Archive for 2008

GM, Chrysler, News

More on GM, Chrysler in Canada, and U.S. Republicans, and ideology vs. being practical, courtesy of Stormy at Angry Bear.  

GM, Chrysler in Canada--News on the CBC

By Stormy

Even the conservative Harper goverment of Canada is having difficulty abandoning ideology for good old fashion pragmatism, something the Republicans in the U.S. have yet to learn. GM and Chrysler’s possible implosion affects both countries in terms large numbers of jobs.

Tony Clement, Harper’s minister of Industry, is still in "studying the problem mode," collecting information. Nonetheless, he is concerned--as is the CBC news media.

Canadian car sales are down. A lot of jobs are at stake. The Big Three were not prepared for the 21st century. In Canada, Chrysler is building muscle cars--not exactly what is needed.

Like U.S. Republicans, Canadian conservatives are wed to free market ideology. But a melt down of the auto industry challenges such ideology. Pragmatism may rule in Canadian. Such pragmatism may distinguish Canadian versus American conservatism. Canadian conservatives will think outside the box, when they are forced to.

Right now, Republicans are toeing the ideological line. They are, however, running a huge political risk if GM and or Chrysler go under before Obama takes office.

Tony Clement is well aware that the auto industry must transform itself.

Unfortunately, it needs time to do so, but it certainly is in no position to re-tool quickly, to about-face and to march to a more intelligent drummer. It needs to get over the present hurdle.

Obama has talked of an auto czar; Conservatives in Canada would most probably follow suit. They are watching carefully to see how the Americans jump.

See also "Showdown looming in Congress over automaker rescue."

 





Turning Japanese

Tim Iacono asks "are we Turning Japanese?" and concludes, that yes, we are,…  I really think so (music below).  

Turning Japanese I really think so

Courtesy of Tim Iacono at The Mess That Greenspan Made.

As most of you probably already know, with the "effective" Fed funds rate much closer to zero percent than to the one percent prescribed by the "target" short-term rate , the Federal Reserve has already edged closer than ever before to a dreaded ZIRP (zero interest rate policy).

A ZIRP really isn’t that bad, unless of course you’re a saver, in which case the disparity between "real-world" inflation and the numbers concocted by governments in their "official" version of the same will end up eating you alive over time.

For banks and hedge funds, ZIRPs are great because they’re a cheap source of funding for all kinds of wild speculative bets that are bound to inflate another asset class eventually.

As discussed in this report in The Economist, we are turning Japanese: 

REMEMBER Japan’s zero interest rates? America is almost there too. Since October 29th, the target for the federal funds rate has been at 1%, but the rate at which funds actually change hands, known as the “effective rate”, has averaged around 0.25% (see chart).

The Federal Reserve does not always hit its target on the nose but the size of the gap is extraordinary. If it persists, any decision to lower the target further would be meaningless since it would not affect the rate banks actually pay.

Normally, the Fed keeps the funds rate on target by draining from or adding to the reserves that the banks hold with it. But the Fed has extended huge loans to banks and others to loosen up the credit markets, creating more reserves than it can drain. So to keep the fed funds rate up, it has, since November 6th, been paying interest on excess reserves at the full target rate of 1%.

Even so, the effective rate remains stubbornly low. One explanation is that the quasi-governmental home-loan banks and mortgage agencies have been lending to banks at rock-bottom rates. Another is that there are so few transactions that the effective rate has become an imprecise gauge.

The irony is that, were the gap to disappear, there would be


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Words from the Wise





GM–Pro and Con

Following up on the GM dilemma at Angry Bear, by Stormy

GM--Pro and Con

By Stormy

(Bow to Movie Guy)

Apparently, GM may have to file Chapter 7 bankruptcy, meaning that it will be forced into liquidation, not reorganization. GM is asking for a government for loan of $25 billion to see them through "its worst sales slump in more than 25 years." According to Bloomberg, if GM fails, Ford and Chrysler will quickly be next. Again, according to Bloomberg, total loans are in the neighborhood of $50 billion.

To understand the gravity of the problem, we should ask a number of questions.

What are the consequences of GM--or the Big Three-- being forced into liquidation?

