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Bankruptcy In America

In America, if a company can’t make a profit and loses money, they have one choice and that’s to file for bankruptcy.  Just because a company is big doesn’t mean that the government has to lend them taxpayer’s money to save it.
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It’s amazing to see how the CEO’s of these big corporations have destroyed the company so much that they need the assistance of the U.S. government and the American taxpayer to save their skin. How can these men with such education be so stupid to take on the extreme risks that they did?
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What I really want to know is how stupid is Congress to keep on bailing out these companies that shouldn’t even be allowed to operate as a business after losing that much capital. Using the excuse that they’re such big business’ within the United States is a lame one at that. Yes, many people will lose their jobs and the unemployment rate will jump into the double digits, but what other choice do we have? Do we keep giving them money until the Federal Reserve runs out of paper to print more? The airline industry went through bankruptcy years ago and they’re still in business (except for Eastern of course).
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Do you really think that if the big three automakers go into bankruptcy that they (or we) won’t survive? We as American people have to not fall for the hype that the CEO’s, Congress and the mainstream media are trying to feed us. Look at all the money that’s was given to the financial industry and now it turns out it wasn’t used for what it was meant to be used for.
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What about the banking system mess? These companies along with Congress have also done the wrong thing to the American people. If it wasn’t for Congress passing all those bills in the 1990’s that allowed the financial sector to lend money out in sub-prime mortgages, we wouldn’t be in this mess.
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What has me really PO’d is that none of the people who are actually at fault, are being held accountable. Hank Paulson, Dick Fuld, Christopher Cox, Frank Dodd, Barney Frank and the President-elect are all to blame for the financial mess. Dick Wagoner, Alan Mulally and the UAW are to be blamed for the failure of the auto industry. I would like to blame Bob Nardelli from Chrysler too, but he just got there (I will blame him for the fall of The Home Depot).
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Capitalism is what this country was built on, if we are to continue as a capitalistic country we need to let companies fall when they fail to make a profit.
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When the decision was made to let Lehman Brothers filed bankruptcy, the company had no other choice but to restructure everything and sell of the assets that they had to clear their debt. If the American automakers are forced to do the same, they too will do what they have to to make the company survive. If they need to sell off assets, I’m sure that there’s an entrepreneur some where in this country that is willing to make profitable business out of the ashes. He could name the first model Phoenix.

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Ethanol And Alternative Energy

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photo by plan my green

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Now with the price of oil being down over 60% since it’s July high of $147 per barrel, it seems that ethanol and other alternative energy sources have fallen out of flavor with investors. It was obvious to see that we needed to find other means to supply our fuel needs when we were paying $4.11 per gallon of gas (national average July 7, 2008), but with the price of gas now at $1.89 (Nov. 24,2008) people and investors are being blinded by how cheap it is at the moment.
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Ethanol is a fuel source that is derived from corn. A fuel source that has been in use for many years. Unfortunately, it has cause the price of corn to be very volatile and may cause a food shortage if we’re not careful.
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Other alternative energies consist of wind, solar, nuclear and natural gas. All of which we can produce and manufactured in our own backyard without the assistance of foreign countries.
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The problem is that with the price of oil falling to where it was in March 2007, it has made the idea of alternative energies less competitive. The credit crisis has also made it even harder to get the funding that is needed to expand on these ideas.
T.Boone Pickens plan of have a major wind farm built in Texas has been delayed because of the lack of financial lending.
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It now seems that President-elect Obama is getting on board with Mr Pickens and his ideas to free this country from the dependency of foreign oils. Word is spreading that within the next stimulus package, alternative energies will be added in.
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Out of the choices that were listed in this post, ethanol is the one that Obama is favoring the most. If that’s the case, ethanol stocks may be something that might interest you. I do not recommend any ethanol stocks because of what is going on with the industry. VeraSun Corp. (NASDAQ:VSE) has filed bankruptcy last week and it’s leading competitor Poet LLC, a private held company is looking to acquire them.

