Sunday, April 26, 2009

Get Your Boots On (Cause the Bull S**t is getting deep)

The U.S. equity market has responded well to policy and jaw boning.  Nothing in the fundamental picture changed during the past 6 weeks.

Larry Summers was out yesterday trying to cool off expectations - and he should, or at least somebody from the administration should.  

Yet he is still making prognostications based upon past experience:

Summers said the economy will pick up as manufacturers rebuild depleted inventories and consumers replace aging cars. “These imbalances can’t continue forever,” he said. “When they are repaired they will be a source of impetus for the economy.”
Larry Summers knows that we have overcapacity everywhere in the system.  If consumers need to replace aging cars, we have nearly 1 year's worth of inventory at today's rate of sales unsold and stored in ports the world over.  Even if this were not the case, will consumers replace aging cars at a pace sufficient to cause a recovery as defined by the administration?  Maybe, but I have my doubts.  This will be entirely dependent upon the volume of imported oil, and my bet is that over the next 5 years, imports will continue to decline - perhaps precipitously.

If it wasn't for the Federal Government, Chrysler, along with G.M. would have been liquidated earlier this year.  The Feds can keep anything going that they want to keep going.

The simple fact of the matter is that if we want G.M. and Ford to survive, Chrysler must die.


Labor leaders and U.S. officials seeking a way to pay for Chrysler LLC's and General Motors Corp.'s benefit programs for retirees might find an important source of aid in an obscure federal subsidy covering certain retiree health-care costs.

Under the provision, known as the health-coverage tax credit, the federal government can pay health-insurance premium costs for early retirees -- those between 55 and 65 years old -- if their former employer runs into financial problems and can't pay promised benefits. In recent years, some early retirees from the troubled U.S. steel industry have used the tax credit, which was created by Congress in 2002. Now some retirees from auto-parts makers also want to take advantage of it.
If a small business owner like myself falls upon hard times the government will NOT be there to pick up my healthcare costs - despite the FACT that small business owner's paid FAR more in taxes than UAW employees.  Small business people have not organized like the UAW - yet. If the government keeps up this type of political favoritism it risks REAL upheaval.


Last year I read John M. Barry's "The Great Influenza", a powerful narrative of the circumstances and outcomes of the 1918 flu that killed 50 million people.  I recommend the book highly.

I have no opinion on the Mexican swine flu other than to say that if it is something bad, or worse, it could not come at a more inconvenient time for politics,  the economy, or the markets.

Mentat (at) yahoo (d0t) com


bureaucrat said...

The EIA "monthly" oil imported into the U.S. report showed a substantial drop in oil coming in from Nigeria. Nigeria used to send us a million barrels per day (along with Venezuela). But in recent weeks, Nigerian imports have now dropped below HALF a million barrels a day. We already know about the government/rebel problems in Nigeria, but this is the first time I've seen such a substantial drop from one report to another.

Donal Lang said...

Re the flu; in 1918 the flu pandemic caused a reduction in consumption of just about everything but, in today's World of 6,800 million people, losing 50 million to the flu wouldn't do much to reduce World consumption of anything.

Unless of course they were Americans! :-)

oOOo said...

Perhaps Matt Simmons was right about Saudi oil:

April 25 (Bloomberg) -- Saudi Arabia, OPEC’s biggest oil exporter, is producing less crude than its target and global stockpiles are likely to decline, according to Oil Minister Ali al-Naimi.

The country is producing less than 8 million barrels of crude a day, al-Naimi told reporters today in Tokyo, where he is attending a meeting of Asian energy ministers. Stockpiles “will come down eventually,” he said.

sharon said...

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