Political payback, Chicago-style

The Chrysler bailout is going from tragedy to farce: several bloggers have all but proven that the Obama administration is rewarding political supporters and Democrats at the cost of Republican supporters and non-political owners. A small list of links:

• A quote showing that the government is choosing the plan.
  
• Joey Smith has an entire blog at http://chryslerdealershipshutdown.blogspot.com/
  
• Doug Ross is documenting a lot of evidence of political favoritism over at http://directorblue.blogspot.com/
  

I could post at least 10 other links, but I think this is a good start. It's clear: the Obama campaign is rewarding its supporters, Clinton's supporters, and other Democrats, and punishing Republican supporters under the color of a Government Motors bailout.

Why is GM's stock above 0?

According to Reuters, GM is going to go bankrupt soon, becoming Government Motors. Even ignoring the insanity of the government essentially nationalizing two car builders at the same time, the markets are past irrational.

GM will go bankrupt. Their good assets will be bought to pay off their secured debt (at least they're not robbing bondholders like Chrysler). The trash gets left to pay off the unsecured debt (hah!). Yet, at the time of writing GM's stock is 1.29 and rising.

Essentially, GM is going to destroy itself and void the stock. The current stock will at best be worth pennies on the dollar, and most likely is now worth 0. Even so, people are buying it.

As Milady pointed out, perhaps there's a deal to save the stockholders over the bondholders. Maybe program buying of the Dow or S&P 500 is holding up GM. Or maybe people are just plain dumb.

I would short GM with borrowed money if I wasn't afraid that the fix was in.

Jeff posted! Jeff posted!

I knew if I kept Jeff of Think Sink fame in my RSS Folder, he would finally post. And he did!!!.

Now, if I could just post more...

Why the Stress Tests were fraud

Karl over at The Market Ticker has nothing good to say about the "Stress Tests":

Second, some of the data points and "expected losses" are comical. For example, the banks are expected under the "more adverse" situation to believe that prime mortgage losses will not exceed 4%, and ALT-A (liar loans and Option ARMs) will not exceed 13%. HELOC loss (most of which is unsecured!) is expected not to exceed 11%.

Commercial Real Estate, in total, is not expected to produce more than a 12% loss.

...

If these numbers have any sort of credibility then this paper should be trading at 85 cents or so.

The truth is that you can't find a bid for anything over 40 cents, and the reason is that for those pools where the internals are exposed the known loss figures are high enough to make the actual "today" value of that paper 40 cents, not 85 or 90.

I suspect we're looking at the complete insolvency of most of the banking system by 2011. We would be much better off in just allowing them to die now, and spread what's left of their capital out to work. Until then, I think we're stuck in a Japan-style deflation.

Would you like a little cheese with that whine?

Michelle Caruso-Cabrera over at CNBC is in full whine mode. Why? Amazon has released a new Kindle too soon. Her 3 month old one is now obsolete.

Ms. Caruso-Cabrera needs to go back to her brick analog cell phone and her two-ton 486 IBM clone (with the turbo button!). Technology improves. The whiz-bang cutting-edge item of today is second-string tomorrow.

To steal a phrase: Give me a break! Unless you're obsessed (and rich), you can never stay on the cutting edge. You buy what you need at the time, and then you use it. If Michelle really needed the Kindle DX, then she should have waited. Instead, she'd jealous (and covetous), and wants someone else to fix her lack of judgement and toy money.

I am glad that we no longer have the dish, so that we don't get polluted by CNBC.

Why I am still a bear

Several people, including Mark Perry over at Carpe Diem, are becoming bullish about the economy. The stock markets seem to be going with them, rising from bottoms over the last month.

Don't buy in. Yes, manufacturing inventories are dropping, but that's because factories are closing or furlowing, dropping supply, not because of an increase in demand. The fundamental problem, a crushing debt load, hasn't yet been solved.

Until all of that debt is unwound, one way or another, this economy is a dead cat bouncing.

The loan sharks have taken over

If I were a hedge fund manager with a secured loan from Chrysler, I'd be so pissed off right now. They are getting all but raped in order to give Chrysler to Fiat and the UAW.

Fiat? Are they the only car company greedy (or insane) enough to get in bed with this merger?

If it was my hedge fund, I'd insist on getting the asset or a 100% payoff, just on the principle of the matter. With asset in hand, you can at least threaten to box it up and ship it to China, or scrap it.

I used to think it was the Republican neo-cons that wanted business socialism. I had no idea that the neo-lib Democrats were in on it too.