Unwinding the Fantasy Trade

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Stocks plunged after the open today on the Chicago Purchasing Managers report which indicated contraction in the largest manufacturing region of the U.S. Also this morning, commercial lender CIT, one of the largest sources of loans in the U.S. for small and midsized business, is on the verge of collapse. The company has received $5.3 billion in federal bailout money so far... and even after that, it is still having trouble staying afloat (it will be the fifth biggest bankruptcy in U.S. history if it goes under). Yesterday's September Consumer Confidence number fell instead of going up as economists predicted. Added to all this, the FDIC board voted to ask solvent banks to pre-pay the next three years of their insurance premiums so its deposit insurance fund won't run out of money. Just more evidence of how well the banking system has been 'stabilized' and how well the economic 'recovery' is doing.

The 4th quarter begins tomorrow and the first four trading days should give us a good indication about whether or not the big money will be selling stocks. A net drop in stock prices during this period will be negative going forward. The rally that has taken place since March has a typical bear market pattern to it. In the case of the Dow and S&P 500 it just shot straight up without any basing pattern forming. The rally that followed the 2000 to 2002 sell off, had a ten-month base and this is what allowed it to continue for several years. Stocks have also reached historically overbought levels based on the percentage of stocks trading above their 200-day moving average (the definition of a rally). This reached 95% on the NYSE. Previously a number in the low 70's would have been enough to create a top. While stocks have skyrocketed, Nasdaq up 68%, S&P 500 up 57% and the Dow up nearly 50%, volume has not. Volume on the Dow has continually declined during the entire rally - a very bearish pattern. Even worse a handful of junk financials, traded mostly by computer, have accounted for a large percentage of overall NYSE volume.

Stocks, and bonds as well, have had spectacular rallies because the monetary authorities have pumped an unprecedented amount of money (a lot of it newly printed) into the financial system. The U.S. government additionally changed its accounting rules and this magically made the close to worthless subprime debt held by financial companies worth a lot more overnight. The rising prices of stocks and bonds that followed have been used as evidence that the economy is recovering and along with the accounting rule changes allowed banks and brokers to report significant, but illusory, profits last quarter. The IMF has helped perpetuate this financial fantasy in a just released report that estimates that bank's losses from the Credit Crisis will only be $3.4 trillion now instead of a previously estimated $4 trillion. The logic behind their reasoning? Stock and bond prices have gone up! The IMF is still willing to admit however that U.S. banks have yet to recognize 40% of their losses and UK and euro zone banks 60% of their losses from the Credit Crisis. It warned that monetary policy makers had better consider this before deciding to withdraw the massive stimulus programs that are currently in place.

Government stimulus can only work so long in keeping stock prices up. The Japanese found this out in the 1990s and early 2000s. The Nikkei had more than one spectacular rally, but each time the rally failed because stimulus programs ended or were eventually cut back. New stimulus programs were then created and the cycle began all over again. The one thing the Japanese didn't do was fix the underlying problems with their banking system. The U.S. has not done so either and until this happens, the government can produce all the economic 'recoveries' it wants to, but they won't last. What will last is the inflation caused by all the money printing needed to produce the recoveries.

NEXT: If You Ignore the Facts, Things Are Good

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Gold, Oil, Dollar and Market Update

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Gold and silver had sharp sell offs this morning, while the dollar rallied. If you believe the press reports (and in general, you shouldn't), gold and silver sold off because the dollar was rallying. The dollar was supposedly rallying because of bad figures on Eurozone industrial production. Are they likely to be worse than the U.S. production figures after GM's bankruptcy (production is being closed down during the summer)? Probably not. If you look, you will see despite the screaming headlines the dollar was not up that much. As of now, the trade-weighted dollar is trading at 80.07, up from yesterday's close of 79.36. The breakdown point is 78.33.

The drop in gold and silver is more than overdone. Gold closed strongly yesterday at $962. Optimism for the U.S. dollar is also being fueled because the treasury auction went well this week and there was supposedly heavy demand for long-term U.S. treasuries from foreign buyers (I had difficulty not laughing as I wrote that last statement). What outrageous claims will the government make next? For those not paying attention, interest rates on the 10-year bond hit 4% yesterday, double the low of 2%. Not exactly and indication that these bonds are experiencing increasing demand relative to supply (interest rates would be falling if this was true, looks to me like they doubled).

