Tuesday, November 18, 2008

Brief opinions on financial markets

There so many important issues flying around the financial markets that there is only time at the moment for opinions, it seems, not explanations. So here are a few:
---Everything that Paulsen said to a congressional panel today about the need to use TARP to create liquidity in the securitization markets is absolutely correct. Without a loosening in the securitization markets there can be no credit expansion, none at all.
---To repeat from a post last week, no TARP funds should be used to fund the car companies. That's a totally different issue which needs to be addressed but not with funds approved to de-ice the credit markets.
---Near term money into the auto companies is money almost immediately down the toilet, unlike the potential for significant recoveries under TARP. Toilets have a purpose, however, and if they buy time for a cure they may be justifiable.
---The decision on buying time for the car companies is crucial as it comes at the most inconvenient of times---understatement. Bankruptcy in more normal times would almost certainly be the best solution, but testing out bankruptcy of these core U.S. industries in the midst of today's economic downward spiral, a period of political transition as well, is a risky, if not reckless, bet. Let them go under a year from now if we can, as they will most certainly not eliminate their candidacy in the interim.
---GM's Rich Wagoner talking about the U.S. economy and his economists analysis of the devastating impact of the bankruptcy of the car companies is not helpful. One would just guess that he should be talking about how to rehab and revive his company, as who gives this Dukee any credibility on a bigger stage than the one that he has struggled to manage for a very long time, as CFO from the late '80's until now as CEO.
---The U.S. Congress is embarrassing. The House of Representatives, as a part of Congress, is incompetent, petty, and generally uneducated. I said that this would be opinion, so sorry for such an obvious comment. Perhaps the House members just represent the majority of their constituents, rather than lead them as one would presume is the role of leaders. So in representing their constituents they exaggerate the helplessness and resentment that they feel and look not for solutions but for punishment, a head on a stick for the homefolk.
---It was odd to hear Dodd today lambasting the auto companies for their mismanagement. Senator Dodd has been in Congress for almost 40 years, a Democrat who supported every labor union initiative for most of his time there. Now that the current car company leaders have inherited unworkable and misguided union contracts and retiree promises, he has the gall to castigate management for their situation. Management has not been good, no doubt about that, but their chances were slim to none by the time they took over. There is no way out, and the fingerprints of Dodd and many other politicians have been all over this crime for many years. As one pundit said yesterday, GM is an HMO that happens to make some cars.
---Senator Richard Shelby of Alabama is hideous, a bitter man of no ethics. Some of us experienced this years ago, but now he is putting on a show for everyone. He must see this as a last shot at ego building on the national stage. My God, he even makes Senator Carl Levin of Michigan look like a decent person in comparison, and that's saying a lot, now that's an opinion.


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