Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Big 3 U.S. Auto's $25 Billion Bailout

Companies / Credit Crisis Bailouts Dec 02, 2008 - 12:56 PM GMT

By: Mike_Stathis

Companies Best Financial Markets Analysis ArticleAn Offer the Big 3 Can't Refuse: $50 Million per Mile - Just as I was ready to pass out in my chair last night, I regained full consciousness after hearing a news headline. Can you guess what caught my attention? No, it wasn't the buyout of AIG's asset management business by our friends in Dubai . And no, it wasn't over Citigroup's purchase of a Spanish construction company using taxpayer funds. In fact, although these deals were recently announced, they didn't make the headline news. Instead, it was more on the rumor that the Big 3 auto execs plan to drive, possibly via car pool in a Chevy Volt to Washington today. Their purpose of course is to present a “more structured” bailout plan; in other words, a better rehearsed begging session.

I'll tell you right now there isn't going to be any real substance to this proposal. Although likely to be riddled with black holes, it'll contain just enough fluff for Washington to pretend it's viable so they can throw away another $25 billion to this pathetic industry. By now we already know what to expect from these three bailout beggars - more scare tactics, empty promises and lies.

Sure, I heard about the car pooling rumors last week like everyone else. But after hearing the media play it up over and over, I finally got ticked off. Why? Because the media is ignoring the key issues and blowing this car pooling trivia out of proportion, as if the auto clowns are making some monumental sacrifice worthy of a $25 billion payout, compliments of taxpayers.

I predict this is going to be the event of the week for America's useless, dying media machine, filled with all the pomp and circumstance you'd expect from the Britney Spears-like media coverage that's so typical today. All you're going to hear about the rest of the week are how these bums drove to Washington , as if they're Gods…wow, what a sacrifice. I'm so impressed. It's enough to convince me they'll spend our $25 billion wisely. If you believe that, you probably also believe half of Washington and thousands of banking and mortgage execs don't belong in prison. If you believe that, you're probably either high or just plain naive.

The media is likely to blow this car pooling event out of proportion because they know it's going to serve as the launch pad for what will most likely end up being a huge ad campaign, probably for the Volt, and probably featuring each of the Three Stooges in the auto of their choice. If I turn out to be right, at stake are millions in ad revenues, so the media plans to really spice the whole event up.

The media is playing right into the hands of Washington and the Big 3. In the process, each party gets what they want. Media networks get more ad revenues after they've Paris “Hiltonized” this event, the Big Three gets positive PR which will strike a “feel-good” chord with unsuspecting Americans, and Washington gets to pass the bailout without the fear of voter reprise.

In reality, they're trying to manipulate you into thinking these guys deserve a bailout for doing something most of us do probably at least once a year (when gas prices are reasonable) – take a long drive. The only difference is when we drive a few hundred miles, it costs us money. We don't get an 11-figure payday.

“Oh well, golly gee….they drove all the way to Washington ! Well, that shows they're really committed.” Since most Americans have been dummed down by the media, they're likely to fall for this preschool psychology. If I was looking at a $25 billion handout, I'd walk backwards nude across America . But that wouldn't prove I'm capable of rescuing a ship that's under water.

But for the Three Stooges, a few hours on the road could end up landing them their biggest payday ever. A trip from GM world headquarters to Washington is about 525 miles. That comes out to $47,619,047 per mile split between Moe, Larry and Curly. With money like that, I'm sure they'll be doing 100mph - that is if the Volt even goes that fast.

I don't care if these clowns hitchhike from Detroit . The taxpaying majority of America is firmly against a bailout for these losers under any circumstances. Apparently, the Washington majority has delivered the following message to the auto execs: we just need you guys to set a good example for taxpayers by driving here. And give us some type of plan that makes it look like you have an idea what's going on. Once you do that, the money is yours. Is this how the game is played? You can't have a bailout because you flew to Washington in private jets. But if you drive here in one of your company's overpriced cars that no one wants, we'll hand over $25 billion to three stooges to squander on outrageous compensation for themselves and their equally greedy employees.

Listen up all of you Washington bums. I know you don't realize this because you actually believe all the bogus data fudged by economists you've bought off (including most of those in academia), but millions of Americans have lost their jobs and homes. And most have lost their retirement savings. And I can guarantee you there's much more devastation to come. The economy has barely begun to meltdown and the stock market is going to drop easily below 7000 over the next few months. Already, Washington has stolen $8.5 trillion from taxpayers and handed it to the same banks that committed unprecedented fraud. And now taxpayers are supposed to hand over another $25 billion to enrich CEOs who should be under investigation for shareholder fraud and overpaid workers, thousands of which who'll draw full compensation just for playing checkers?

