–
Ok, the potato is hot and the key is not to get stuck with it AND have a seat at the table when this round of musical chairs ends. Not an easy task.
What I am wondering after reading the most recent series of your Posts is;
If the model is broken which only a comrade would deny, what sort of mutation will manifest from this cesspool of “virtual wealth”?
I say mutation and not some other more “organic” term, because the the level of governmental financial intervention is beyond gaudy.
What is interesting to me is, at the same time the global economy is tanking, here at home, the government is making Frankenstein loans; in effect nationalizing asset’s while at the same time squeezing out credit by their own actions. Weird how they complain about making the rope by which they will hang.
Bottom line, these IGITS can’t have it both ways.
On one hand, politically soothing the comrades and other …well it ain’t even close to Smith&Barney’s slogan…
Where is this Godzilla monster heading next? How will it blend with external forms of “exchange”? Will it become what BO did to finance his campaign?
Lots of un-traceable small but frequent transactions? Facebook or Sharia financing, Or will it remain “in your face”, like a GW NSL letter?
I can’t wait to see how many of those are issued in the name of counter-intel ops…for Corporate profit.
What black markets await us?
OK LD, a little of track, but while I am in the middle of reading your Article,
Across the ticker goes a viewUG comment,
“We should nationalize the Auto industry…and turn it into a green….”
Just before that, “Pelosi “supports” and a “package” to the Auto-industry…”
The canyon between public opinion and what is the right thing to do, is of the magnitude of those canyons found on Mars.
Back to the future…and the rest of your post.
—–
Ok, the potato is hot and the key is not to get stuck with it AND have a seat at the table when this round of musical chairs ends. Not an easy task.
What I am wondering after reading the most recent series of your Posts is;
If the model is broken which only a comrade would deny, what sort of mutation will manifest from this cesspool of “virtual wealth”?
I say mutation and not some other more “organic” term, because the the level of governmental financial intervention is beyond gaudy.
What is interesting to me is, at the same time the global economy is tanking, here at home the government is making Frankenstein loans, in effect nationalizing asset’s while at the same time squeezing out credit by their own actions. Weird how they complain about making the rope by which they will hang.
Bottom line, these IGITS can’t have it both ways.
On one hand, politically soothing the comrades and other …well it ain’t even close to Smith&Barney’s slogan…
Where is this Godzilla monster heading next? How will it blend with external forms of “exchange”? Will it become what BO did to finance his campaign?
Lots of un-traceable small but frequent transactions? Or will it remain “in your face”, like a GW NSL letter?
I can’t wait to see how many of those are issued in the name of counter-intel ops…for Corporate profit.
What black markets await us?
Here’s what my economic guru says about China’s annoucement.
They’re going to fund it by selling US Treasuries.
This could be thing that pops the Dollar Bubble.
Or not.
Interesting…. I feel like a conspiracy theorist.. I remember some Mexican politico sniggering they would take back territory without ever firing a shot (through illegal immigration, for which you will soon have shamnesty as both parties pander to Hispanics and to Corporate greed for ever cheaper labor) and non-Democratic countries would take us out through our economy. Has no one listened to Lou Dobbs for the last 10 years?
As soon as the market implosion happened, the countries communicated and reached some basic agreements, which China apparently violated the very next day.
Do you have a link? I would like to see the youtube piece.
Hi. The message came in email but this is the link he referred to.
Peter Schiff Was Right 2006 – 2007 (2nd Edition)
That is a great piece. I actually laughed at how moronic some people are. Peter has been doing this for a long time.
I have been beating this drum for three years. I wasn’t comfortable with housing and listened to the few voices of reality. I told a friend not to buy while we refused to up-size and ran from real estate 3 years ago. We dumped stock and put resources into cds and cash two years ago knowing what would happen to the market. I had no sympathy for my friend who lost his house and no sympathy with those swimming in debt.
I do have sympathy for those stuck in the middle. I am pissed I have to bail out others when we have lived within our means.
LD, this is a great snapshot of today’s financial issues. I have a real problem with the (big…erhem) 3 asking the gov for a bailout. For over 2 decades our automakers have been mismanaged. If the government keep on bailing out public companies here and there, where does it stop? If the tech industry begins to tank badly, do they step in to stop the bleeding there too? Am I wrong to think this way? It just pisses me off that we, taxpayers, have to help out these poorly run companies.
