GM = Government Motors

by Larry Levin

Yeee-HAW, General Motors is now Government Motors. Alright! Wonderful! It must be NIRVANA - all of the major indices closed with huge gains today. YEEE-HAW!!!!! Wow, if we only knew that Barney Frank and Co. running all of our major industries would be so bullish we would have suggested the "G" run everything a long time ago. Who knew? Let's see, umm, the government is now running; Fannie Mae, Freddie Mac, Bank of America (don't fool yourself), Shitigroup (don't fool yourself), Chrysler, AIG, and now General Motors. Yes sir, it's rapture I tell ya!

With today's good news the Dow rocketed up 221 points. Now if only Caterpillar, GE, and Boeing would go belly-up maybe the Dow would race to 20,000? Yeah, that's the ticket!

President Obama committed another of $30 billion today to its latest pet project: "green cars" from the auto maker formerly known as General Motors. This latest staggering sum of cash to make the UAW happy brings the total amount of funds allocated and promised to the auto industry to $110 billion, which include both bailout cash and free money for green-car component suppliers. According to White House officials as much of 40% of this massive handout will never be recovered. Said another way - IT'S FREE MONEY TO THEM.

Did you know President Obama was going to huff and puff about financial responsibility but behind the scenes give away 40% of the loot? Is this the "change you can believe in" or business as usual?

Regarding the latest massive government takeover the Associated Press said this "Given the economic crisis, the Obama administration's aggressive intervention is a defining moment for capitalism. Whether the president's actions serve as a private sector lifeline or a tether is a question that Obama and his economic team must confront not only with GM and Chrysler, another bailed-out automaker, but with the financial sector as well."

A defining moment for capitalism? Is he joking? I wonder if the reported would know capitalism was if it fell from the sky.

- Capitalism is not prepackaged bailouts in the multi tens of billions of dollars.

- Capitalism is not taking control of massive portions of the economy.

- Capitalism is not occurring when the Treasury and President act like Tony Soprano and make up new bankruptcy rules as the process moves along where they summarily dismiss 200+ years of contract law in favor of political allies.

- Capitalism is not accepting getting screwed on $2 out of $5 in so-called bailout money. Capitalists do not give money away!

- Capitalism allows for failure and bankruptcy whereby bondholders lose money indeed, but it is not taken from them by politicians, it is decided in a court of law.

- Socialism seeks totalitarian control of a society's economic processes through direct state operation of the means of production, which we do NOT have here. Fascism, however, seeks that same control indirectly, through domination of nominally private owners. Sound familiar?

I wish I could believe President Obama and the clown posse in DC when they say they will have a "hands off" approach to all of their meddling, but I don't. For example, take the latest hubbub over GM importing a small fuel efficient car from China. It was going to be built there and shipped here to the US. The optimal word in that last sentence is "was."

Once the UAW complained to the clown posse in DC (your Congressman) things changed: the car is being built here. House Speaker Nancy Pelosi and Majority Leader Steny Hoyer asked White House officials Sunday night how they would prevent sending GM manufacturing jobs overseas to China. Last month, several lawmakers were furious the administration didn't speak out publicly when GM considered importing a fuel-efficient car made in China. GM has since announced it will build the car in the U.S. in one of the plants that had been targeted for closing.

Is this a "hands off" approach or more like indirectly controlling GMs economic processes because it now dominates the nominally private owners?

Now I know the switch sounds good at first, but think it through. A MAJOR reason why GM is bankrupt is that it cannot profit from manufacturing small cars; its labor costs are too high. Making the car in China, with strict US safety standards, and exporting them to the US makes sense since GM would be able to profit on these small cars, thus paying back its debt to the taxpayer quicker. To be clear, any vehicle that can be made profitably in the US should indeed be made in the US but some will never be profitable.

But when have politicians had a lick of sense? They want the UAW to make these cars at a LOSS, thus further tethering Government Motors to Congress in perpetuity.



Previous Day's Trading Room Results:

Trade Date: 6/1/09

E-Mini S&P Trades*
(before fees and commissions):

1) OTF buy @ 10:40am at 940.75 = +3.25 (1 lot)

2) FT buy @1:10pm at 944.75 = -1.50 (1 lot)

3) Algorithm positions (5)...combined Secret's and Algo total...-1.00


Electronic (YM) Mini-Dow:

1) None today



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