Sputtering Auto Industry Chokes Suppliers - Barron's [View article]
Thanks for the heads-up.
JCI, while very exposed to autos, stands to gain from the stimulus spending on the greening of Federal Govt. buildings, as well as various other stimulus on energy savings. However, anyone sitting on profits in JCI would be reasonable to take some off the table at around $20 (I did).
My take on CMI is that their exposure is mostly to the truck and heavy equipment market, rather than autos. However, I've been watching it and consider it overpriced.
You have not mentioned Modine (MOD). A few weeks ago, they renegotiated terms with major lenders and moved back off the brink. Do you have any insights on its current prospects?
I would expect CMI & MOD to gain some benefits from energy stimulus, although to a lesser extent than JCI.
Disclosure (Long positions in JCI and MOD, none in CMI).
Preview from Europe: Pigs Scare the Market Bulls [View article]
"..... there does appear to be some underlying resilience to the recent rally, presumably helped by the positive earnings surprises ...."
et tu Mole ? I cannot fathom the notion that when revenues are down 20-40%, and earnings down by 40-80%, we should rejoice because of the "positive surprise" that they are "higher than expected". I imagine that those who did the "expecting" were being clever, hoping all will celebrate and drink the kool-aid.
Obama Wants a 'Better Plan'? Here's One: Bite the Bullet [View article]
Mr. Wood,
You are a voice of reason, and judging from your "Profile" you appear to have the experience to understand the issues. I fully agree that biting the bullet late is better than never, and that the only way to ensure long-term prosperity is to let natural market forces bankrupt all irresponsible and incompetent gamblers. Those who cannot properly assess risk should not be bailed out and entrusted with allocating society's capital resources.
One poster suggested that it's too late to bite the bullet, as this should have been done four years ago. My opinion is that we should never have put ourselves in a position to need to bite the bullet in the first place, and all it would have taken is to put experienced and thoughtful individuals at the helm of the fed, instead of self-promoting pop-stars like Mr. Greenspan. Like you, I fear that repeating his failed policies now, in amplified form, will bring greater economic disaster down the line.
Ousting Rick Wagoner Won't Solve GM's Problems [View article]
Wagoners "mismanagement" of GM pales by comparison with the large banks' MISMANAGEMENT. An amazing double standard, given that the administration has not demanded the resignation of the top managements at banks that had to receive taxpayers' bailouts. Instead, the mismanagers continue at the top, and continue to extract huge rewards for their incompetence.
Capitally Challenged Stocks That Could Be Diluted or Extinguished [View article]
This is an excellent article and a prudent view of current valuation metrics: (a) Balance Sheets Rule the Day. (b) Cash is King (c) Debt is Death.
Unfortunately, many of our largest companies are managed by overpaid incompetents supervised by ignorant and irresponsible boards, who have failed to think through the sobering reality your article brings to light. Thus, they continue to embark on debt-fueled, cash-wasting mergers, ignoring the obvious lessons of a de-leveraging world. Dow Chemical was first, and has thus managed to morph, miraculously, from a US corporate powerhouse into a zombie on life support. Pfizer, then Merck followed close on Dow's heels, in an astonishing display of foolishness.
The lesson I learnt in the past few months, is that one has to apply a "mismanagement discount" to stocks, since the probability of arrogant managers demolishing the value of perfectly excellent companies has to be added to the other uncertainties of this complex market climate.
(disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)
As GM Goes, So Goes the Nation (Part 2) [View article]
James, your article is so well written and well researched and organized, I had to read it a second time.
Just another thought: GM's problems are the result of very poor management, but, perhaps partially they are also a victim of the US's economic trajectory and socio-political environment.
The problem of unfunded liabilities is a product of our economic trajectory. We were so rich and prosperous, that they needed 600,000+ employees to churn out our cars in the years before automation had fully developed. This greatly expanded GM's burden as these folks retired with what our socio-economic environment dictated for appropriate benefits.
The debacle of the past decade, leading to the recent catastrophic sales collapse, is partly due to artificially low interest rates bringing future demand forwards in the period 2001-2007. Many of the folks who would have been buying cars in 2007-2009, are not, simply because they already bought them sooner than they might have. In this regard, they are a victim of the fed's populist policy of low rates for instant gratification.
