Go, Economy!

[Gooch]

We've seen a precipitous fall in the price of crude oil and consequently prices at the pump. The fall is most likely driven by a combination of deleveraging and demand destruction due to the global economic recession. The price of crude may continue to fall but I don't expect it to fall a significant amount further. Combine this with what appears to be a slowing down in the rise of the U.S. dollar, setting up perhaps for a future decline which will have a positive cross-market impact on commodity prices and I expect the price of oil to be near its bottom. I could very well be wrong so I'm cautiously and gradually opening positions in DXO. DXO is an ETF that provides twice the return of going long crude oil (i.e. a leveraged ETF). DXO is currently trading at under $4.00 and had a 52-week high of over $29. DXO set its 52-week low of $2.87 on 11/21, not even a week ago. There certainly could still be downside, but oil at the current prices is one of the few things I'd feel a bit comfortable going long for a longer term hold.

One correction: DXO is an ETN, not an ETF, the main distinction being that the bank holds the notes.

[Bojack]

Lengthy short sighted piece on denying an Auto Bailout

The domestics are only suffering due to heavy legacy and benefits costs. To axe those in a bankruptcy would turn over these costs to some one else (the government is most likely). So Uncle Sam spends a little upfront to try and keep from having to fund the domestic legacy costs.

Every one likes to try to blame a very few amount of things affecting the domestics now and to only look at a few trees and not the forest is intellectually dishonest. Simply removing UAW would not free them from pension benefits from 40's onward. Removing Management wouldn't do this either (especially because good C level execs would not come to work for any cheaper than the current guys and might not produce better results). They've been building decent cars for a while now but the imports have millions of buyers snowed on that fact. They will never get to live in a business environment where you can lose cash on a Prius for near ten years until it gets famous and popular.

The domestic Auto industry is a victim of being a very old company hindered by a LOT of shit the competition isn't (namely a government and public that doesn't give a shit about anything not themselves)

With the domestics it's very likely going to be a pay hell now or pay hell later.

[Gooch]

Huzzah! New leveraged ETFs, specifically the following are now available:

UGL - ultra long Gold (200%)
YCL - ultra long Japanese Yen (200%)
AGQ - ultra long Silver (200%)

There are also new ultra shorts for these (-200%) as well as new ultras for commodities, oil, Euros, etc.

[Gohron]

The domestic car companies can fuck off. I suppose in the end we'll end up paying anyway, but between the stupid business strategies (sometimes you have to wonder about the intelligence level of the people who run these companies) and them outsourcing a good deal of production to other countries, why the hell should we pay to bail them out?

[Bojack]

why the hell should we pay to bail them out?

Because they were on track to turn around? Their new shit hadn't kicked in before Wall Street fucked us? They're asking for very little in the grand scheme of things? A large portion of our manufacturing will vanish? Millions out of work? Millions of people climbing on board medicaid and other forms of welfare?

I could go on but as it stands it's pay hell now or pay hell later. When an economy is fragile you try to help your giant companies NOT add to the problem.

Besides assuming their turn around works then they'll pay the shit back with interest. If it doesn't? Well what's a few billion more thrown into the fire right now?

[Gooch]

Auto Bailout On Deathbed Over Union Wages


The Wall Street Journal is reporting Auto Bailout Talks Collapse Over Union Wages.


A frantic, last-ditch attempt to forge an emergency-relief package for the Big Three auto makers collapsed in the U.S. Senate, amid a sharp partisan dispute over the wages paid to workers at the troubled manufacturing giants.

After a marathon day of negotiations, top Democrats, including Senate Banking Chairman Christopher Dodd of Connecticut, appeared close to a deal that would toughen the $14 billion bailout package, in a bid to raise Republican support. The focus of talks was on seeking commitments to restructure the industry's debt load and bring labor costs in line with wages paid by Toyota Motor Corp. and Nissan Motor Co. in the U.S., among other things.

But those talks fell apart after Republicans insisted that wages reach parity in 2009. Sen. Bob Corker (R., Tenn.), who emerged a pivotal player this week in negotiations over the industry's future, said negotiators were "three words away" from striking a bipartisan compromise.

