The Economy, stupid

[NorthSideSox72]

If Chrysler comes back asking for more money now, let em burn.

Anyone want to give us a lecture about how corporate pay levels are reasonable because the executives are always beholden to shareholders and work in their best interest?

For companies that aren't on government welfare, I think the government should stay out of this.

 

But for Chrysler, since we basically own them now and they are gambling with the livelihood of tens of thousands of people over their own executive compensation... f*** 'em.

 

[Balta1701]

Something interesting playing in to the data we're getting on these "Profitable" banks. It seems that, especially amongst the ones we thought were in the worst trouble (Citi, etc.), although they're telling us how they're currently making profits, they're also acting like banks that are very concerned about what's on their balance sheets; dramatically cutting back on lending, esp. over the last couple months.

 

By the Journal's way of counting, they claim that lending in Feb. was off by 4.7% over January. Noteably, that's a raw number, not projected out over a year; it fell 4.7% in 1 month. Over a year that'd be well over a 30% drop if you factor things that way.

 

Whatever the banks are saying publicly, there's a lot more depth to those "profits" than what we've been presented so far. It's hard to know exactly what to make of those numbers, given the recessionary pressures, the movement of money between different types of lending, etc, but it's as interesting of a signal as the claims of profitability.

[southsider2k5]

Something interesting playing in to the data we're getting on these "Profitable" banks. It seems that, especially amongst the ones we thought were in the worst trouble (Citi, etc.), although they're telling us how they're currently making profits, they're also acting like banks that are very concerned about what's on their balance sheets; dramatically cutting back on lending, esp. over the last couple months.

 

By the Journal's way of counting, they claim that lending in Feb. was off by 4.7% over January. Noteably, that's a raw number, not projected out over a year; it fell 4.7% in 1 month. Over a year that'd be well over a 30% drop if you factor things that way.

 

Whatever the banks are saying publicly, there's a lot more depth to those "profits" than what we've been presented so far. It's hard to know exactly what to make of those numbers, given the recessionary pressures, the movement of money between different types of lending, etc, but it's as interesting of a signal as the claims of profitability.

 

What is happening is exactly what I told you would happen. The healthy banks want nothing to do with the federal governments every changing rules, so instead of taking the money and lending, they are cutting back on lending and tightening their belts. This is a direct result of Obama policy, nothing else.

[mr_genius]

If Chrysler comes back asking for more money now, let em burn.

Anyone want to give us a lecture about how corporate pay levels are reasonable because the executives are always beholden to shareholders and work in their best interest?

 

They shouldn't have got a bailout in the first place.

[lostfan]

So I was going down I-895 today in Baltimore, past the industrial part it goes through where you can see a lot of the port activity. I've gone down there a couple dozen times but this is the first time I've been there in several months... there are thousands, maybe even hundreds of thousands of cars parked in numerous lots along the highway, because they have nowhere else to go. I've also heard that there are still cars in containers on ships because the lots are all full, and apparently it's been like this for several months now.

[Balta1701]

There's something poetic about this statement from Barclay's.

We view the 17.75 percent stake in the Boston Red Sox as having among the very best long-term asset appreciation potential at the company,

 

The company they're talking about? The New York Times.

[Balta1701]

I actually kinda like this move.

The U.S. Treasury would own at least a 50 percent stake in General Motors under a plan the company released today to avoid bankruptcy.

 

The strategy would essentially formalize the government's control over one of the icons of corporate America.

 

By June 1, the Detroit-based automaker, which has already received $15.4 billion in federal loans, must gain significant concessions from stakeholders to continue to receive aid.

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Under the outlines announced yesterday, the federal government would take an equity stake of at least 50 percent, the United Auto Workers would take as much as 39 percent, the company's bondholders would get 10 percent and the existing shareholders 1 percent.

 

None of the debt-for-equity swaps have been formally reached, however, and it is still possible that the company will be reorganized in bankruptcy court.

The government gets a significant share in the company that can be sold off once the government-funded reorganization is complete, the shareholders and the bondholders get a huge hit, and GM starts to do the shrinking that it needs to do. It's better than dumping money down the GM hole like we're doing with all the banks. And they're giving the bondholders an ultimatum and trying to face them with legit bankruptcy.

The Treasury Department has mandated that GM swap two-thirds of its debt for equity. But GM bondholders have balked at previous proposals to do so.

 

"If we seek bankruptcy relief, you may receive consideration that is less than what is being offered in the exchange offers and it is possible that you may receive no consideration at all for your GM notes," said a letter to bondholders that was part of the filing.

 

The deadline to participate in the exchange offer is May 26.

The bond market IIRC is trading at something like 10% of the value on GM, so they'd be getting a fair value for them. The issue for the last couple months has been that the bondholders have been demanding a better deal from the feds than they could have gotten had anything other than a federal bailout happened, which would be a terrible thing for the taxpayers to do.

[southsider2k5]

I actually kinda like this move.

The government gets a significant share in the company that can be sold off once the government-funded reorganization is complete, the shareholders and the bondholders get a huge hit, and GM starts to do the shrinking that it needs to do. It's better than dumping money down the GM hole like we're doing with all the banks. And they're giving the bondholders an ultimatum and trying to face them with legit bankruptcy.

