Volt no jolt: LG Chem employees idle

If you want accurate sales forecasts, don't listen to the manufacturer's propaganda.  Go to the source:  their vendors.  Politics aside, and for a myriad of reasons, sales of GM's electric car Volt, have been dismal.  Since General Motors is now "Government Motors", taxpayers are undoubtedly getting the most bang for their buck, paying for idle employees to play card games.  And I'm sure this will stimulate the economy as Chevy Volt's are pouring out the back door, stuffing the dealer channels to "boost" sales figures.

http://www.woodtv.com/dpp/news/target_8/Volt-no-jolt-LG-Chem-employees-idle

GM = The future of the US?

Bill Gross: GM Failure a Preview of Our Future Economy

Monday, June 8, 2009 1:25 PM

By: Julie Crawshaw Article Font Size

The General Motors failure is a harbinger of things to come for the United States as a whole, says bond guru Bill Gross.

"I think it is important to recognize that General Motors is a canary in this country's economic coal mine; a forerunner for what's to come for the broader economy, the Pimco co-CEO writes in a note to investors.

"Their mistakes have resembled this nation's mistakes; their problems will be our future problems."

The most significant comparison between GM and the U.S. economy is the enormous unfunded healthcare and pension liabilities they share, Gross says.

“Reportedly, $1,500 of every GM car sold in the dealer showrooms goes to pay for current and future health benefits of existing and retired workers,” Gross points out, making the car manufacturer liable for nearly $60 billion in healthcare costs.

“The total future healthcare liability for all U.S. citizens can be measured in the tens of trillions,” Gross notes.

A study to be published in the August American Journal of Medicine — the first-ever to be based on a national random-sample survey of bankruptcy filers — shows that illnesses and medical bills contribute to a large and increasing share of consumer bankruptcies.

"The U.S. healthcare financing system is broken, and not only for the poor and uninsured,” writes study author David U. Himmelstein, M.D.

“Middle-class families frequently collapse under the strain of a healthcare system that treats physical wounds, but often inflicts fiscal ones."

© 2009 Newsmax. All rights reserved.

GM on the ropes

I've stated for months that General Motors will be insolvent within 18 months (now 12 months--see previous blogs), and now CNBC is splashing it all over the headlines today. Shorting it was the call. It may go down further, but if this trade was put in a while back, it's time to cover and take profits. I may miss out on further gains, but there's no need to be greedy.

The larger issue is the cascading of financial crises from one sector to another, and to the general economy overall. The capitulation is coming (despite several false proclamations already), and we want to see a definitive bottom forming before jumping back in. I will confess that I nibbled at quality yesterday on long-term plays, but it is still too early to catch the falling knife. Warren Buffett stepped up big with Goldman Sachs and GE, and in hindsight, could have bought better (and lower). Even the best of the best can be early. But let's face it--even he admits he is a lousy market timer--he is a long-term value buyer, being a Benjamin Graham disciple. His participation means we're closer to a bottom than a top, but the market and the economy still need to unwind some more before I feel confident we indeed have reached bottom. My rule (and one I don't always follow, to my detriment), is to sell early (to avoid the bulk of the carnage), and buy late (even if it means I don't catch the exact bottom). Specifically, I want to see confirmation, and right now, we're not anywhere near close to that.

As usual, I am not dispensing advice and please consult your investment advisor, but the call here is to play some more golf--you'll save money for now.

Washington Mutual...what's next?

I posted this last week on WaMu:

Well, another shoe just dropped--the biggest bank failure ever. Washington Mutual was just seized over night, so good luck to any depositors with over $100,000 in their accounts. I'm going to guess there are many Californians, Floridians, New Yorkers, and Washingtonians who lost millions.

Hate to be the bearer of bad news, but this is getting ridiculous. I saw this coming a couple years ago, and adjusted accordingly, but my friends thought I was a doom and gloomer, when in hindsight, I wasn't gloomy enough.

So what's next? More bank failures, I assure you. Berkshire Hathaway's Warren Buffett (only the wealthiest man in the world), just mandated that one of their portfolio companies stop insuring any assets above the FDIC limit of $100,000. That should tell you something--get any amount over that limit out of there--now! Bank deposits, money markets, etc. are NOT the safe haven you thought they were. Check the capital reserves of your bank (banks are required to have reserve requirements to cover bad loans) to measure how healthy they are. I predict hundreds, if not thousands of banks will fail going forward. Heck, the biggest ones are failing before our eyes--expect this to cascade to other major money centers, as well as smaller regional banks. The Federal bailout programs may save some, but if they let big commercial banks like WaMu go under, and big investment banks like Lehman fail, should we have confidence that the local bank around the corner will be saved?

I hate to be an alarmist, but I can't in my conscious NOT give my opinions. As always, seek professional investment and tax advice from your investment advisor and tax advisor. But please, do your own research as well, because they are human and not infallible.

Looking further out, I predict General Motors will be insolvent within 18 months. Shareholders will be slaughtered. Their manufacturing costs are too high relative to their nimble competitors, and their obligations to fund the pension fund and healthcare will drive them to bankruptcy. Instead of building hybrids in the face of $5 a gallon gas, they continued to build gas-guzzling SUVs.

In between banks failing and American industry icons going under, everything else is Jim Dandy. :-) The economy will recover, but it's going to be a long time before things get better. I'm thinking we bottom out in 2010, which means we've got a few more years of pain.

Keep a cool head, stay the course, and tell your loved ones how much they mean to you.