My view is that GM was indeed poorly managed, but our large, failing banks were managed even worse. Additionally, GM was, in part, a victim of political and socio-economic history, as well as the interest rate environment, to an extent that goes unmentioned in most articles about its crisis.
As GM Goes, So Goes the Nation (Part 2) [View article]
An excellent and sobering article.
You state: "The only logical solution is for GM to enter a pre-packaged bankruptcy with financing provided by the U.S. government if bank financing is unavailable. Shareholders and bondholders will be wiped out. They made a bad investment,...."
Many others have expressed similar sentiments, and I would agree if this sentiment was applied uniformly in a true free market.
However, by this logic, shareholders and bondholders of bankrupt banks should be wiped out just as well, as they made equally bad investments. However, the government seems to be intent on applying a double standard, spending trillions to protect the shareholders and bondholders of banks. Is it that the banks' shareholders and bondholders just happen to be too rich and influential?
Also by this logic, homeowners who purchased overpriced housing that they cannot afford should be wiped out, after all, they to made a bad investment decision. But here we are, spending hundreds of billions to bail them out. Is it that they are just too numerous and too vocal?
This double standard plays havoc with investment decisions, and utterly destroys confidence in markets which have become like a rigged casino in which the house favors certain players, unbeknownst to the others.
(disclosure: owns securities in auto companies, as well as banks)
You are spot on. Too many people want something for nothing. Bailouts and stimuli are just another way to re-distribute wealth from the productive and the prudent, to the unproductive and wasteful. A sure way to increase the number of dependents per productive member of society, taking us along the GM slippery path.
What Does GMAC's Bond Exchange Failure Mean for Detroit? [View article]
Good. Now a question for you or others on this forum:
Not being knowledgeable about bond covenants, I've always wondered why a company can't simply buy back its bonds on the open market, just like a stock buyback. When a company's bond is trading at $0.20 on the dollar, why don't they just buy it on the market?
Bailouts Affect Industry Winners Too [View article]
It's the same with banks. When the fed backstops Citi's toxic waste, allowing it to resume piling debt at terms that don't reflect the risk, how can a better run bank (like WFC or UST) compete?
For that matter, how can any business compete in an economy where the fed or treasury pick the winners and losers?
When Bankruptcy Is Good for Bondholders [View article]
Sputtering Auto Industry Chokes Suppliers - Barron's [View article]
JCI, while very exposed to autos, stands to gain from the stimulus spending on the greening of Federal Govt. buildings, as well as various other stimulus on energy savings. However, anyone sitting on profits in JCI would be reasonable to take some off the table at around $20 (I did).
My take on CMI is that their exposure is mostly to the truck and heavy equipment market, rather than autos. However, I've been watching it and consider it overpriced.
You have not mentioned Modine (MOD). A few weeks ago, they renegotiated terms with major lenders and moved back off the brink. Do you have any insights on its current prospects?
I would expect CMI & MOD to gain some benefits from energy stimulus, although to a lesser extent than JCI.
Disclosure (Long positions in JCI and MOD, none in CMI).
Preview from Europe: Pigs Scare the Market Bulls [View article]
et tu Mole ? I cannot fathom the notion that when revenues are down 20-40%, and earnings down by 40-80%, we should rejoice because of the "positive surprise" that they are "higher than expected". I imagine that those who did the "expecting" were being clever, hoping all will celebrate and drink the kool-aid.
Wall Street Breakfast: Must-Know News [View article]
I thought they already did.
Geithner to Put Chrysler in Bankruptcy Next Week [View article]
Obama Wants a 'Better Plan'? Here's One: Bite the Bullet [View article]
You are a voice of reason, and judging from your "Profile" you appear to have the experience to understand the issues. I fully agree that biting the bullet late is better than never, and that the only way to ensure long-term prosperity is to let natural market forces bankrupt all irresponsible and incompetent gamblers. Those who cannot properly assess risk should not be bailed out and entrusted with allocating society's capital resources.