Oil was over 73 yesterday and I began taking some profits in ERX and to a lesser extent DXO. The oil rally has been going on four months now and seems to be losing steam as we approach major resistance around 77. Stocks are likely to get into trouble when the S&P gets to 1000. Resistance is very strong at that point. When you have large profits, its always a good idea to take some money off the table.

For those who don't want to hold U.S. dollars, there are a lot more options in ETFs than there used to be. While we have mentioned FXA and FXC (the Australian and Canadian dollar ETFs) previously, you can now buy New Zealand (BNZ) dollars as well. You can even buy emerging market currencies such as the Brazilian Real (BZF). For a more complex trade, you can consider DBV. This ETF is double long the three G20 currencies with the highest interest rate and simultaneously short the three currencies with the lowest interest rate.

NEXT: G8 Hot Air Inflates Dollar

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21


This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

GM Bankruptcy End of an Era; Oil Rally Continues

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

GM will declare bankruptcy this morning, striking a major blow to the prestige of American manufacturing. This is one more step, and a major one at that, in the end of the economic dominance of the U.S. In the future, historians will look back and cite this as a key event that represented a turning point and a significant failure in U.S. policy. GM is the largest industrial bankruptcy in American history. The new 'improved' GM that emerges from bankruptcy will be a socialized company with the federal government owning 60%. The government will be paying for its stake with $30 billion of newly printed money under the TARP program.

GM's bankruptcy is not an isolated event, but will be taking down a host of associated companies and this will have ripple effects throughout the economy. Two parts suppliers already filed for bankruptcy on Friday. The first major dealership, Chevrolet-Saturn, of Harlem, declared bankruptcy this morning, expect many more to follow. The problems are not limited to the U.S. either. There are apparently over 100 Japanese companies that have significant exposure to GM. There could be quite a few in other countries as well (I am sure they will all be delighted to do business with U.S. manufacturing firms in the future). The company will cut 21,000 employees or 34% of its work force during a time of rapidly rising unemployment, reduce dealerships by 2600 and close 11 manufacturing facilities.

Markets in Asia last night and Europe this morning were rallying. U.S. stock futures are up a the moment in the pre-market. Oil broke over $68 a barrel last night, breaking through resistance at 67. It was recently trading at 67.69 in mid-morning European trading. Once oil can hold above 67, the next stop is chart resistance at 70, which was the top during hurricane Katrina. Gold was as high as 988 and silver was in the 15.80s pre-market, both close to major breakout points. Silver is overextended on the technicals however, so it should have trouble getting to and staying above 16 at the moment. The trade-weighted U.S. dollar was priced at 78.79 this morning and is in danger of a major breakdown. There should be at attempt on the part of the authorities to try to save it, which might work for awhile and cause a temporary pause in the rise of gold and silver. It will be interesting to see how this plays out.

Markets which are bullish tend to go up the first few trading days of the month (and down when they are they are bearish). While oil, gold and silver look like they are in good shape, so do stocks for the moment. Nasdaq traded convincingly above its 200-day moving average four days last week (as this blog predicted it would). The Dow and S&P are both about to hit this line though and this will lead to stickiness at the very least. A failure of the stock rally is possible at this point, but that is by no means definite. The next week or two will be a key period for all markets which should tell us a lot.

NEXT: So Far This Doesn't Look Like a Top

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21


This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Oil Takes Gas, Silver's Shining Moment, GM Watch

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

The oil inventory report was delayed this week and it was bullish big time for the third week in a row. The natural gas report was just better than expectations, but even this minimal accomplishment proved a combustible mix that caused UNG (the natural gas ETF) to shoot upward. SLV (the silver ETF) traded over 15.00 this morning, removing all doubt that a breakout has taken place from strong resistance around 14.50. News reports are indicating that some progress is being made with GM bondholders in a last minute effort to avert the largest industrial bankruptcy in the history of the United States.

Analysts expected that U.S. oil inventories would rise 1.8 million barrels last week. Boy did they get a surprise! Inventories fell by 5.4 million barrels. Gasoline, the major use for oil during the summer months, had 600,000 less barrels in storage. Year over year U.S. gasoline demand is down only 1.2% despite the troubled economy, yet oil is still 47% off of last year's high. Despite dropping supply and the barely lower demand for gasoline compared to the much lower price of oil, you can still find bearish comments on oil in media coverage. Our favorite oil ETF, DXO, has continually told an opposite tale however - and when in doubt, the market is always right. DXO broke above 4.00 today and should be heading higher until light sweet crude reaches at least $75 a barrel. Triple leveraged energy company ETF, ERX, is having an even better day after consolidation around support between 29 and 30 level.