The collapse of the big three would eliminate three million jobs. For the sake of argument, let’s say the loss of just GM means the loss of one million jobs. The repercussion to the economy are incalculable. Are we willing to lose that many jobs suddenly, within the space of one or two years?

Can GM and the Big Three be helped? If they have enough time, yes. Even if they have to shrink and retool, they can do so gradually.

Who is opposed of helping them and why? As far as I can tell, opponents fall into categories:

  1. Those who are simply angry. These include those who have had enough of bailouts, those who are angry with the auto industry for its SUV’s….
  2. Republicans who argue that the financial package was not intended for the likes of GM
  3. Those who argue that bailouts breed more bailouts, rewarding poor management and worse.

Who is in favor of helping them and why?

Obama and many Democrats who argue that collapse of GM would wreck almost irreparable harm to the economy. The problem, they say, is time. The longer we wait--even if until January--, the more intractable and more costly the problem will become.

Obama aids are reported to have said that one condition of any loans will be the appointment of an auto czar to oversee the companies. Such a move now requires the approval of President Bush. (Bush recently offered to support the plan if Democrats would support a free trade agreement with Columbia. That kind of horse trading boggles the mind.)…
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Mirabile Dictu!

Conflicting stories – when did Paulson know, or suspect, he was going to change the nature of the TARP?

Mirabile Dictu! Congress is Mad at Paulson for Lying!

By Yves Smith, at Naked Capitalism.

Excerpt:

"It is remarkable (and admittedly late, but late is better than never) that Congress is developing a spine and pushing back at Hank Paulson’s unprecedented land grab. Even better they got mad at something that made your humble blogger nuts. Trust me, I am highly confident that no Congressional aide picked up on the issue via this blog, but you did have to be paying attention to catch Paulson’s dishonesty, and to their credit, they took notice.

Of course, this is all part of a larger Kabuki drama. Paulson is insisting that Congress release the remaining $350 billion of the now-misnamed Troubled Assets Repurchase Program so he can hand out more cash to his industry buddies. Congress will be damned if it gives Treasury any more money, given that the funds have so clearly been dispensed with no controls to favored parties. But since they don’t dare say the taxpayer has been ripped off (that would call their judgment into question for acquiescing to the hastily drafted and aggressively sold TARP), they will pound on Treasury as many ways as they can.

But this is a central issue. Paulson was brazen enough to say that he had misrepresented his intentions while the bill was still being renegotiated. From our earlier post, "Paulson Now Admits Mendacity."…  From the text of Paulson’s remarks today (boldface ours):

"During the two weeks that Congress considered the legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks."

Either way you cut this, it’s a lie. Either Paulson let his intentions be misrepresented via his silence, or he is now falsely claiming


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Being WRONG is the Problem!

Here’s a rant by Howard Lindzon, with the supportive video to go with. He’s a bit harsh (I’ve been wrong plenty and don’t want to go Iceland), but there’s no denying that Peter Schiff’s predictions were right on. 

Being WRONG is the Problem!

Too much energy is spent and too many accolades are given to those that are ‘right’. Lot’s of people were right calling for a nasty recession. Most of them are still broke or down 40 percent. You can’t say you were ‘right’ if you called for a tsunami and than it smacked you and your family in the face as you watced it coming from the back porch.

It is one of the biggest problems in our society that NOBODY talks about, but we need to ship OUT all the idiots that are just ‘wrong’. Send them to Iceland to rebuild.

Let’s focus on losing the real dummies to get back on track.

In the economics world, two idiots that get more ‘air’ time than Jake and Josh and must be stopped – Arthur Laffer and Ben Stein. They must be stopped. Nincompoops.

CNBC is an accomplice to these crimes and should have the chords pulled as well:

 

 





How to Ground The Street

This is an article by Eliot L. Spitzer, in the Washington Post, explaining why misconceptions about capitalism and free markets have lead – predictably – to Enrons and the financial system’s meltdown.  This is my favorite quote, and key concept: 

"A market doesn’t exist in a vacuum. Rather, a market is a product of laws, rules and enforcement. It needs transparency, capital requirements and fidelity to fiduciary duty. The alternative, as we are seeing, is anarchy."

How to Ground The Street

The Former ‘Enforcer’ On the Best Way to Keep Financial Markets in Check.