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Henry Paulson And The Recession

Henry “Hank” Paulson was the CEO of Goldman Sachs for many years. He has too many friends in the financial sector as well as on Wall Street. The man should never have been selected by President G.W. Bush, but he was and at the time everyone thought it was a great idea.
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Why was it a great idea? Because at the time the markets were recovering from the tech bubble collapse in the Stock market. He was also one of the guys who help redesign the hedge funds (another reason we have this financial meltdown) as well as pushing the idea of sub-prime mortgages. The Democrats loved him because he was full-filling the “American Dream”, getting everyone into the house they wanted, no matter what.
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It’s now come to a point that he’s out-lived his usefulness in the Treasury Department. He’s been having press conference after conference in just the last couple of weeks that shows that he doesn’t even know what to do for the economy while still trying to help his cronies within the financial sector.
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I’m counting down the days until Paulson will be out of the position. The job will now fall on Obama’s choice for Secretary of Treasury. Timothy Geithner will fill that position next month. The man has a long history with the economy and the Treasury department as well as being in charge of the New York Federal Reserve. Timothy Geithner has made a name for himself on Wall Street and some of the rallying in the markets last week was most likely due to the decision.
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Unfortunately the rally the only last so long in what is now “officially” a recession. That’s right the news was released Monday. The economic advisors and experts have now made it official. Like anyone with a half a brain couldn’t see that two months ago.
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The markets typically show the signs of a recession before it actually is made official. With that in mind, it’s nice to think that a recession is usually 8-12 months long. Looking back the markets have been showing signs of it for at least four months, which means that we can be half way through this mess already.
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As I’ve been saying for the last to months, build up some capital (40%-60% of your portfolio) and wait for the right time to buy to build a new position in the stock market. That time is just about upon us, so I say when the DOW reaches 7500 points again, start putting your money to work behind all that research that you’ve been doing.

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Citigroup

Citigroup (NYSE:C) Is now the center of attention now within the financial sector. Of course it’s expected since they too were doing what the rest of the industry has been doing for the last few years.
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Over the weekend the Federal Reserve and the Treasury department have been talking on how to stabilize the company. The discussions are still going on and not much more is being revealed. Speculation is that they are thinking of assuming some of the risky assets held by the company. As with the rest of the trouble assets that the government has taken over from the other troubled banks. Removing the assets off of Citigroup’s balance sheet will give them the chance they need to put them in a better position to do business and raise capital.
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From all the news coverage I’ve followed over the last few days, Citigroup has declined to comment.
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I was on vacation last week and while spending my time with my family, I didn’t follow any news, but to come back to find out that Citigroup lost nearly 60% of their stock value brought me back to reality real quick. Having Citigroup collapse could possibly bring the end to the entire sector. They are too intertwined within the sector.
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When you think about it, it shouldn’t be a surprise that this is happening. Look what happened to Citigroup last month when they tried to acquire Wachovia (NYSE:WB). They lost the opportunity to Wells Fargo Corp (NYSE:WFC). They are no longer the big dog on the block. As a matter of fact they are probably the most vulnerable of all the financial institutions out there.
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Who knows what is to come this week. Last week the DOW lost 5% and that’s after the 500 point gain on Friday. I’m going to catch up on the thing I missed and watch the action from the sidelines.

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Capitalism

With all the talk about the state of our economy, Obama being more of a socialist-type leader and the out-of-control bailouts, one wonders what is the idea of capitalism that this country was built on.
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Wikipedia defines capitalism as,”Capitalism is an economic system and a form of society, in which resources are controlled by private power, as opposed to a state or public institution.” (to read the rest…)
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If we are to survive as a capitalist country and continue what our fore fathers started two hundred and thirty two years ago, we must stop saving companies that are not doing the right thing to make it in the market.
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The government should have never started with all this financial assistance to save companies that have been doing the wrong thing to make money. Things that could be considered morally wrong and legally questionable at best. If a board of directors want to give millions of dollars to a man that makes decisions that will eventually cause the company to lose billions of dollars, well then they get what they ask for, bankruptcy.
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The big three automakers are another set of companies that should face the music like all other smaller companies must face if they don’t do the right thing to preserve their future. Chrysler became a privately held company about a year ago. The company choose Bob (corporate raider) Nardelli to be the CEO. If you guys are not familiar with Mr. Nardelli let me give you some first hand insight.
In the six years that Nardelli was the CEO of The Home Depot he removed more associates from the floor as well as eliminating many of the employee benefits. In effect of his decisions he ruined the customer service that The Home Depot was known for and help them stand out amongst the competition. How do I know this? I worked for The Home Depot before he got there and was there after he left. As a matter of fact, they fired him to get rid of him knowing that they would still have to give him $209 million departing package.
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Let’s get back to capitalism. If this is the way the government is going to start defining the meaning of the word, well then I suggest that if you have a company the isn’t making the money that it needs to make payroll and pay your suppliers, go to Washington and ask for a bailout.
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I don’t know about you, but I go into business to make money and I have only two choices… to either make it or break it and if I break it, it’s my problem not anyone else’s.

