Vultures Feed Off Of Bull Market Carcass

Elaine Meinel Supkis

This particular bull market is actually a vulture market. As everyone flocks to feed off the carcass of our economy, it looks as if there is great opportunity and good times but how can this be with the housing debacle, the US auto industry on the ropes and the trade deficit soaring? Looking past this dangerous feeding frenzy means understanding how the dessication of our economy can be profitable in the short run.

From Market Watch:

Cerberus Capital Management's decision to inject $7.4 billion into Chrysler in return for an 80.1% stake in the Detroit automaker is a good deal for owner DaimlerChrysler , as it will relieve it from heavy pension obligations, Equinet analyst Tim Schuldt said Monday. "They're not really getting anything for it in terms of cash, but relief from pension obligations, which is quite important," he said. "Quite a few people had feared that they [DaimlerChrysler] would have to inject cash before getting rid of Chrysler," he added. Schuldt also said he found it "astonishing" that the deal gained the support of the United Autoworkers, which he said has in the past been opposed to a deal in general. "It's especially surprising as it's a deal to sell to private equity," he said.

The Germans were about to simply shutter the last factories and hightail it back to der Vaterland. Es ist einfacht (Tis simple). The entire US auto industry gambled during the 1990s that energy would be cheap forever and so they built a gigantic fleet of gas guzzlers and Americans jumped into these foolish machines. Then the price of energy began to climb rapidly for various reasons, the number one being, the US and UK launching an illegal invasion to steal oil from the Iraqi people.

Starting in 1968, the US began to import oil. By 1980, thanks to us hitting the Hubbert Oil Peak, we imported vast quantities of oil. To keep down inflation, to protect the USA's bottom line meaning keeping our trade deficit under control, the government mandated better fuel milage cars. But they had a loophole for trucks and truck-suspension vehicles, SUVs.

This elephantine hole has allowed an invasion of behemoths that get very poor milage. Two years ago, I went to showrooms to photograph the milage charts on these guys. 11 miles to the gallon was common.

So here we are, with world oil prices shooting to the moon, the entire country driving a zillion gas guzzlers and this is not only destroying our balance of trade and causing inflation but is also killing our own auto industry as Americans rush to buy gas misers. There is little money to be made, selling good cars that get good milage. Except for Japan. Thanks to their fake yen. Even so, the Japanese built factories here for producing gas guzzlers which guzzle less gas than American gas guzzlers.

Today we see relief in Germany as the exit the American gas guzzler market and relief they no longer have to carry the burden of the private insurance that goes along with American business. Germany has national health insurance and so they don't have that huge overhead. The Japanese are building factories only in the deepest south where there are no unions or in Canada where there is universal health insurance. Congress won't even talk about imitating Germany, Japan and Canada in this matter. Hello, suicide.

The fact that Cerebus, a dark organization that has little money but uses funds funneled out of the Bank of Japan, is buying is bad news. For Cerebus has zero experience running a car manufacturing company. The experts all stayed away from this downward bidding war because they know a dead dodo when they see it.

Cerebus isn't bringing in money, it is LOADING ON DEBT onto this sinking ship. How will this help? Sort of like loading on dead lead weights onto the legs of the passengers of the Titanic, that's how.

Of course, the fools celebrating any uptick in the stock ticker think this is glorious news and not a death knell. And this preverse thinking infects everything connected with our economy. Namely, the bull died several decades ago. In 1972, to be exact. And all the wonderful things we have seen since have really been the flood or red ink blood pouring out of this carcass and now the vultures are picking at the bones.

Once they get the last shreds of flesh, the bull market will be a skeleton bleaching in the sun.

From Market Watch:

Members of Ford Motor Co.'s founding family are discussing the sale of part of their controlling stake in the money-losing automaker, Bloomberg News reported on Monday, citing three people with direct knowledge of the talks. Chairman Bill Ford briefed directors on family members' views before the annual shareholders meeting last week in Wilmington, Del., the report said. At a gathering last month, some family members urged that investment bank Perella Weinberg Partners be hired to advise on a share sale or alternative strategies, the report added.

Time to row away from this sinking Titanic. Ford is basically reloating to China. The family which founded this great American company see the writing on the Great Wall and want to jump ship. This is true of many families running business empires. Walmart, the marketing genius which blasted open the doors of American trade to allow a flood of Chinese imports, are now seeing their consumer base melt away as poverty grows due to high energy costs and the sad fact that low income people love huge SUVs which mak them feel like the King of the Road.

Well, they are now the Chump of the Dump. So, time to leave. Goodbye, Ford.

