Batten Down the Hatches.

The bailout has been rejected. Say it again, but this time, think about what the implications will be. Are you curled up in a fetal position yet? You should be.

In a stiff vote of 205 to 228, the House sealed the deal on the $700 billion bailout package.

How can the leaders of our nation be so obtuse? Without this package, Armageddon has waltzed into our lives and will surely Riverdance on our chest – with spiked heels.

Was Warren Buffet’s warning to Congress not enough? The fact the markets have stumbled downwards for a year, doesn’t say anything? When the Canadian dollar reigns triumphant, we have a problem.

The House members should be ashamed of themselves. Although, they believe that they have saved the taxpayer and the greater good by screwing over Wall Street. I guess they do not believe in trickle-down economics. Life on Main Street is going to get harder.

In turn, we will see the struggling automotive industry get even worse. With the lack of credit availability and much tighter spending habits, it is unlikely we shall see a rise in auto sales.

The end of the week will bring results from September’s US SAAR auto sales. I am looking forward to the numbers and what they bring; however, I do not believe it will be positive given the macroeconomic environment. Even with the insane incentives, I do not think many buyers lined up this month.

Oil is under $100 as of press time, so, gas prices should lower within two weeks. Let’s see how that shoe drops.

In the meantime, I have constructed a tinfoil hat which should, in these times, protect against Armageddon visitors. I suggest you do the same if you intend to ride this one out.

rp

What Happened to Free Markets?

Another bailout? Again? Could it be possible?

Yes. Unfortunate but true, it is becoming more common talk that we could see another bailout with the automakers stepping into the batter’s box.

As my prior write-up noted, sales remain to struggle even taking into account August’s seasonality. Not very positive looking charts, down below. Year-over-year the “Big three,” have taken on serious debts and have managed to align themselves in an unfavorable position regarding their model offerings.

Now, the United States government has aided in two bailouts - namely Bear Stearns and the Fannie/Freddie debacle – and this has the auto industry feeling as though they deserve their fair share. Thus, this has raised the chatter on a possible automotive industry bailout due to the sizeable losses which have been reported from the domestic builders.

This is a tough situation.

On one hand, the government has to look to protect the workers of the automotive industry and guard the US economy. Remarkably, the US economy has managed to prevail relative to the damage already done. It is a wonder if this could be the final straw.

The other hand paints a different picture, depicting the government star-gazing as the manufacturers fail or consolidate to stay afloat.

American auto manufacturers got away with producing over-sized vehicles for far too long and the industry is paying the piper. To analogize, the American OEMs faltered precisely where the big banks ran astray - they got greedy. General Motors, Ford and Chrysler all had high margin truck portfolios which yielded big rewards; unfortunately, risk reared its ugly head.

The past year has provided some stellar collapses. Real estate, mortgage-backs and now sport utility vehicles. Unfortunately, there are going to be repercussions for these firm’s actions. The only way I can see the playing out is through mergers or consolidations.

Welcome to the SUV bubble.

rp