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General Motors And Ford Motor Company

General Motors And Ford Motor Co. as well as Chrysler are in Washington begging for money that they so desperately need. For more than a week we’ve been hearing them say that they will not last very long without the money.
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If the three auto makers go belly up and close their doors, it will cause about two million jobs within the United States. That would be the nail in the coffin in this country’ economy and send us closer to a depression.
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From where I sit, I see three companies that have been dragging their feet for the last three decades. We knew in the 1970’s that they needed to build a better fuel efficient vehicle and they along with the government’s protection, have been keeping the standards and the vehicles being as efficient as they were then.
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Yes, the Ford Expedition, the Hummer as well as the GMC Yukon look and drive great, but that is nowhere near being a wise choice to saving our dependence on foreign oil. None of these companies wanted to build the smaller cars in fear that no one would buy them. Guess what guys, no one is buy the one that you did build and that’s why you’re on your knees in Washington.
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The big three auto makers have the unions that are not helping the matter either. UAW (Union of Auto Workers) have been strong arming the companies for so long that it’s excepted has how it’s suppose to be. The union have been making more money of the workers than the auto maker are.
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BMW, Toyota and Honda all have plants here in America and employ Americans to build their vehicles. There are no unions in any of the facilities and their won’t ever be. They offer their employees great benefits as well as great pay. The average worker in these plants make $40-$48 per hour and don’t have to pay any union dues. They are not forced to work extended hours for the same amount of money per hour. They have the option to contribute to their 401K plan and make their own decision for the retirement.The days of slave labor in manufacturing plants in America are over,and these workers are protected from that type of employment.
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Let’s look at the big three, their average worker make $78 per hour and have to pay a ton of union dues to help them keep their jobs. They are also protected from slave labor, but there are labor laws in this country that do that already. What about their retirement? They are enrolled in the companies pension plan. which is covered with all the other dues they pay. The problem is that the three auto makers can’t even pay for the pensions that are out there already. Their pension payout keeps growing with no end in site.
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Giving the big three auto makers this money is more like throwing it away. These guys have been helped out in the past and will continue needing the assistance of the American tax payer to save their rear end. This is a capitalist country so let’s let capitalism work it way through.
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Hedge Funds Part Duex

Today five of the most powerful men in the hedge fund world are in Washington speaking to the Oversight committee. The were invited (told) to testify in Washington to the effect that hedge funds had in the economic crisis that is upon us now.
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George Soros Of Soros Fund Management, John Paulson of Paulson & co., Jim Simons of Renaissance Technologies along with Citadel Investment Group’s founder Ken Griffin appeared in front of Committee Chairman Henry Waxman.
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Ironically they agree that there needs to be more transparency from the industry of secretive funds. They also gave different views on whether or not they contributed th the financial crisis. George Soros di say that hedge funds were part of the reason for the financial bubble. Mr Soros wrote in a statement “A deep recession is now inevitable and the possibility of a depression cannot be ruled out,” sent to the Oversight and Government Reform Committee hearing.
This is the ma who is know for betting against the British pound back in 1992 and recently backing Senator Barack Hussein Obama for President.
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The Committee wants to hear from the leaders in the hedge fund industry about the role of these funds as well as their tax status and regulation. Oddly enough when the financial and economic world was falling apart, these gentlemen made on average $1 billion last year. That is also why they were called to appear in Washington.
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“Currently, hedge funds are virtually unregulated,” Waxman said. “They are not required to report information on their holdings, their leverage, or their strategies. Regulators aren’t even certain how many hedge funds exist or how much money they control.”
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I don’t know about you but this is quite fishy. Why is it that these guys can do what they do and not have to be accountable for their actions? Yes I know that many of them are operated outside of the United States, but they trade in U.S. currency and it’s assets.
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I also know that they are not the only reason for the collapse of the financial industry. Most of that blame does have to fall on the managers of those institutions, rating agencies, investment banks as well as the people who over-extended themselves with credit.
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As to the regulations that were non-existing for the last several years. Most of that blame must be put on Congress, the Treasury Dept. and the Federal Reserve. It’s their job to keep things in order. Unfortunately, many of those politicians were re-elected. Barney Frank, Henry Dodds along with Obama who was able to deflect most of the blame during the election. We will have to wait until 2010 before we have a chance to remove some of these lazy, elected government officials.
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David Ruder, a former chairman of the U.S. Securities and Exchange Commission tried a few years ago to force the hedge funds to register with the agency, but failed was also present at the hearing.
“Although hedge funds have been active participants in the financial markets during the past years, they do not seem to have played a major role in the events precipitating the crisis,” Ruder told the hearing.
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The men who were summoned to the hearing today are some of the leaders in the hedge fund industry. These guys are known by playing by the rules. The bad thing is that there aren’t that many rules for them to follow. Many of the hedge funds that we’ve been hearing about going under are the less respectable ones. The ones that don’t really follow any rules and leveraged the hell out of their funds.