LD I assume you’re against any kind of aid to the big 3?
I really appreciate these roundup posts by the way. I don’t always comment. And thanks for mentioning Meredith Whitney at Oppenheimer, had not heard of her before.
Two comments regarding the big 3.
1- they need a new labor contract to get rid of the workers getting benefits a year after the plant is closed. In the past good times that might have been sustainable, but in this new era of reduced consumption and downsizing the industry that is not sustainable
2- they need to cut produst offering which will cut thier engineering and support costs to get better economies of scale for existing staff.
I lived through a similar downsizing with GE in Schenectady NY. I survived it and tell the local auto people to smell the coffee and get it over it. I had to move to a different state and they will also have to do it.
The proposed government bailout will not do onything untill they address the two items above. The market will force the results over a longer period of time if the union does not find a way to cooperate with GE.
By the way, GM executives have taken a 20% cut and things like tutition reimbursement are no longer there. They have quietly laid off 20% of their white collar staff in the last two months. So Wagner is going the right way. The overcapacity of auto and their labor contracts still have to be addressed
Thank you LD for your insight and expertise. I’ll keep reading and learning.
“Banks At Risk If Not Part of rescue Plan” Dow Jones News 11/06/08. This story is scary & implies alot of regional banks could soon go under. That ought to do alot for confidence. I’m kinda blown away that no one is ticked (other than me) that banks are now running hard credit checks on depositors that lower their credit scores. It makes the adage, “we need to save more” a friggin’ joke! The fact that there are no laws/regulations governing how the credit agencies report is part of the bs ailing this country. The ratings agencies like S&P, Moodys, Fitch, etc are just as arbitrary. False financial portraits should not be allowed. S&P will give a company a AA+ rating & then trash them. How is one to know how to invest? Interesting little story around noon on CNBC (that hasn’t developed legs) Henry Paulson & Griffin were shorting financials etc before the decline & these are the guys that are suppose to be fixing everything.
Northwest rain, I went back & reread your post, “(And credit checks to deposit money???? WTF is that?)” Thanks, I need the empathy.
NorthWest Rain, I think the justification for the hard credit hits is HOMELAND SECURITY. Somehow screwing with your credit score is suppose to clear you of being a lousey terrorist or money laundry, but I don’t really know ’cause I can’t get any clear answers.
LD, thanks for the read ‘em ‘n weep appraisal.
My other comment got snagged on a tree limb I guess. Just wanted to say thanks for posting it and to NQ for the forum.
Pittsburgh National Corp (PNC) “borrowed” the tax payers money and bought out National City Bank. I am unsure if it was an “arranged deal” or PNC saw an opportunity to take the money and expand their business. There doesn’t seem to be any regulations on what banks can or cannot do with the money once they get it.
As a side thought I wonder if the unions could now buy the Big Three stock. It would be risky, but who better to take the risk than the employees who may get the benefit. We can’t afford to loose any more heavy industry.
I get my financial advice from Lou Dobbs and never from those experts. Over 2 years ago Lou Dobbs reported that over a trillion dollars of variable rate mortgage financing was going to be readjusted within the next 18 months. I started to move around the pension funds then switching over to T-Bills.
I also agree that China will finance their stimulus by dumping part of their US dollars. I also would like to remind everyone that Hillary Clinton warned of this possible scenario and its devastating implications. This will destroy the dollar. The price of oil will skyrocket since it is set in US dollars. This will give impetus to set the price of oil in Euros. We will be forced to contend with a reality of what it truly means to be a debtor nation.
Cheers guys. Maybe USA will go the way of the USSR Just devolve one morning into separate republics.
The current red /blue states would be a good splice.
There are many parallels which I can see -having visited the USSR in 83.
The bad news is they were Bankrupt but the good news is it was achieved with barely one loss of life.
USSR 1990 = USA 2015
I think Pres Bush should state he will not be throwing more tax dollars at the private Auto Corporations. We have consistently been aiding their failing businesses and if the Democratic Congress wants to give more tax dollars to these private businesses, they’ll have to do it on their own.