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.

skek - 04 December 2008 09:15 PM

You could be right—again, I’m just relaying a hunch.  But you kind of made my point.  Americans are used 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?

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.

skek - 04 December 2008 09:15 PM

You could be right—again, I’m just relaying a hunch.  But you kind of made my point.  Americans are used 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?

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.

I think I might have posted this pic awhile ago.  But this sums it up for me…This poster really motivates me…haha

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?!

“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.”

acpme - 04 December 2008 09:41 PM

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?!

“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.”

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”.

The ten year is at 2.55%.  I am amazed.

Failedagent - 05 December 2008 01:23 AM

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”.

P/E ratios indeed are a horrid way to look at equities.  As they are derived from past earnings.  Now in a stable economy you can get a general idea as to how expensive or cheap the stock is trading at.  But in this environment when future earnings can all of a sudden be down 50%, it will in theory double your P/E ratio making it expensive again.  That is why its better to look at PEG ratios as they incorporate future earnings growth (assuming they have it correct), but in this market even that is risky.  For a great example punch in ticker DRYS and see how low their P/E is at.  However now they are charging 1,000 a day to ship vs. 200,000 when demand was high.  It looks dirty cheap, but it will even look cheaper when it trades at 1 dollar.

Dividend to price ratio? Not sure thats any good either.  Many firms have already slashed dividends and as capital gets more scarce they will continue to do so.
I mean go take a look at Frontline Limited (a shipping company, FRO is the ticker).  The stock is around 26 with a 7.75 annual pay payout which yields 29%.  Do you think they will continue to pay it out?  What about Bank of America?  Is their dividend safe?

I wouldn’t buy investments based on dividend rates unless you know for a fact they won’t cut it.  Because if you buy something, and dividend gets yanked the stock will collapse the amount that it got yanked.  So in FRO’s example, a zero dividend will cause a 29% drop and some as it signals an obvious weakness.

There are many ways to play this market and succeed.  To be honest this year has been one of my best years ever due to volatility and numerous ways to make fast cash.  However, its a market where you can lose your pants and your wife if you’re not careful either.  So you have to be armed to the teeth with information, patience, instict, common sense, anticipation, discipline, focus, sounds strategy, etc.  If you don’t have that, just wait till the economy is better or pay someone to do it for you.

Here is a potential trade if you feel like gambling.  Well its not gambling just protecting myself because I don’t like the potential bad news coming out tomorrow.

I bought puts on BofA about 3 days ago.  I was down about -45% and doubled my position early this morning to bring my overall loss to -14%.  I’m holding on to it as a small hedge against my long positions if the market goes south tomorrow…and here are great reasons as to why…

A.) Employment data is the most important indicator of all.  It is due to report tomorrow morning.
B.) Bank of America shareholders are voting on M.Lynch merger.  The expectation is that the deal goes through…Has anybody wondered what happens if the shareholders vote it down?  This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper.  Oh yeah…here is the answer; MER will fail, and market will COLLAPSE.
C.) Nobody really wants to hold shares over the weekend, as ALOT can happen. 

Here is a prediction for fun.  Market drops 750 pts tomorrow.  YEEEHAAW!!!

awgee - 05 December 2008 01:33 AM

The ten year is at 2.55%.  I am amazed.

As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?

blackvault_cm - 04 December 2008 09:21 PM

skek - 04 December 2008 09:15 PM

You could be right—again, I’m just relaying a hunch.  But you kind of made my point.  Americans are used 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?

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.

I believe you misunderstood the intention of the analogy.

I wasn’t comparing contributions to GDP.  I was simply stating that very visible large companies go into bankruptcy seemingly every day.  They continue operations, and emerge later and go about their business.  Sure, it sucks if you are a stock holder in the companies.  But the companies keep on keeping on.

Also, though the automakers are larger, the airlines are no slouch.  Delta Airlines has 52,386 employees, American Airlines has 85,500 employees, US Airways has 32,779 employees, ...  (All numbers are according to Yahoo Finance)

Simply put, I believe most people are aware that going bankrupt doesn’t mean that they cease to exist.

Yeah I did.  Morekaos pointed what you meant and I acknowledged it.  At times it is harder to communicate over the internet as I don’t get to see people roll their eyes when I talk. haha my bad.