One poster suggested that it's too late to bite the bullet, as this should have been done four years ago. My opinion is that we should never have put ourselves in a position to need to bite the bullet in the first place, and all it would have taken is to put experienced and thoughtful individuals at the helm of the fed, instead of self-promoting pop-stars like Mr. Greenspan. Like you, I fear that repeating his failed policies now, in amplified form, will bring greater economic disaster down the line.
Preview from Europe: Market Back on the Defensive [View article]
I'd suggest that this sort of operation will continue on a massive scale in various ways, some transparent and others concealed.
Ousting Rick Wagoner Won't Solve GM's Problems [View article]
Capitally Challenged Stocks That Could Be Diluted or Extinguished [View article]
(a) Balance Sheets Rule the Day.
(b) Cash is King
(c) Debt is Death.
Unfortunately, many of our largest companies are managed by overpaid incompetents supervised by ignorant and irresponsible boards, who have failed to think through the sobering reality your article brings to light. Thus, they continue to embark on debt-fueled, cash-wasting mergers, ignoring the obvious lessons of a de-leveraging world. Dow Chemical was first, and has thus managed to morph, miraculously, from a US corporate powerhouse into a zombie on life support. Pfizer, then Merck followed close on Dow's heels, in an astonishing display of foolishness.
The lesson I learnt in the past few months, is that one has to apply a "mismanagement discount" to stocks, since the probability of arrogant managers demolishing the value of perfectly excellent companies has to be added to the other uncertainties of this complex market climate.
(disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)
As GM Goes, So Goes the Nation (Part 2) [View article]
Just another thought: GM's problems are the result of very poor management, but, perhaps partially they are also a victim of the US's economic trajectory and socio-political environment.
The problem of unfunded liabilities is a product of our economic trajectory. We were so rich and prosperous, that they needed 600,000+ employees to churn out our cars in the years before automation had fully developed. This greatly expanded GM's burden as these folks retired with what our socio-economic environment dictated for appropriate benefits.
The debacle of the past decade, leading to the recent catastrophic sales collapse, is partly due to artificially low interest rates bringing future demand forwards in the period 2001-2007. Many of the folks who would have been buying cars in 2007-2009, are not, simply because they already bought them sooner than they might have. In this regard, they are a victim of the fed's populist policy of low rates for instant gratification.
My view is that GM was indeed poorly managed, but our large, failing banks were managed even worse. Additionally, GM was, in part, a victim of political and socio-economic history, as well as the interest rate environment, to an extent that goes unmentioned in most articles about its crisis.
As GM Goes, So Goes the Nation (Part 2) [View article]
You state: "The only logical solution is for GM to enter a pre-packaged bankruptcy with financing provided by the U.S. government if bank financing is unavailable. Shareholders and bondholders will be wiped out. They made a bad investment,...."
Many others have expressed similar sentiments, and I would agree if this sentiment was applied uniformly in a true free market.
However, by this logic, shareholders and bondholders of bankrupt banks should be wiped out just as well, as they made equally bad investments. However, the government seems to be intent on applying a double standard, spending trillions to protect the shareholders and bondholders of banks. Is it that the banks' shareholders and bondholders just happen to be too rich and influential?
Also by this logic, homeowners who purchased overpriced housing that they cannot afford should be wiped out, after all, they to made a bad investment decision. But here we are, spending hundreds of billions to bail them out. Is it that they are just too numerous and too vocal?
This double standard plays havoc with investment decisions, and utterly destroys confidence in markets which have become like a rigged casino in which the house favors certain players, unbeknownst to the others.
(disclosure: owns securities in auto companies, as well as banks)
The Real Cost of Economic Stimulus [View article]
The Bailouts Are Doomed - All of Them [View article]
What Does GMAC's Bond Exchange Failure Mean for Detroit? [View article]
Not being knowledgeable about bond covenants, I've always wondered why a company can't simply buy back its bonds on the open market, just like a stock buyback. When a company's bond is trading at $0.20 on the dollar, why don't they just buy it on the market?
Thanks.
Bailouts Affect Industry Winners Too [View article]
For that matter, how can any business compete in an economy where the fed or treasury pick the winners and losers?