While oil may have only a month or so left of its rally (frequently when the most money is made), natural gas is still putting in its bottom and I have been accumulating UNG since it fell back to the low 14's. Unlike oil, the fundamentals of natural gas are indeed negative and have been for a long time. Moreover, the favorable seasonal for natural gas can begin as late as July as opposed to February for oil. The peak is most likely in late October, early November, while oil statistically peaks in early August. This week, analysts expected U.S. storage of natural gas to increase 111 bcfs (billion cubic feet), but the increase came in at only 106 bcfs. In a heavily shorted market, that was enough to generate a big move up.

In the precious metals, SLV trading above 15.00 today was quite impressive. At the moment silver is doing better than gold, but it has a lot of catch up to do. Gold is only 4% off its recent highs of 1000, while silver is about 30% lower than it previous high around 21. SLV has another point of resistance at 16. After that, SLV testing 21 is almost certain.

Some progress seems to have been made with GM bondholders this morning. It is still too early to tell if this will come to fruition. Whether or not GM declares bankruptcy (allowing this to happen will be one of the biggest economic mistakes that the U.S. government has ever made) is obviously going to go down to the wire. The stock has not fallen below a $1.00 today however and is actually up 10% at the moment. When the market thinks a company is going bankrupt, it pushes its price into the penny level. Watch to see if this happens. While a GM bankruptcy will weigh on the market, the avoidance of bankruptcy would cause a big rally next week.

NEXT: Silver, Oil , Gold - Market Screams Inflation

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

GM Saga Continues; Gold Becomes the New Oil

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

This is the last week for GM to arrange a deal with its bondholders in order to avoid bankruptcy - and things don't look good at the moment. While this has been weighing on the market for some time, it didn't prevent a huge rally yesterday that saw the Nasdaq zoom and close well above its 200-day moving average. This picture would be extremely bullish, if volume had been heavy instead of just average. Gold and silver were down slightly in the stock rally and this was odd behavior to say the least considering the Korean nuclear test. News coverage on the precious metals is beginning to resemble the negative coverage that oil experienced from February to just recently. Oil wound up basically flat on the day Tuesday, but was as high as $63.45 in European trading this morning. Look for $67.00 as the next resistance.

What has been going on with GM in the last few months highlights the extent of recent government incompetence in handling the U.S. economy. Federal policy from the last several presidential administrations has undermined our industrial base and built up the FIRE (Fire Insurance Real Estate) economy to replace lost manufacturing. Obama claims he wants to restore the balance. Unfortunately, none of his actions support his rhetoric. GM, which is the first major opportunity to help revive U.S production, has been handled disastrously. The Obama administration has interfered with the operations of the company as if somehow they know more about how to run a large industrial enterprise than people in the industry. They don't. While GM has been poorly managed for decades, it is still run better than the U.S. government.

Furthermore Obama's people have made demands that are improper and unlikely to be met in order for GM to get more bailout funds. No such demands were made on any financial institution that received TARP funds. While the unions have been more than cooperative, the unsecured bondholders have balked about accepting equity in exchange for their holdings. This was inevitable since they would be entitled to more in a bankruptcy, either through distribution of assets or by cashing in their credit default swaps - an action that would cost the financial companies receiving TARP funds a lot of money. Trying to force bond holders to accept equity is also an attempt to violate their rights under law. Who would want to lend capital in a country that does this? If the Obama people sat down in a room and tried to figure out an economic policy that would lose in the short term, lose in the intermediate term, and lose in the long term, they couldn't have done any better.

Lack of confidence, along with the massive money-printing operations of the major central banks, will continue to drive up the price of gold and silver. Don't expect to hear this from the mainstream media however. Some tidbits from today: 'Gold off for second day amid broad metals selling' (gold was down $2.20, a minor intra-day blip); 'The strong dollar has sapped some of the resilience that gold has been showing' (a quote from someone who has a $600 price target on gold and has been wrong about the price direction of gold for months, but that's not mentioned in the article and doesn't keep the media from quoting him); and 'silver skidded 4.5 cents' (but was still above the key breakout level of $14.50). I also particularly liked the coverage in the Wall Street Journal yesterday that said 'gold could go to a $1000 by the end of the year'. Now that's an earth shattering prediction. And to think investors who get their information from the media have trouble making money in the markets. I can't imagine why.