IrvineRenter - 05 December 2008 03:35 AM

awgee - 05 December 2008 01:33 AM

The ten year is at 2.55%.  I am amazed.

As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?

I guess so.  Or maybe I would need cash very bad for redemptions on the hedge fund I was running.  Or maybe I would be counting on the Fed buying treasuries on the open market.  Or maybe I would need a place to put cash while I wait to see when the equities market and corporate bond market and commodities market and ________ market was heading up.  I guess that is result of deflation, eh?

IrvineRenter - 05 December 2008 03:35 AM

what would you have to believe to buy a 10-year note at 2.55%?

That there will be a Greater Fool who will buy it next month @ 1.7%.

awgee - 05 December 2008 01:33 AM

The ten year is at 2.55%.  I am amazed.

And most likely going lower below 2%.  The markets have hit bottom IN 2008, the markets go lower in 2009.

blackvault_cm - 05 December 2008 03:23 AM

Here is a potential trade if you feel like gambling.  Well its not gambling just protecting myself because I don’t like the potential bad news coming out tomorrow.

I bought puts on BofA about 3 days ago.  I was down about -45% and doubled my position early this morning to bring my overall loss to -14%.  I’m holding on to it as a small hedge against my long positions if the market goes south tomorrow…and here are great reasons as to why…

A.) Employment data is the most important indicator of all.  It is due to report tomorrow morning.
B.) Bank of America shareholders are voting on M.Lynch merger.  The expectation is that the deal goes through…Has anybody wondered what happens if the shareholders vote it down?  This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper.  Oh yeah…here is the answer; MER will fail, and market will COLLAPSE.
C.) Nobody really wants to hold shares over the weekend, as ALOT can happen. 

Here is a prediction for fun.  Market drops 750 pts tomorrow.  YEEEHAAW!!!

bv, bofa is buying mer with stock.  0.8595 bofa: 1 mer, which is currently reflected in the stock price of mer.  so they’re not paying 50B, but somewhere around ~20B since bofa stock is down that much since the deal was first announced.  i think the deal goes through.

acpme - 05 December 2008 06:02 PM

blackvault_cm - 05 December 2008 03:23 AM

Here is a potential trade if you feel like gambling.  Well its not gambling just protecting myself because I don’t like the potential bad news coming out tomorrow.

I bought puts on BofA about 3 days ago.  I was down about -45% and doubled my position early this morning to bring my overall loss to -14%.  I’m holding on to it as a small hedge against my long positions if the market goes south tomorrow…and here are great reasons as to why…

A.) Employment data is the most important indicator of all.  It is due to report tomorrow morning.
B.) Bank of America shareholders are voting on M.Lynch merger.  The expectation is that the deal goes through…Has anybody wondered what happens if the shareholders vote it down?  This can happen btw, since BofA did pay 50Billion for it, and shareholders know they could have had it cheaper.  Oh yeah…here is the answer; MER will fail, and market will COLLAPSE.
C.) Nobody really wants to hold shares over the weekend, as ALOT can happen. 

Here is a prediction for fun.  Market drops 750 pts tomorrow.  YEEEHAAW!!!

bv, bofa is buying mer with stock.  0.8595 bofa: 1 mer, which is currently reflected in the stock price of mer.  so they’re not paying 50B, but somewhere around ~20B since bofa stock is down that much since the deal was first announced.  i think the deal goes through.

I realize that.  However, I believe they still have to record on their books 50B.  The point is though if they waited a bit longer MERs stock would have dropped further and they could have had a better deal.  Not virtually 1 for 1 on the stock conversion. 
Then BAC was still trading around 30s I believe when they acquired them…a weeks wait, and they could have had it for a .5 or a .3 conversion.

IrvineRenter - 05 December 2008 03:35 AM

awgee - 05 December 2008 01:33 AM

The ten year is at 2.55%.  I am amazed.

As an investor, what would you have to believe to buy a 10-year note at 2.55%? Massive, decade-long deflation like Japan?

Or that you need treasuries as collateral for your CDS.  Or you are a hedge fund or mutual fund company expecting plenty of redemptions.  Or you think the stock market will fall further.