Obama’s Government Motors
Stop the Presses
This Blonch blog on personal finance issues is still so new that we spend most of the time laying some basic groundwork of background positions on the main areas we try to cover. However, I feel compelled to comment on investment news today. Yesterday President Obama announced the (forced) resignation of GM’s long-tenured CEO and Chairman, Rick Wagoner, along with a demand that the company take stronger action in restructuring in the next 60 days or face bankruptcy. At the same time he guaranteed both GM and Chrysler’s warranty programs and provided interim funding to keep both companies going, albeit on different paths as he announced the arranged marriage for Chrysler with Fiat in the next 30 days.
Free Market Vanquished
This is huge news in economics, investments, politics, and nearly any other arena. The free market has been vanquished. By the afternoon, Sean Hannity was giving out the main switchboard number of the White House as the “Warranty Hotline” and encouraging folks to call to ask for the warranty office with any questions they might have about automobile warranties. Others have begun referring to GM as “Government Motors.” Ford has to be happy they turned down government help right now.
Right Wing Reaction
Although I haven’t seen any reaction from Republican leadership in Congress, Rush Limbaugh weighed in with the retail store policy, “if you break it you bought it.” Well, Obama figures he is paying for them anyway, he might as well own them, and now he does. Whatever happens to GM and Chrysler from this point is Obama’s. As much as the left dislikes the automobile industry for pollution and carbon emissions and consuming hydrocarbons and filling landfills, the left imposed the emissions, CAFÉ and safety standards and are married to the unions that together hamstring this industry. I just don’t see Obama as the guy to tell the unions they can’t have their pensions, health benefits, or jobs. And yet, he’s the guy who is going to have to do just that. Unless he really can run a car company better than the car guys, how can he turn the juggernaut around?
President Obama just took away GM’s leadership and then said “you have to do better, and quickly.” Who is going to lead that effort? My cynical side says Obama wants failures to create dependency on the government, and an excuse for urgent solutions involving health care and government take over of retirement programs as we hurry down the freeway to socialism. Every day brings other crises that must be solved quickly – too quickly to work out the details prior to approving the plan. “Trust me!”
Changing Rules
If the President is promising sweeping changes in taxes, regulation, and health care to go along with taking control of businesses that are too large to fail, how does anyone plan for and invest in the future without knowing what the ground rules are going to be? Can he be so married to the idea of imposing great social change that he is willing to foster an economic atmosphere of failure that will require government intervention to solve the problems of government intervention? It seems to me that the Obama team is in over their heads on so many issues, and is so mired in this economy that other matters of significance can’t possibly get adequate attention. I don’t like my attitude either – but every lap around the sun seems to increase my cynicism even more than it warms the environment.
Market Reaction
The markets reacted strongly to yesterday’s announcements, broadly losing over 3%. One of the few green numbers on my portfolio was a short position (DXD) I took last Thursday morning after reading multiple articles (including Cramer) calling the bottom as having been reached 20% lower. Unfortunately, I didn’t go short enough, and I merely held my own through the day. I was tempted to take the 9% gain on the shorts, but held on for fear that there isn’t anything to push us back up soon. Maybe Timothy Geithner is right, and we still need to be fighting off deflation before we get sucked in a downward spiral that cannot be stopped. Bring on the helicopters.
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