Excerpt (read the full article here).

President-elect Barack Obama will soon face the extraordinary task of saving capitalism from its own excesses, much as Franklin D. Roosevelt had to do 76 years ago. Up until this point in the crisis, policymakers have appropriately applied the rules of triage — Band-Aids and tourniquets, then radical surgery — to keep the global financial system alive. Capital infusions, bailouts, mega-mergers, government guarantees of unimaginable proportions — all have been sought and supported by officials and corporate chief executives who had until now opposed any government participation in the marketplace. But put aside for the moment the ideological cartwheel we have seen and look at the big picture: The rules of modern capitalism have been re-written before our eyes.

The new president’s team must soon get to the root causes of the mistakes that have brought us to the economic precipice. Yes, we have all derided the explosion of leverage, the failure to regulate derivatives, the flood of subprime lending that was bound to default and the excesses of CEO compensation. But these are all mere manifestations of three deeper structural problems that require greater attention: misconceptions about what a "free market" really is, a continuing breakdown in corporate governance and an antiquated and incoherent federal financial regulatory framework.

First, we must confront head-on the pervasive misunderstanding of what constitutes a "free market." For long stretches of the past 30 years, too many Americans fell prey to the ideology that a free market requires nearly complete deregulation of banks and other financial institutions and a government with a hands-off approach to enforcement. "We can regulate ourselves," the mantra went.

Those of us who raised red flags about this were scoffed


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Prescription Drugs and Americans

Interesting.  Rdan at Angry Bear notes that prescription drug use is causing more deaths than illegal drugs in Florida.  

Prescription drugs and Americans 

by rdan

NaturalNews: A report by the Florida Medical Examiners Commission has concluded that prescription drugs have outstripped illegal drugs as a cause of death.

An analysis of 168,900 autopsies conducted in Florida in 2007 found that three times as many people were killed by legal drugs as by cocaine, heroin and all methamphetamines put together. According to state law enforcement officials, this is a sign of a burgeoning prescription drug abuse problem.

"The abuse has reached epidemic proportions," said Lisa McElhaney, a sergeant in the pharmaceutical drug diversion unit of the Broward County Sheriff’s Office. "It’s just explosive."

In 2007, cocaine was responsible for 843 deaths, heroin for 121, methamphetamines for 25 and marijuana for zero, for a total of 989 deaths. In contrast, 2,328 people were killed by opioid painkillers, including Vicodin and Oxycontin, and 743 were killed by drugs containing benzodiazepine, including the depressants Valium and Xanax.

Alcohol directly caused 466 deaths, but was found in the bodies of 4,179 cadavers in all.

While the number of dead bodies containing heroin jumped 14 percent from the prior year, to a total of 110, the number of deaths influenced by the painkiller oxycodone increased by 36 percent, to a total of 1,253.

Across the country, prescription drugs have become an increasingly popular alternative to the more difficult to acquire illegal drugs. Even as illegal drug use among teenagers have fallen, prescription drug abuse has increased. For example, while 4 percent of U.S. 12th graders were using Oxycontin in 2002, by 2005 that number had increased to 5.5 percent.

It’s not hard for teens to come by prescription drugs, according to Sgt. Tracy Busby, supervisor of the Calaveras County, Calif., Sheriff’s Office narcotics unit.

"You go to every medicine cabinet in the county, and I bet you’re going to find some sort of prescription medicine in 95 percent of them," he said.

I could not access the Florida Examiners report this morning, but it is a topic worth keeping an eye one. Will it get worse, or is Florida a special case?

My Comment:  I
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Cost of GM Collapse

Here’s a Bloomberg article discussing the price of different courses of action regarding General Motors. 

GM Collapse at $200 Billion Would Exceed Bailout Tab, Firm Says

By Alex Ortolani and Mike Ramsey

Excerpt: 

General Motors Corp., burning through cash as sales slump, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean “more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,” Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh’s projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers.

Included in the Global Insight estimate, which Behravesh supplied to Bloomberg News, are the anticipated costs for existing programs, such as unemployment insurance, and new measures that the economist said would be needed to revive economic growth after millions of auto-related job losses.

A GM shutdown would wipe out jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent, Behravesh said.

