Quote for the Week, July 29-August 4, 2012

The future is here. It is just not evenly distributed.
--William Gibson

 

The Snickers Depression

Gonna be here for awhile...

"Sadly, there is no evidence that suggests controlling excessive indebtedness worked better with, than without, the Fed. The relevant point to take from this analysis is that U.S. economic conditions beginning in 2008 were caused by the same conditions that existed in these above mentioned panic years. Therefore, history suggests that over-indebtedness and its resultant slowing of economic activity supports the proposition that a prolonged move to very depressed levels of long-term government yields is probable."  [Read more...]

--Van R. Hoisington & Lacy H. Hunt, PhD.,

Hoisington Quarterly Review and Outlook

Q2 2012

Stakeholders Lose, But Which Ones?

Morgan Stanley's Arnaud Marès

"Ask Not Whether Governments Will Default, But How"

Full commentary here.

GM: Not So Good for America

The "New GM" hits new lows.

[courtesy ZeroHedge]

The above graphic from ZeroHedge overlays the trend in unsold inventories at General Motors dealerships with the downward trend in the company's stock price (closing yesterday at about $19 a share).  GM claims to be profitable, but investors aren't fooled.  Revenues have been boosted by channel-stuffing.  It remains to be seen whether the product sitting on dealer lots will actually be sold through to customers.

U.S. taxpayers should care, because they are still invested in the company.  GM took down $50 billion in TARP aid during the first wave of the ongoing Global Financial Crisis.  The firm entered Chapter 11 bankruptcy, crushing equity holders and extracting union concessions.  When GM emerged from bankruptcy in 2009, the U.S. Treasury owned 61% of the company.  An IPO in November 2010 allowed Treasury to sell 35% of the company for $13.6 billion.

When you think of it, Treasury tried to do what Mitt Romney did many times at Bain Capital:  buy up a distressed company, cut costs in draconian fashion, then sell the carcass to retail investors and pension funds.  But "facebooking" the investing public requires skill, and Uncle Sam doesn't have it.  He locked in a partial loss by selling at the IPO price of $33 a share.  Now he needs a share price on the remaining 26% of almost $54 to break even.  And even that will recover neither the interest paid on offsetting Treasury debt during the interim nor the $18 billion in tax-loss carry-forwards gifted to GM.

President Barack Obama has few accomplishments to brag about during his re-election campaign this year.  One has been that he SAVED the U.S. auto industry.  It is true that GM regained some market share when Japanese competitors were dealing with supply-chain constraints brought on by a rather large tsunami and biblical flooding in Thailand.  But the Toyotas and Hondas of the world are back on track.  That turns GM back into what it was before the bail-out.  A pumpkin.

Keep talking, Barry.

P.S.--As of June 30, the MainePERS investment portfolio held 139,712 shares of GM stock, worth $2.65 million today.  The same shares were worth $4.6 million when first offered to the public.  Reality has bitten bigtime.  Maine taxpayers will have to make up the difference.

Six-month chart for GM common
The trend is not our friend.

P.P.S.--Don't look now, but investors are suing GM for false representations in the IPO prospectus.  Say the plaintiffs, statements by GM that the firm was expanding production to meet increased customer demand were "false and misleading, because the increased inventories were the result of channel stuffing and were not attributable to higher demand.  Indeed, at the time of these statements, dealer inventories were rising and trucks were sitting unsold on dealer lots for longer periods of time." Here's the lawsuit:

GM 2012 Complaint

Quote for the Week, July 22-28

Every great cause begins as a movement, becomes a business, and turns into a racket.
--Eric Hoffer

It's Almost Midnight. Do You Know Where Your Money Is?

Before we return you to your regularly scheduled summering, just think for a moment where your retirement assets are.  If you are a public-school teacher in Maine, or for that matter any state employee, your are partially invested in Wall Street's biggest banks.  And if you are a taxpayer in Maine, you are backstopping those investments.  How do you feel about that?

Are you comfortable that your financial security depends on the continuing hegemony of white-collar racketeers?  Consider the recent headlines.  Peddling fraudulent loans, then securitizing the loans with fraudulent disclosures.  Gouging delinquent borrowers.  Colluding to rig bids in the municipal bond market.  Strong-arming credit-rating agencies.  Buying influence in Congress and in the White House.  Manipulating interest rates.  Front-running markets.  Overcharging clients.  Betting against clients.  The list goes on and on.

The time is coming when the banksters will get theirs.  When they do, equity holders will get crushed, making them both ashamed AND poorer.

MainePERS, smell the coffee.

"Wall Street has so many friends in Washington that meaningful reform is impossible."

--Elizabeth Warren, nominee for U.S. Senate

Washington Post op-ed

Quote for the Week, July 15-21

If you think a colleague is stupid, refer to him as 'the able, learned and distinguished senator,' but if you know he is stupid, refer to him as 'the very able, learned and distinguished senator.'
--former U.S. Senator Alben Barkley (KY) coaching a freshman senator

Watch, Then Vote

Do your due diligence:

Inside Job, Narrated by Matt Damon (Full Length HD).

Quote for the Week, July 8-14, 2012

The greatest enemy of knowledge is not ignorance; it is the illusion of knowledge.
--Stephen Hawkings

Crowding Out Business Investment

"[C]entral governments and the money center banks co-exist in a mutual admiration society where government capitalizes the banks and the banks are the primary buyers of excessive government debt.  Because government doesn't create any real economic value (it regulates it and transfers it from one group to another), the domination of government assets on bank balance sheets in place of private sector assets spells real trouble for the future economic growth in the Western economies."--Robert N. Barone, Ph.D.

Dr. Barone's commentary is viewable at Minyanville.

Quote for the Week, July 1-7, 2012

Horse sense is the thing a horse has which keeps it from betting on people.
--W.C. Fields