I THINK THE MARKETS HAVE BOTTOMED!!!

[quote author="Oscar" date=1228446291]If a bankruptcy filing qualifies as a credit event that results in a payout on the credit default swaps written for their bonds, then Congress will sign off on the loans the automakers are requesting. Ironically, this may cause the cascading effect that Ben and Hank sought to stave off with the AIG & Wall Street bailouts.</blockquote>


GM paper is the lowest form of junk already. Moody`s cut it again today.

Default is almost inevitable even with a bailout.

<a href="http://www.businessweek.com/ap/financialnews/D94S1PPG1.htm">http://www.businessweek.com/ap/financialnews/D94S1PPG1.htm</a>



It will be interesting to see if this creates the same payout in the CDS

market as Lehman`s demise.
 
[quote author="skek" date=1228445527]Indeed, but a GM bankruptcy would be equivalent to a run on a bank in the public's eye, many of whom are still not paying attention and figures the government will "fix" this. I suspect it weakens consumer confidence, further suppresses consumer spending and generally provokes the next step down in the death spiral.</blockquote>
I suspect that more than a few people are waiting/hoping/counting on Obama to perform a miracle and turn things around over night. I think when it becomes clear that not even he has the power to reverse this, we will see the kind of panic and capitulation in the general population that hasn't really materialized yet.



It's for this reason that I think anyone calling a bottom is overly optimistic. Yes, the markets have fallen. But how much of that is a result of a recession and how much of it is the result of the massive amount of hedge fund redemptions? I know IrvineRenter has mentiond that this kind of negativity is evidence that we are near the bottom based on the contra-indications of general sentiment (buy when orthers are fearful, etc.), but I don't see actual panic and resignation. What I see is the reduction in spending based on lack of MEW and rising unemployment combined with a reduction in consumer credit lines. But that isn't a reduction in spending based on fear and panic. Among the people I talk with, most are taking a "wait-and-see" attitude because the effects of the downturn are only just now affecting them in areas other than house value. Again, I suspect that they are holding out hope that Obama has some magic bullet that will turn the clock back to 2006 and put us back on the path of endless prosperity. Once reality sets in, I think the general sentiment will finally reach the kind of negative levels that will result in a solid bottom.
 
[quote author="skek" date=1228446713][quote author="WINEX" date=1228445739]I think a lot of perception is based on whether any bankruptcy was a liquidation versus a reorganization.</blockquote>


In reality, that makes all the difference in the world. But I'm not sure the public perceives a difference. If the front page of the OC Register says "GM, Chrysler File for Bankruptcy" then regardless of whether it is a pre-pack, a DIP or a liquidation, I think the average man or woman on the street (1) buys fewer Christmas presents, (2) doesn't buy that car they thought they might get, and (3) has a talk with the spouse about less dinners out and tucking a little more away for a rainy day.



There's nothing technical or scientific about my opinion, just a hunch...</blockquote>


Time will ultimately tell, but I believe the average American is used to seeing airlines go bankrupt on a regular basis, so they understand that bankrupt != going out of business. I don't see why it would be different if one (or more) of the Big 3 go through bankruptcy.
 
I agree, this is not a new phenomena and if it is couched in the proper language of a government loan than they just may be able to pull it off without too much fallout
 
I'm glad you typed it all out Oscar instead of me. 100% agreed.



I mean if you go and study the magnituted of the problem we are in and ask yourself this question... "Do we really get off this easy?" (my reality check)

So far we had a 45% drop in the markets? If that is all...I can live with that. In a weird way, that would seem too good to be true.
 
I don't think this is getting off easy by any means. People are losing homes, jobs, fortunes, and futures today and tomorrow.
 
[quote author="skek" date=1228450515]You could be right -- again, I'm just relaying a hunch. But you kind of made my point. Americans are <em>used</em> to seeing airlines in bankruptcy. BK is part of their business model. But when was the last time we've seen a car company in BK? You'd have to go back to the Chrysler bailout in the 80s for a close comparison. So a car company BK would be different. And, given that most Americans know that the government is considering a bailout of the auto industry, wouldn't a BK indicate that, to some degree, the government couldn't "save" GM or Chrylser?



