Category: Economy

HAPPY NEW YEAR EVERYONE!

It’s the start of the new calendar year, the start of a new Presidential administration (well on the 20th actually), and of course the start of the first business quarter.  We got in some disturbing, ok that’s putting it mildly, some crappy manufacturing news from the gang at ISM.  The steel industry, in hopes of restoring some business, initiates a new campaign. Arizona & Michigan are starting a green jobs plans. All this, but first…

Greetings folks, I hope your holiday season is going well.  In case you were wondering, there was no Manufacturing update last week, family and health related issues.  This week will be kinda short, my apologies, but I wanted to cut some of the gloom and doom for the holiday season.  We got stuff on solar energy, a new grant system for electric car innovation, milestones on wind, and something for the kids!  But as always, we hit our first section…

On Friday morning, George W. Bush announced he would allow the Treasury Department to use a small fraction, $13.4 to $17.4 billion, of the $700 billion financial bailout to help automakers GM and Chrysler.

While normally Bush would have just let the automakers go bankrupt, he explained in a televised speech before the U.S. markets opened. “But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action,” Bush said.

Then shortly after Bush’s finished his remarks, Treasury Secretary Henry Paulson announced that he needed more money. According to the Washington Post, Paulson noted that “that nearly all of the funds remaining at his disposal have now been committed for a loan to the nation’s automakers.”

The message being crafted is that helping the automakers forced the Bush administration to ask the second half of the bailout money. The message has been developing over the past two weeks.

My oh my, what an interesting week, and I don’t mean that in a good way.  From our trade deficit to our automakers on the brink of joining our domestic consumer electronics firms, things aren’t looking all that swell.  The latest indicators are showing, at least for November, what has been on everyone’s mind, the economy.  Some are saying, though that things will pick up, that the recession began a year ago and we’ll come through it by 2009.  We’ll see, when the average worker is able to stop worrying not just about making rent or that mortgage payment, but also putting food on the table, then I’ll agree.  Globally, like the United States, things for now look dim.  And like I said, the figures show it…which leads us to the Numbers!

This morning in Docudharma Times, Mishima noted that polls indicate —

That Americans believe that the big 3 shouldn’t be bailed out. Do they understand the residual effects it will have upon the economy if they are allowed to fail? It doesn’t appear so.

The “reasons” why many Americans do not support the bailout are mixed. I think these are the main “reasons” that I’ve heard:

• Anger over the Wall Street bailout

• Anger over Detroit vehicle selection (electric car versus SUV)

• Anger over rich automaker executives

• Anger over “overpaid” union workers

So, what’s behind this anger?

Here are the current Circuit Breaker Rules.

As you will certainly know by this time, the Senate has failed to invoke cloture on the Bridge Loan Bill by a 35 – 52 vote and Harry Reid has declared himself the failure he is and is adjourning the Senate for the holiday.

You can expect GM to declare bankruptcy by Monday and thousands of parts suppliers to do the same by Christmas.

The overnight markets in Asia are already tanking and you can expect selling pressure to move west with the dawn.  If Dow futures are not down over 400 points by opening bell I’ll eat my hat.

I expect it will go downhill from there.

Trading halts for 1 hour with a 1100 point drop before 2 pm.  If there is a 2200 point drop before 1 pm there will be a 2 hour halt.

If the DJIA loses 3350 points, regardless of time, the market will close.

This is a very real possibility.

If you have equity it’s too late to sell now, all you can do is hang on and see if things get better, but this is bad.

Very bad.

Late updates from Firedog Lake-

Auto Bill Fails: Market Bails By: Ian Welsh Thursday December 11, 2008 9:00 pm

White House May Just Lend Auto Companies the Money Through TARP By: Ian Welsh Thursday December 11, 2008 9:20 pm

Wire Business News Update below.

Joseph Stiglitz won the Nobel Prize for economics in 2001.  He was Chairman of the President’s Council of Economic Advisors from 1995 to 1997 for Bill Clinton.  He is also the former Senior Vice President and Chief Economist of the World Bank.  He opposed financial industry deregulation under Clinton, fought with Larry Summers, who is now Obama’s chielf economic advisor, over regulating derivatives (Stiglitz wanted to, but Summers won and that wrong decision contributed to the mess we are in.)  Stiglitz, while favoring trade, has questioned some of the faith-based beliefs of the free trade fundamentalists.    

Stiglitz has an excellent article in Vanity Fair on how we got to the worst economic times since the 1930s.  He points to five key mistakes-under Reagan, Clinton, and Bush II-and one national delusion.

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal.

Joesph Stiglitz, Capitalist Fools, in Vanity Fair

Free market fundamentalism is the God that failed.  More, after the fold.

Damn, talk about a pretty intense week!  The auto sector looks like it just…just might get saved.  Still, it looks as if the issue of over capacity is being looked on, which means job cuts.  Sadly, that seems to be the theme of this week’s manufacturing update. Well actually there is something on health care…think of it as “nyceve lite”. They say it gets darkest before the light, well this must be a long tunnel then.  ISM is saying that ’09 will suck as bad as 2008.  Well before I dispense with the unfortunates, it’s time for the Numbers!