Democrats were willing to reach parity, but not on such a swift timetable. Senate Majority Leader Harry Reid (D., Nev.) declared talks at an impasse. "We have not been able to get this over the finish line," he said. "We have worked and worked…that's just the way it is."

Even with a bailout, GM may be forced to file for protection from creditors. GM executives are worrying that suppliers could tighten credit terms, and the government could swiftly recall its loans.

GM's 13-member board is subjecting Mr. Wagoner to deepening scrutiny. The board is now meeting three times per week and receiving constant updates on the financial situation.

"This is an urgent situation and we need to deal with it," said Kent Kresa, a GM director since 2003.

Mr. Kresa said GM management was constantly caught off guard by declines in the U.S. auto market. While executives were continuously revising sales projections, the managers never fully understood how bad the situation could get, he added.

"We simply cannot ask the American taxpayer to subsidize failure," said Sen. McConnell, suggesting the Big Three would have to find a way to survive without congressional help.

Best Possible Result

Bankruptcy is the best possible result. I am sick and tired of taxpayer money funding corporate ineptitude. Nonetheless I am fearful that Bush and Pelosi will try one more time to revive the dead.

This is the critical juncture. The bill needs to fail. The world will not end. GM will restructure, Wagoner will be forced out, and union contracts that mandate 90% pay to laid off workers will be tossed in the ashcan where they belong.

I salute Senator Mitch McConnell who said "We simply cannot ask the American taxpayer to subsidize failure."

Fax and phone your Senators. Do not bother with the House, they stupidly passed this bill already.

Please phone, email, and fax all the following senators with the message "Do not subsidize failure in any industry. Please block the auto bailout. And do not release the remaining $350 billion TARP funds for Paulson to squander."

Also phone your own senator.

Congressional Phone And Fax Numbers

Click Here For Congressional Phone And Fax Numbers

Richard Shelby
Tel: (202) 224-5744
Fax: (202) 224-3416
Email: senator@shelby.senate.gov

Jim DeMint
Phone: 202-224-6121
Fax: 202-228-5143

Judd Gregg
Phone: (202) 224-3324
Fax: 202-224-4952

Mitch McConnell
Phone: (202) 224-2541
Fax: (202) 224-2499

Sample Fax

Fax Title: Stop Subsidizing Failure - Say No To Auto Bailout

Dear senator

It is time for Congress to stop subsidizing failure.

Please block the auto bailout.

And do not release the remaining $350 billion TARP funds either. If you do, Paulson will just squander it with no Congressional oversight, just like he did the first $350 billion.

World Will Not End If GM Goes Bankrupt

The very best thing that can happen to GM and Ford is they go bankrupt. The sooner bankruptcy happens the better. Congress will then see that the world will not end. Both companies will reorganize. Both companies will keep making cars.

The airline industry did not stop flying when it went bankrupt and the auto companies will not stop producing cars if they go bankrupt. Coming out of bankruptcy debt levels and interest on debt will be lower. GM and Ford will be more cost competitive.

Not a single job will be saved by propping up GM. In fact, jobs will be lost and money will be wasted if money is thrown at the problem. GM and Ford are suffering under a burden of debt and interest on debt with no conceivable way of paying that debt back.

There is no hope for GM other than bankruptcy and a restructuring of that debt!

GM's burn rate is $2 billion per month. GM loses money on every car and truck it makes.

In one year's time, short term borrowing and interest on long term debt has gone up by $2 billion per quarter, $8 billion per year!

I urge you to BLOCK any bailout for the Auto companies. Any bailout effort would be a further waste of my hard earned money.

Your Name
Your Email Address
When writing your own rep, put in your address and phone number.

[Drewbacca]

The domestics are only suffering due to heavy legacy and benefits costs. To axe those in a bankruptcy would turn over these costs to some one else (the government is most likely). So Uncle Sam spends a little upfront to try and keep from having to fund the domestic legacy costs.

You're simplifying the matter way too much and making a big mistake in the process. The domestics aren't ONLY suffering due to heavy benefits and scuzzy unions refusing to take pay cuts. They're dying because they produce cars that don't hold up very well past 120k when there's a bunch of oriental brands that refused to die after 500k easy.