`Significantly Short’

GM said Nov. 7 it may not have enough operating cash by year’s end, and would be “significantly short” of its needs by June unless it adds capital or the U.S. auto market recovers from its worst sales year since 1991. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.

While some investors including Wilbur Ross say a GM bankruptcy would be a “real mess” that would end in liquidation, others such as hedge-fund manager William Ackman say there is no need for taxpayer funds and that GM should reorganize in court.

“A bankruptcy wouldn’t address our immediate liquidity concerns,” said Renee Rashid-Merem, a GM spokeswoman. “It’s not an option for GM because it creates more problems than


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Budget Meltdowns

Courtesy of Michael J. Panzner, at Financial Armageddon

State and Local Budget Meltdown

During the good times, few state and local governments thought about what might happen if it all went wrong.

Polticians and policymakers failed to anticipate an inevitable bursting of history’s greatest housing bubble. They did not foresee an end to the debt-fueled hyper-binge of consumer spending. They skimped on essential maintenance and infrastructure replacement projects and, instead, bought peace (and votes) from public employees with unaffordable pensions, wages and fringe benefits.

Now, though, it is all coming home to roost. In an article entitled "State Budget Troubles Worsen," the nonpartisan Center on Budget and Policy Priorities details a rapidly deteriorating state of affairs that should not have been a surprise to, well, anyone.

States are facing a great fiscal crisis.  At least 41 states faced or are facing shortfalls in their budgets for this and/or next year.  Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states.   Now, their budgets have fallen out of balance again.  New gaps have opened up in the budgets of at least 31 states plus the District of Columbia just four months after they struggled to close the largest budget shortfalls seen since the recession of 2001.  And these problems are expected to continue into next year.

Current estimates are that mid-year gaps total $24.3 billion — 6.6 percent of the budgets of the 29 states that have estimated the size of the gap — but they will almost certainly widen as the continuing economic turmoil causes revenues to come in below estimates in more states.

The 31 states facing mid-year shortfalls are Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, and Wisconsin.  In addition, the District of Columbia faces a budget shortfall.  These budget gaps are in addition to the shortfalls that these and other states faced as they adopted their budgets for the current fiscal year.  At that time, 29 states faced a total of more than $48 billion in combined shortfalls.

9-8-08sfp-f1

Click here to read the rest. 

 





 
 
 

Zero Hedge

Americans' Economic Hope Has Collapsed

Courtesy of ZeroHedge. View original post here.

Which came first, the confidence or the stock market rally?

One thing is for sure, the crash in stocks in December has crushed the hope of Americans that their economic future is going to be better under President Trump.

Overall confidence dipped to 58.1 - a 4-month low, but, U.S. consumers this month were the most downbeat on the economy since November 2016, a third straight drop after expectations reached a 16-year high just three months earlier, as the partial government shutdown wears on toward a fourth week.

...



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Kimble Charting Solutions

Triple Breakout Test In Play For S&P 500!

Courtesy of Chris Kimble.

Is the rally of late about to run out of steam or is a major breakout about to take place in the S&P 500? What happens at current prices should go a long way in determining this question.

This chart looks at the equal weight S&P 500 ETF (RSP) on a daily basis over the past 15-months.

The rally from the lows on Christmas Eve has RSP testing the top of a newly formed falling channel while testing the underneath side of the 2018 trading range and its falling 50-day moving average at (1).

At this time RPS is facing a triple resistance test. Wil...



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Phil's Favorites

Brexit deal flops, Theresa May survives -- so what happens now?

 

Brexit deal flops, Theresa May survives -- so what happens now?

Courtesy of Victoria Honeyman, University of Leeds

As the clock ticks down to March 29 2019, all of the political manoeuvring, negotiating, arguing and fighting is coming to a peak. In the two and a half years since the 2016 EU referendum, views on both sides have hardened and agreement still seems as far away as it was the day after the referendum.

With Theresa May’s withdrawal agreement disliked by all sides, and voted down by an unprecedented majority in the House of Commons, everyone is wondering what can and should be done next?

...



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Digital Currencies

Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?

Courtesy of Michelle Jones via ValueWalk.com

The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000... so is this a sign that the crypto market is about to recover?

Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.

A year after the cryptocurrency bubble popped

CCN...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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