NEXT: Oil Takes Gas, Silver's Shining Moment, GM Watch

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Market At Key Resistance; Scamdemic Update

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

While it looks like Chrysler declaring bankruptcy weighed on the market yesterday, the selling from the intraday highs has a technical explanation. During the day, the Nasdaq reached 1753, almost hitting its 200-day moving average of 1756. This is always an important resistance point in any bear market rally. The Dow itself traded as high as 8307, a price where there is significant chart resistance. While some selling should be expected soon because the market usually can't just break through strong resistance immediately, I think the Nasdaq will manage to break above its 200-day after awhile and the current rally will last until the Dow and S&P 500 reach theirs. As of today, the Dow's 200-day is at 9077 and the S&P 500's is at 964 (the S&P's high yesterday was 889). All the 200-day's are falling, so you need to check where they are every now and then.

One thing that has not made the market go down, to its credit, is the mainstream media misinformation campaign about the current swine flu outbreak. While any rational assessment indicates that this is much ado about nothing and this version of flu is probably the least serious that ever existed, health care officials from WHO, the U.S. Health and Human Services, the CDC and the New York Health Department have done everything possible to fan the flames of hysteria and engender panic among the global populace. The media has been a more than willing accomplice in this endeavor. Moreover, this is not the first time this has happened. There was also a major swine flu scare in 1976 created by the U.S. government. That epidemic never materialized.

Having much experience deconstructing investing news for its intent to mislead the reader, it was easy to see immediately that the supposed dire situation with the current swine flu outbreak was all a bunch of hype. Let's examine the actual facts of what is taking place:

1. No one outside of Mexico has died from this disease. The one case of a death reported in the U.S. was for a toddler who was a resident of Mexico City and was brought to the U.S. Furthermore, he had other significant underlying health problems that the medical authorities refuse to reveal. Did he die from those instead of the flu? Quite possibly.
2. As for the supposed deaths in Mexico from swine flu, which is the basis for the pandemic panic, the evidence doesn't support media reporting. Almost from the beginning, the media reported 160 'suspected' deaths (sometimes the word suspected got left out). The figures as of this morning indicate that only 300 cases of swine flu have been confirmed by viral typing in Mexico (less than half of suspected cases turned out to be swine flu). Of these, only 7 people have died. What other medical conditions these seven had that might have contributed to their deaths is unknown and probably will remain so.
3. The danger of contagion seems to be minimal as well. Mexican health workers have so far found only 2 cases of family members of suspected and actual swine flu sufferers who have tested positive for type A influenza (this doesn't mean they have swine flu, but they could).
4. As of yesterday, the CDC had confirmed only 109 cases of swine flu in the U.S. The number of cases plateaued fairly quickly. The average sufferer has had relatively mild symptoms for a case of the flu and has recovered quickly.
5. The U.S. government has committed $1.5 billion of taxpayer money to handle this 'dire' emergency. So someone's getting rich off of it.
6. Based on the actual evidence (not supposition) so far, it looks like you are more likely to be hit by a bus than to get swine flu. Even if you got swine flu, it seems much less risky that the usual varieties of flu that we are exposed to on a regular basis.

While a certain percentage of the public has panicked over swine flu, most people have ignored the hysteria the government officials and the mainstream media are trying to foment. The credibility of both continue to sink - as they should. Perhaps the public is more worried about the gross mishandling of the economy by the powers that be and refuses to be distracted. Unlike swine flu, that's a problem that's not going to go away.

NEXT: Swine Flu Update - Government Scamdemic and the Credit Crisis

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Tribune Bankruptcy Has it All

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

Only minutes ago the Tribune filed for bankruptcy. The failure of the Tribune contains within it a multiplicity of elements from the credit crisis, the economy, and the failure of mass media to adequately inform the public of both. According to its filings, the owner of the Chicago Tribune and the Los Angeles Times has $13 billion in debt, but only $7.6 billion in assets. Under such circumstances, it is not surprising that it sought bankruptcy protection, but that it managed to avoid doing so for so long. This leads to the obvious question of just how many other U.S. companies have similar finances that are so precarious that it is inevitable that they will go under? Probably quite a few.

The Tribune was taken private under one of the many private equity deals that took place during the low interest rate fueled credit bubble. Just like subprime borrowers for homes, the company was loaded up with debt that could never be successfully paid back if future circumstances proved to be anything less than rosy. And less than rosy certainly describes the recent history of events impacting the Tribune. The current recession, denied until this month by the U.S. government, has caused a dramatic decline during the last year in all of the Tribune's advertising categories (the source of most income for mass media outlets in the U.S.). The credit crisis makes it impossible for the Tribune, as well as all other companies in similar circumstances, to get out from under the stranglehold of debt that it took on earlier in the decade.