But, you could be right. I just wonder what piece of news is going to finally make the point that this is serious to the average American. What do you think might do it?</blockquote>


I am of the opinion that the Federal government is going to have a hard time selling all of the T-Bills needed to finance all these bailouts in a world where money is tight. I think a rapid ratcheting upward of interest rates and/or having to sell US T-Bills denominated in Yen or Yuan could shock a lot of people.
 
[quote author="skek" date=1228450515]You could be right -- again, I'm just relaying a hunch. But you kind of made my point. Americans are <em>used</em> to seeing airlines in bankruptcy. BK is part of their business model. But when was the last time we've seen a car company in BK? You'd have to go back to the Chrysler bailout in the 80s for a close comparison. <strong>So a car company BK would be different.</strong> And, given that most Americans know that the government is considering a bailout of the auto industry, wouldn't a BK indicate that, to some degree, the government couldn't "save" GM or Chrylser?



But, you could be right. I just wonder what piece of news is going to finally make the point that this is serious to the average American. What do you think might do it?</blockquote>


Car company going under vs an airline is different. Let alone 3 of them.

Here are some few obvious reasons.

The amount of employees and GDP contribution that car companies have vs. airlines is not even a comparison.



People don't buy planes, and they really don't have to fly to Europe, Asia, or to New York. But people do need cars to get to work and do their everyday functions. So an airline going BK...who cares. I guess I'll have to drive instead?

The big difference is will you replace your car every 3-4 years, or will people buy one every 8? I know my relatives in europe cycle cars until it literaly can't be repaired anymore and MUST be replaced. If you follow this logic, you won't need a car for about 20 years.
 
The comparison is not meant to be apples to apples. Of course the auto industry has huge tendrils within the economy but one or two (GM C) could operate under Chap 11 and get itself out from under its crushing legacy costs and UAW contracts. It would very likely unshackle them to compete more vigorously with the other auto makers and still allow them to keep the other supply businesses employed. I think this is the strategy we will ultimately see.
 
UAW finally gave some concessions. they agreed that if you're laid off, you won't get to continue collecting 95% of your paycheck. it's outrageous that people who lose their jobs should also lose their paychecks too. i mean, what are they going to do next -- take away our homes when we don't pay our mortgage?!



<em>

"Everybody has to give a little bit," said Rich Bennett, an official for Local 122 in Twinsburg, Ohio, representing Chrysler workers. "We've made concessions. We really feel we're doing our part."</em>
 
[quote author="acpme" date=1228452110]UAW finally gave some concessions. they agreed that if you're laid off, you won't get to continue collecting 95% of your paycheck. it's outrageous that people who lose their jobs should also lose their paychecks too. i mean, what are they going to do next -- take away our homes when we don't pay our mortgage?!



<em>

"Everybody has to give a little bit," said Rich Bennett, an official for Local 122 in Twinsburg, Ohio, representing Chrysler workers. "We've made concessions. We really feel we're doing our part."</em></blockquote>


Oh and by the way that doesn't take affect till 2010 when our contract expires.
 
When comparing a BK Airline to a BK Automaker. The consideration of Warranty and Support

for the vehicle after sale is huge. Big difference in the Auto business with post sale

issues. I just dont see a BK General Motors ever recovering. Its market share would further

diminish to the point it would no longer be able to recover from BK.



The stock is off 15% at its low for the day. I would say its in its death throws at this point.



Good time to buy a new top end Corvette and put it in dry storage for 20 years.

You can count on that investment.
 
I think the market will bottom when price/dividend ratios start to make sense, not when price/earning ratios look good. I for one have given up on phantom earnings from the BS that public corporations put out as an income statement. My new motto is "send me the money" not "show me the money".
 
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