There are fundamental business and strategy problems with the American auto makers that are going to kill them regardless of whether or not they get a bailout for their debt. And it shouldn't be the people's problem that they fucked up.

Obviously the crux here is that automakers will be out of jobs in mass quantities for a time (not to mention their suppliers, agencies and even things like trucking companies that deliver GM parts around). But the thing is the market should be wide open for better, new companies to take its place or GM and Ford will bounce back after a time. It's a grim scenario for awhile, but you'll get over it.

[Gohron]

Because they were on track to turn around? Their new shit hadn't kicked in before Wall Street fucked us? They're asking for very little in the grand scheme of things? A large portion of our manufacturing will vanish? Millions out of work? Millions of people climbing on board medicaid and other forms of welfare?

I could go on but as it stands it's pay hell now or pay hell later. When an economy is fragile you try to help your giant companies NOT add to the problem.

Besides assuming their turn around works then they'll pay the shit back with interest. If it doesn't? Well what's a few billion more thrown into the fire right now?

The only reason these companies would truly turn around is because of consumer ignorance. Any void created by layoffs and drop offs in manufacturing would likely be replaced by foreign car companies. There's definately negatives when it comes to letting this companies drop off a bit, but they dug their own graves.

What we should do is put all these ignorant assholes, who started this mess in the first place by agreeing to loans they didn't understand or couldn't pay, to work for the government to raise the funds to help make the economy better. The lenders didn't help, but there wouldn't be a problem if the average stupidity of Americans didn't fall into these traps.

[Bojack]

You're simplifying the matter way too much and making a big mistake in the process. The domestics aren't ONLY suffering due to heavy benefits and scuzzy unions refusing to take pay cuts. They're dying because they produce cars that don't hold up very well past 120k when there's a bunch of oriental brands that refused to die after 500k easy.

There are fundamental business and strategy problems with the American auto makers that are going to kill them regardless of whether or not they get a bailout for their debt. And it shouldn't be the people's problem that they fucked up.

Obviously the crux here is that automakers will be out of jobs in mass quantities for a time (not to mention their suppliers, agencies and even things like trucking companies that deliver GM parts around). But the thing is the market should be wide open for better, new companies to take its place or GM and Ford will bounce back after a time. It's a grim scenario for awhile, but you'll get over it.

I don't oversimplify the auto industry. Saying the domestics dug their own grave is oversimplifying. And it shouldn't be the people's problem they fucked up but it will become our problem if they fail. They've made mistakes, but now they're busting ass to fix them.

No, the market would shit on itself. Both domestics and domestically produced transplants would have some serious issues. Suppliers of both sides have a good chance of failing hindering the foreign companies. The foreigners already have plants that until recent were running at near full capacity. There will not be an immediate influx of import cars to fill in the void of like 8 million domestics (yes they STILL sell shitloads of cars) that vanish. The only way that would occurr is if foreign companies buy out US factories outright to essentially slap T's and H's onto Focii and Cobalts. I supposed that independent investors could try to fire up the factory lines again but how much of a chance would they have against people that can't get off foreign nutsacks? Cerberus tried to prove that they would/could fix Chryslers problems (or at least strip and flip) but they're getting torn up in the process.

Meanwhile,

Ze Germans

The Japanese

Other countries HELP their industries. I'm still waiting for some one to show me how America helps its own industries (aside from Farm subsidies, Wall Street bailouts, and big oil) because I'm hoping that we at least help some of our industries against foreign comp. Our auto companies ask for some help and people shit themselves over the idea. This wouldn't be an issue except our domestics are expected to ace the comp that is in a much better position for a variety of reasons that don't have that much to do with product.

The funny thing is that I have (and I know anecdotal evidence is weak) owned many domestics with out major issues well into the 6 digit odometers and I know many others. That modern domestics are as shitty as Vegas and Granadas is a farce. Quality is evening out big time amongst all manufactures, even the domestics vs. imports.

[icarusfall]

Focii

I lol'd a little.