The bond market IIRC is trading at something like 10% of the value on GM, so they'd be getting a fair value for them. The issue for the last couple months has been that the bondholders have been demanding a better deal from the feds than they could have gotten had anything other than a federal bailout happened, which would be a terrible thing for the taxpayers to do.

 

No big surprises there, the union who has run the company into the ground gets more of the company than the bondholders who actually have been keeping the company afloat. The government is going to have to do a lot of financing because they keep screwing over the people who can finance debt and deals in this country. Brilliant.

[mr_genius]

There's something poetic about this statement from Barclay's.

 

 

The company they're talking about? The New York Times.

 

Huber pegs the private market value of the Globe at $100 million, a far cry from the nearly $1.1 billion the New York Times Co. paid for the paper in 1993

 

ouch

[mr_genius]

http://finance.yahoo.com/tech-ticker/artic...me%22-Americans

 

an economy built on debt-fueled spending will be painful for years to come.

 

qft.

 

unfortunatley most Americans don't understand basic economics anymore.

[StrangeSox]

Chicago Public Schools are adding basic financial literacy to the curriculum.

 

http://www.suntimes.com/news/cityhall/1537...-042109.article

[NorthSideSox72]

Chicago Public Schools are adding basic financial literacy to the curriculum.

 

http://www.suntimes.com/news/cityhall/1537...-042109.article

Excellent. I've been screaming for this for years. You should not be able to graduate high school without some basic knowledge of finance.

 

[Balta1701]

http://finance.yahoo.com/tech-ticker/artic...me%22-Americans

 

qft.

 

unfortunatley most Americans don't understand basic economics anymore.

What do you think our economy has been built on the last 20 years?

[HuskyCaucasian]

Chicago Public Schools are adding basic financial literacy to the curriculum.

 

http://www.suntimes.com/news/cityhall/1537...-042109.article

So badly needed. i took one course in HS that taught finance... and I didnt think it was a good course.

[bmags]

I hated our consumer economics class because the teacher was clearly assigned to teach it and had no idea what she was talking about.

[SoxFan562004]

I hated our consumer economics class because the teacher was clearly assigned to teach it and had no idea what she was talking about.

I lucked out and had a good teacher and actually learned a few things in that class.

[Cknolls]

I gotta believe the bond holders in Chrysler will give the finger to the plan that is on the table. Why would secured debt holders, who would normally receive dollar for dollar in bankruptcy procedings, agree to a 10% share of the company?

[Balta1701]

Some American Express customers are being told to send in copies of their tax returns or Amex will cancel their account.

[Balta1701]

I gotta believe the bond holders in Chrysler will give the finger to the plan that is on the table. Why would secured debt holders, who would normally receive dollar for dollar in bankruptcy procedings, agree to a 10% share of the company?

Link

If the bankruptcy proceeds as expected, the administration would create a new Chrysler that would purchase assets of the old company. The ownership of the new company would be divided between the union's retiree health fund, which would get a 55 percent stake, Fiat, which would get at least a 35 percent stake, and the United States, which would take an 8 percent stake. The Canadian government would receive two percent.

 

Chrysler's creditors would get $2 billion in cash and no equity stake. The automaker's current owner Cerberus Capital Management would be wiped out.

 

Turning over ownership of a U.S. industrial company to an employee-run trust is "unprecedented on this scale," said University of California-Berkeley professor Harley Shaiken, an expert on unions.

 

The bankruptcy could still be avoided if all of Chrysler's creditors agree to accept a government offer to be repaid only a small portion of what they are owed. These secured lenders hold $6.9 billion in Chrysler's debt overall, but the Treasury Department is pressing them to write that down to $2 billion.

 

While four of Chrysler major creditors, J.P. Morgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley, have agreed to the Treasury's plan, other lenders, mainly hedge funds, have held out. One source said the holdouts include Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital. Treasury officials spent much of today engaged in last-minute negotiations with the funds.

 

Some hedge funds likely believe they could get a better return in a bankruptcy filing or in a sale of Chrysler's assets, said Sheldon Stone, a turnaround expert at Amherst Partners.

 

"These rogue hedge funds are not coming in line because they feel like the government is attempting a cramdown, which is essentially a take it or leave it deal," he said.

[mr_genius]

What do you think our economy has been built on the last 20 years?

 

it's really amazing that people actually think the current levels of government and consumer debt is healthy.

Edited April 30, 2009 by mr_genius

[NorthSideSox72]

Link

I actually like this idea, in general. The unions complain and complain; let them take ownership, and responsibility for the jobs. Bring in some foreign capital. Give the company a shot to survive, and if they don't the employees/union have themselves to both credit and blame. US takes a small stake.

 

Not bad.

 

[StrangeSox]

Didn't that happen with some airlines in the past?

[NorthSideSox72]

Didn't that happen with some airlines in the past?

United was, at one time, employee owned, I believe.

 

[NorthSideSox72]

Didn't that happen with some airlines in the past?

Also, they are talking about this model for the Chicago Spire project. The various unions want the jobs, but the Spire doesn't have the funding yet - not enough units sold. So, the unions are discussing taking a major equity stake, with the influx of cash going towards getting the project moving again.

 

I really do like that sort of thing.

 

[StrangeSox]

As do I. Seems like it avoids the whole company management vs. union or management vs. employees thing.