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T Boone Pickens Update

For those who believe in alternative energy and expect big things from the industry may have to hold on a little longer. Throughout this week T. Boone Pickens has been going around speaking at events as well as being interviewed on CNBC on Wednesday saying that because of the credit crunch, his big plans for huge wind farms will be delayed.
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The financing just isn’t there and with falling prices natural gas that are used in power plants as well as oil prices hitting levels that haven’t been seen in over a year and a half are making his projects less economical.
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As I’ve writen before here on this blog, Pickens started a campaign to help the U.S. reduce their need for foreign oil. The plan is for major investment in the wind energy and the conversion of natural gas for vehicles
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He has said that this is just a temporary setback due to the financing of the project. When he spoke with the New York Times he was quoted in saying. “When we were looking at the project, we felt like we could do it with 30 percent equity and 70 percent debt.” The 70 percent debt is where we’re having a little slowdown.”
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Mesa Power, a company that he founded was given the job to oversee the massive wind farm in Texas that would be able to power over 1.3 million homes. The company has placed the orders for the first phase of the project. A total of 667 turbines from General Electric will be able to generate 1,000 megawatts of electricity that will power more than 300,000 average homes.
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Originally that part of the project was to go online in early 2011.
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This is just part of what we’ll see for the next several months with the condition of the credit crisis. So buckle up, it’s going to be a bumpy ride.

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Bailout And Rescue Plans

What is the difference between a bailout and a rescue plan? There really isn’t one. It’s just a matter of how you want to get the message across. The AIG bailout is what they were calling it, but then the government was getting too much slack for how it was being presented.
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So when Hank Paulson went to Congress to get $700 billion to save the financial sector and the credit markets, he first called it a bailout. Then Congress went ahead and didn’t pass the bill, which in turn caused the stock market to plunge. By the end of the week they repackaged it and pitched it as a rescue plan.
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Either way you look at it, it’s still the same thing.
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Now it’s General Motors (NYSE:GM) and Ford Motor Corp (NYSE:F) turn. What will happen is still not clear. There is still two and a half months before Obama takes office. President Bush and Obama sat down yesterday in the oval office to discuss several things that need to be hashed out. Rumor has it that the auto industry was talked about, but neither of the men will reveal what was discussed, even though it seems that Obama’s aids have leaked the information out.
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If we are to save this economy we will need to save jobs and create new ones. Letting the the two auto companies to fail and possibly close some or all of their factories will not help this country bounce back any quicker.
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If we can go ahead and save the white collar jobs of Wall Street, why wouldn’t we save the blue collar ones of Main Street. What’s your opinion on this topic? I’d like to know.

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The Obama Effect In The Stock Market

Now that Barack Hussein Obama has won the election, what will it do to the stock market? At this moment no one is really sure. I will say that since Tuesday morning the Dow has lost 600 points, that’s a drop of 6% in one week.
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During the campaign, we heard that a new President will save this economy as well as the stock market, President bush has ruined this country and many other negative comments.
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We are to believe that President -elect Obama is exactly what this country needs to bring us back from the disaster of the last eight years. it’s not a new President that this country needs, it’s fiscally responsible policies that will save it and nothing else.
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The markets are showing us in the last week that they are still not confident in what is presently going on in Washington. When Obama spoke last Friday, the DOW dropped 100 points, it did gain back those loses by the end of the day, but not any more.
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Obama’s camp announced this morning that they would be making any more cabinet selections this week, which again gave more reason to feel confident.The markets were up big again today when the bell rang (+200 on the DOW),but started selling off immediately where at 1:00pm it gave back 300 points. Since then it has started to climb, but who knows where it will close at the end of the day.
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There is still to much fear and uncertainty in the stock market and we should all be ready for anything. I don’t see good thing in the rest of this year and I’m prepared for it. If I’m wrong, well then the worse thing that will happen to me is that I’ll miss out on some gains, but if I’m right I’ll save myself alot of trouble.
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