The markets are changing and depending on who you talk to (or which way the wind is blowing) we have a bear/bull market coming. What you do with that information is up to you, but most “analysts” seem to think that the end is still a ways off and that the market is going to capitulate for months to come.
And, frankly, I’m okay with that. The Dow was up over 200 points today – and to me that’s a good thing. But, if it drops 400 points tomorrow, that’s okay, too. I’m neither bull nor bear, but I am a writer that wonders – what’s it matter? Bear market? Bull market? Who really cares?
The answer to that is obvious – investors and news media care. Investors so that they have an excuse for their successful guessing or misplaced optimism, and the news media because nothing sells like confusion (unless it’s blood, gore, or Britney Spears, of course.) In this time, when consumers, investors, and even our leadership is shocked and running around like a three legged frog on the highway, bad news sells because in the absence of something positive, the average person is going to grab onto whatever they can find.
My take – bear or bullshit – it doesn’t matter; the media is going to help with your decision.
As much as I hate some of what retailers have done to the holidays, there are aspects that create a frenzy that may help inspire consumers to shop more. That frenzy – for good or bad – wasn’t there this year and for the most part, retailers are to blame. Just looking at the decorations made it quite obvious that this year wasn’t the same as years past. Fewer people and companies were going all out to one-up each other like in years past, and by the 15th every ornament, tree, and blow up lawn decoration was at least 50% off, if not more. In San Jose, Trader Joe’s market was giving away wreaths by the truckload on the 20th! Well before the season died on its own.
According to SpendingPulse, a macro-economic report offered by Mastercard, retail and service sales from Nov. 1 until Dec. 24 showed retail sales down between 5.5 percent and 8 percent. Half of the decline in overall sales can be attributed to the 40 percent drop in the price of gas compared with December 2007. Excluding gasoline, sales were down 2 percent to 4 percent.
General Motors, Chrysler and to some end, Ford, are asking for $34 billion in subsidy loans to support their survival for the next few months. By all acounts, it won’t be anywhere near enough, but that’s beside the point. What’s funny about this is the sheer volume of justification that they’re having to go through to get these loans. AIG, it would seems, got $150 billion just because, and very few questioned the need or the justification for it.
My article talked about the “perfect storm” in terms of what the auto-industry was experiencing in the credit markets, but that is probably more apropos of what is going on in the economy as a whole. Housing is suffering, retail, including auto, is suffering, and jobs are being eliminated at an alarming rate. Most troubling – these are not short term problems and even with a new president these aren’t going to be resolved over night.
First a little history, the phrase “perfect storm” originated with the 1997 book The Perfect Storm, and was cemented into most minds by the 2000 movie of the same title which starred George Clooney. The phrase the perfect storm refers to the simultaneous occurence of events which, taken individually, would be far less powerful than the resulting combination of events. Such occurrences are rare by their very nature, and any slight change in any one event would potentially lessen its overall impact.
I’m starting to think that congress should have approved the $25 billion in loans that the Big Three was asking for a few weeks back, because it seems as though they’ve all huddled back in Detroit and all of a sudden the “emergency aid” requirement is up to about $34 billion. Today’s news even has it that GM will go under without an immediate $4 billion infusion.
In normal times, this might not be such a big deal. Chrysler went into bankruptcy a few decades ago and emerged as a better, stronger company. But, times have changed, and the underlying problem is the same no matter what industry we’re talking about – lenders are remiss to help companies before they get into trouble and even less likely to help those in bankruptcy. Congress seems to be missing these facts as they continue to grill the Big Three, and while I’m not in support of a bailout, it is time to consider a loan or rescue package that will allow these companies to survive.
Hopefully everyone had a great holiday weekend. Sorry for the lack of posts, but I decided to take some time off from writing and spend it with my kids and family. Like many of you, we had a great holiday, did a little shopping, and just enjoyed our time together.
Of course, like most days I still watched the news and read up on what was going on. There was just so much going on it was almost overwhelming. My favorite articles on Friday had to do with the multitude of perspectives surrounding Black Friday. The irony between them made me laugh, even knowing that one was nothing to laugh about.
It’s the day before the big day, and I imagine that everyone is getting ready to hit the sales tomorrow morning. All the while I read the economic reports that suggest fewer and fewer people are going out to buy big this year. Funny, though, the retailers believe that with all the economic news discounting heavily will bring them out to buy things that they may or may not need and save their year. I don’t think they’re too wrong, but I believe that they’re missing a very important part of black Friday – the profitability.\
I talked yesterday about my feelings surrounding the auto-bailout for Chrysler, Ford and General Motors, and the more I read about what Congress is doing and the debates that are flying around the more frustrated I get. Now CNN is reporting that Congress wants the automakers to show how they plan on spending their bailout dollars before they’re willing to offer any. Generally speaking this isn’t a bad idea, but what I find most frustrating is that they haven’t publicly asked the same from companies like AIG or banks taking money from the already approved $700 billion bailout. Doesn’t it seem logical that any company coming to Uncle Sam for a loan/bailout would be held to the same standards?
At the same time they’re asking for $25 billion in taxpayer money – these auto company CEOs are idiots. They all came from the same state in their own private luxury jets. The average American will never see first class, let alone the inside of a private luxury jet, and while continuing to pay their taxes will probably end up eating Mac-and-Cheese to get through this depression recession and these beggars can’t even share a ride or fly commercial. That’s saying two things – they are neither green nor frugal, and that should be disconcerting to everyone. These companies need to get both quickly and those changes need to start at the top.
At what point does a bailout become a lifeline? Is there a point anywhere in there that it becomes another bad idea? The Federal Reserve and Treasury Department got together today and unveiled a new plan to pump upwards of $800 billion more into the struggling US economy. Their hope is that this will jumpstart lending by banks and that suddenly consumers and small businesses will want to use that money.
These plans are as optimistic as TARP, with the Federal Reserve Bank offering as much as $200 billion to purchase securities backed by consumer debt (credit cards, auto loans, student loans, etc.). The Treasury will then insure up to $20 billion against losses (is this confusing yet?) and then the Federal Reserve will purchase up to another $500 billion in mortgage backed securities from Fannie Mae, Freddie Mac and Ginnie Mae (lets call them the three stooges). As if that’s not enough, the Fed will also buy another $100 billion in direct debt issued by those firms. And that’s it for Tuesday.
I’m a huge fan of golf – although watching it on television is a lot less enjoyable than playing it live. Obviously, being a fan of golf makes me a huge fan of Tiger Woods, one of the greatest golfers of all time, but even his association with Buick wouldn’t convince me to even consider one of their cars. Somehow I doubt that they suit the style and image of Tiger and his wife, either, so it is quite likely that Tiger Woods is celebrating today’s announcement that GM/Buick and Tiger Woods will be going their separate ways.
In typical GM fashion, there is a spin and a feeling, and in this case more than most they don’t mesh. The announcement is saying to me “GM is broke, and Buicks aren’t selling – Tiger or not.” The PR machine is spinning out a mutual, amicable separation:
“Tiger is expecting a second child in his family and he’s looking for more time in his schedule,” said Peter Ternes, G.M.’s director of communications for sales, service and marketing. “At the same time, General Motors is looking to cut costs… we both agreed that we would part our ways.”