From Forbes:

Just as U.S. automakers progress on cutting costs and freshening up their lineups, it looks as if they'll need to start bracing for a summer of profit-busting incentives.

General Motors' (nyse: GM - news - people ) Tuesday announcement of 0% financing deals on some of its hefty Chevrolet Silverado and GMC Sierra trucks may be just the tip of the iceberg for automakers looking to clear out inventories in advance of the 2008 model year. A sluggish economy that's still getting no traction from a slumping housing market has dampened the auto industry's outlook for the coming year.

And the fire sales begin. The profit margin for American manufacturers competing with Japanese manufacturers using the cheap yen has now vanished. And the Chinese haven't even begun to import cars. They intend to do this, it is part of the long, long range plan. They will surplant our plants and then surplant our nation. All major Chinese actions are aimed at this one thing: to destroy our industrial base so we can't manufacture much of anything in the case of a war! The Chinese leaders carefully read Dr. Kennedy's famous book about the rise and fall of empires. I wish America's rulers read this book, too.

But they can't. And they won't. So we go on and on, this stupid business of celebrating all the things that are destroying us! The fact that manufacturers are cutting prices in desperation even as inflation rages is a terrible sign! And we know what is going to happen next! We went through this twice before in my own life! Is everyone running this joint senile like Reagan or insane like Bush?

Ha. When an empire's rulers are insane or senile, expect this sort of garbage.

From Market Watch:

I owe the story to Dennis Slothower, editor of a newsletter called On The Money. In his hotline Friday night, he pointed out that the China Banking Regulatory Commission, in an attempt to cool its overheated stock market, had ruled that Chinese banks "can now invest as much as 50 percent of funds in overseas stock markets."

Slothower calculates that this means that "up to $2.3 trillion in China monies ... can now move out of China."

To put a sum like that in perspective, consider that the total value of all publicly traded stocks in this country is around $15.1 trillion, according to Wilshire Associates. If even a modest fraction of the $2.3 trillion makes its way into U.S. stocks, we could see a "further parabolic advance in equities," as Slothower puts it.

I hasten to repeat that there is no guarantee that the future will play out this way, just because a plausible story can be told. Slothower, for his money, remains only cautiously bullish, with 30% to 40% of his model stock portfolios in cash.

I nevertheless find it noteworthy that a story can be told about the stock market that provides plausible grounds for believing that maybe, just maybe, the best in the stock market is yet to come.

Isn't this insane! So, the Chinese workers, flush with funds, seeking a way of getting richer, will bless us by pouring some of this money back into our own system! The vultures flap their wings with joy. The field mice arrive to strip down the carcass further. Not a yuan of this new wealth will flow into making industries that will compete with the Chinese! DUH.

Further: Boeing planes and selling military equipment is what our trade is all about and the Chinese are already beginning to tear out our bellies over this. Today, Xinhua reports China shot a Nigerian satellite into space for them. And China is selling more and more high-tech stuff and they are just beginning to build airplane companies and it is just a matter of time before they esviscerate us over Boeing's markets.

From Xinhua:

Zhuzhu is not alone. According to a new survey conducted by the Chinese Youth and Children Research Center (CYCRC), increasing numbers of children in large cities across the country are experiencing joyless childhoods.

The CYCRC surveyed 2,500 primary and secondary school pupils across the country in Beijing, Shanghai, Guangzhou, Changchun, Chengdu and Lanzhou. The results of the survey reveal how, due to long school hours and growing pressure from parents to study hard, children are feeling unhappy about a lack of playtime.

On average, China's children spend 8.6 hours a day at school, with some spending 12 hours a day in the classroom. The survey also claimed that the majority of children spend longer hours at school than their parents spend at work.

The Chinese are imitating the Japanese school system. This has many dangers. But in the short term, it means they will beat the US where it counts the most: intellectually. Many of these students will go to American universities where they will displace our own students. And this is where the rubber meets the road: who has the best education, the greatest desire to excell and the most motivation to succeed.

And I don't mean as vultures, either.

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Comments

[D. F. Facti]

OK - I have a short fuse today - I can't read any farther than the Cerberus capital injection is chiefly going to relieve Chrysler of its pension obligations.

Like that's what's wrong with Chrysler.

[Elaine Meinel Supkis]

They are going to kick ALL the retirees to the grave. Period. Wealth is very closely attached to Death. Pluto is the god of gold and death.

To get richer, these Hell Hounds will hound workers who have retired or want to retire, to death. There is no way around this fact.