Melissa asked if GM could fail... or maybe it was a dream or something...
So many business models get out of sync... Auto are and have been out of sync since the Model T. The combustion engine hasn't been changed in 80 years.. there is no innovation. Cars are obscene consumer items, used to show status. I've always hoped that someone would revise that model, build cheep economical cars that do 2 things are cheep, and get you there.
There are many such out of date business models. One of which are banks which no longer want your deposits, and just want to nickle and dime you with fees.
Microsoft.... how out of date is that shit.... and I am not a Mac person.
the market is ready to get slammed tomorrow, as the last day of the week it sets up for a terrible Monday....
But it's possible with NFP and the ECB decision, that it will be a Short the rumor buy the news...
it will be interesting.
I got a couple of good trades off today.....
I did go long a nice wave 2 counter trend in a decline today.
At the bell this morning I had some charts lock up, which had me Reeling all morning.
Wednesday, July 2, 2008
Market
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3 comments:
Before the federal government allows GM to fail, they will devalue the US dollar by another third in order to devalue GM's debt and devalue the earnings of the line workers. In other words, it ain't gonna happen.
NFP is expected to be -60K, but I have to agree with Ritholz that it may be double that number and we are no where near the job losses experienced in the 1991 recession...
So, the fed has to make a choice between jobs and the the dollar, and it isn't an easy decision to make. The political outcry of a bad jobs number and increasing unemployment will force the hand of the fed, the Congress and the President to bail out large employers like GM and the only outcome-- in my opinion-- is to devalue the sh*t out of the greenback.
And the market is beginning to factor this outcome into the price of Gold and Silver and... look at the Euro and other foreign currencies today. The technicals on inflation hedges are improving, and that is no coincidence.
All that will do is drive oil up and make GM even more worthless, and the recession worse.
What you are sugjesting is just what we did in the 70's and all it lead to is wage spirals, negative feedback inflation. and the only solution is "Volker-esq monitary policy"
We will try and repeat the mistakes of the past as you sugjest... but we will be smarter and go through the process faster.
that is what I say 5 years for this bear
Given the choice, I believe that is what will happen. I never said it was wise. The political leaders will not-- cannot-- let GM fail. I'm not saying the fed will simply reduce the fed funds rate, but their definitely will be some interest free loans paid out of the Treasury and Bernanke will be slow to raise rates further in this economic situation regardless of how much the dollar drops.
Just as Chrysler was bailed out in the 1970's, so will any US auto manufacturer. Yes, it will dilute the dollars in circulation and confound moral hazard, but that is the fact of the sentiment of the nation. Do you think we learned the lesson of the 1970's?
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