Who are the financial geniuses that are the Tribune's creditors? The usual list of Wall Street's who's who of course. The Tribune's biggest unsecured creditors are its lenders, JPMorgan Chase and Merrill Lynch. Others include Deutsche Bank, New York-based investment management firm Angelo Gordon, hedge fund Highland Capital Management and Goldman Sachs Group. Barclays Capital., which bought key assets from bankrupt Lehman Brothers, is also among Tribune's creditors, with about $142.9 million in interest rate swaps (boy, it was a real bargain picking up those assets). Other outlets in the incestuous mass media business are also on the hook, including Warner Bros. Television, Twentieth Television, Buena Vista Entertainment, and NBC Universal Domestic Television. It can not be ruled out that the Tribune's failure will set off a chain reaction of bankruptcies in the industry.

In a broader sense, there is much more of an object lesson from the Tribune's financial difficulties than that dubious lending practices permeated Wall Street (not exactly a new idea at this point). The lack of responsible reporting on the events that led to the credit crisis, giving an outlet to the Wall Street Pollyanna chorus that denied that the problems were serious and which claimed over and over again that they would soon go away, and not looking into the U.S. government's cover up of the current recession with manipulated economic statistics are how the big news outlet have handled things of late. The tribune itself seems to have been victimized by the web of denial that the U.S. mass media fostered on the American public. Poetic justice perhaps?

NEXT: The Latest Washington Free Lunches

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Auto-Asphyxiation - GM, Ford Gasp for Bailout

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

No industry better symbolizes 20th century American commerce and culture than does autos. It was in the U.S. that mass production of cars were perfected by Henry Ford and the idea that the average person could own their own vehicle first took hold. It was widespread ownership of automobiles that allowed the post-World War II U.S. to become a suburban chain store nation. Now, the three remaining major U.S. auto companies no longer seem to be viable businesses and the implications are not just economic, but social and political as well .

The problems with the auto companies didn't just happen overnight, but first became evident in the 1970s. When oil prices started to soar, the American consumer turned away from the huge gas guzzlers that Detroit manufactured and the Japanese car companies with their fuel-efficient products gained major footholds in the U.S. market. Chrysler eventually needed a $675 million bailout in 1980 to continue operating. Detroit failed to heed the warning however and the lesson it learned from the events of the 1970s was that the government would bail it out if it messed up and it should try harder to get government restrictions and limitations on foreign imports. Auto industry lobbyists also subsequently did everything possible to overturn federal laws that mandated Detroit produce fuel efficient cars. So in the last ten years, this allowed them to saturate the U.S. market with low gas mileage SUV behemoths and pickup trucks. Now another completely predictable surge in fuel prices has taken place and the Japanese along with Korean auto manufacturers are there to pick up the pieces. An industry that has repeatedly lambasted government interference in its operations and used its political power to undo government programs that could have preserved its economic viability, now is begging the government to interfere by bailing it out.

This is not to imply that auto sales aren't hurting all around because of the economy - they are. Year over year industry sales were down 32% last month and while Ford was in line with a 30% drop, GM had a much worse 45% fall. Similar figures can be found for 1930, the first year of the Great Depression by the way (read that sentence again). GM has has been bleeding red ink since the end of 2004 with a total loss of $73 billion. Ford hasn't been much better off, but managed to report a surprise profit in the second quarter of this year. At that time the New York Investing meetup pointed out that this supposed profit was completely bogus, although the financial media trumpeted it with blaring good-news headlines. For a few days Ford's stock surged, but within weeks began to collapse. The low in Monday's trading was a $1.90 and GM had fallen to a new 50 plus year low of $3.02. GM stock dropped almost 25% on the day because it had announced that its 49% owned GMAC credit arm was likely to go under and its spun off part's supplier Delphi might not emerge from bankruptcy.

Bad earnings are not what forces companies into bankruptcy though. Running out of cash is what pushes them over the edge. By this criteria, GM is likely to go under sometime next spring and Ford might last a little longer. A massive government bailout for the entire industry is of course inevitable. The bailout actually started last year with $25 billion in loans in the 2007 energy bill and an additional $25 billion loan attached to a bill for funding for the Iraq and Afghanistan wars this September. Detroit now wants part of the Wall Street bailout bill money, although the Bush administration is hostile to this suggestion, so Detroit may have to wait until early 2009 to be saved from itself by the federal government.

NEXT: AIG - Bailing Out the Bail Out ... Again

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.