To all of you idiots in Washington who support the continued theft of taxpayer funds, I want you to know you're gimmicks are obvious. With the exception of a small handful of responsible Congressmen, you've all planned to bail out these losers all along. But you want to make it look like you're acting responsible by insisting the auto execs drive there and show some type of bogus plan. As you well know, it's going to be another “Paulson” check; that is, a blank check.

These guys have had several years to come up with viable plans. They've repeatedly missed on all cylinders. There is NO POSSIBLE PLAN THAT WILL CONVINCE TAXPAYERS TO APPROVE A BAILOUT for an industry that has been in the toilet for three decades. The U.S. auto industry is beyond repair. Let the free market forces determine what can be salvaged. At the very least, I say let the people take a vote on the matter. I just have one request – NO ELECTRONIC BALLOTS, okay? I can already tell you the results. Virtually no one outside of that abysmal industry (other than stockholders or relatives of auto workers) will support a bailout. We could care less if they fail. Everyone is struggling. Welcome to America , where you're supposed to suffer the consequences of failure just like you've enjoyed the rewards of success.

The big problem as I see it is that millions like myself who have done nothing wrong are feeling the effects due to the incompetence, fraud and outlandish greed of others. Perhaps the biggest concern I have is the economic impact of the real payback down the road. If you think things are bad now, imagine how bad hyperinflation is going to be.

It's our money, and we are all sick of it going to those who least deserve it. Everyone has had it with these scumbag bankers and mortgage crooks. We've heard enough whining and bogus scare tactics from auto execs and UAW workers. I personally find their inflated sense of entitlement shameless and disgusting. And we've certainly had it with the spineless fools in Washington who sit by each day, allowing America 's future to be dismantled piece by piece.

Let the UAW Bail Out the Big 3

Just a few weeks ago the Big 3 pulled down $25 billion in taxpayer funds from the Department of Defense, which already ticked plenty of people off. And they actually have the nerve to ask for more? I have something to say to all UAW workers. If you want a bailout - if you think your companies are worth saving - you guys buy them out with your own money. The total market capitalization for GM and Ford is less than $8 billion, and Chrysler can't be valued any higher than $2 billion. If you guys can't come up with the money, just wait around and you'll be able to buy the same companies you expect taxpayers to bailout for much less. It's very likely the fair value of the Big 3 is $0 after accounting for their massive liabilities.

I'll tell you why the UAW doesn't want to buy them out and take them private. It would mean the end of their gravy train. They'd be forced to run the company like a competitive business which would result in huge cuts in compensation. They'd be forced to run these companies with real free market dynamics instead of corporate welfare. You see, there's an old saying in the investment world. If you aren't willing to buy an investment yourself, why would you expect anyone else to? Answer: because you're trying to unload a lemon. And if anyone knows anything about selling lemons, it would be the Big 3.

That's not to say GM employees haven't loaded up on company stock because they have. In fact, they've loaded up their pensions with so much of it that State Street (their pension administrator) recently shut off further employee stock purchases. But doesn't that speak volumes about employee confidence in GM? Sure it does. Employees know Washington is going to bail them out, especially if their retirement plans are loaded up in company stock because they wouldn't want to see another Enron disaster, whereby thousands lost virtually all of their retirement in a bankruptcy due to over-weighted stock positions.

Washington is on a Roll

By now I hope you all recognize this is just a continuation of Washington 's Ponzi scheme. The fact is the Big 3 will get their bailout and it's going to be another “Paulson check,” similar to the case with Fannie, Freddie, AIG, the banking cartel, and many others to come. Hopefully, I've convinced you how Washington intends to justify to bailout; only after they “get tough” and make them “show some real plans.” Now I'm going to explain to you why Washington will end up bailing them out. And if it doesn't happen in 2008, I'll guarantee you it is going to be one of the first things passed when Obama takes office.

The Real Reason the Bailout Will Pass

Okay, here's the deal. If the Big 3 is subjected to free market economics, the auto execs would be screaming to the media that the reason for their failure was due to the ridiculous free trade policies. They would also throw in uncontrollable healthcare costs as another factor. These are the top two issues no one in Washington wants to address, not even our “savior” Obama. I'll remind you as I have many times in the past. Similar to McCain, Hillary, and every other presidential candidate (other than Kucinich), Obama refuses to address the real problem with healthcare – the need for price controls.

No healthcare program - no matter how seemingly viable - is sustainable without some form of price controls for drug and device makers and insurers because they've created a healthcare mafia with no real competition. Instead, all we see is industry collusion, much of it focused on extorting funds from Medicare and Medicaid. If you don't understand or agree with this, I regret to say that you really don't understand what's going on in healthcare. (Those of you who do want to find out, soon I'll be releasing what could be the most comprehensive book on the healthcare crisis ever written, with clear-cut solutions. Those interested can email me for advanced notification).

The reason why no one will address the price containment issue is because the healthcare industry has the biggest, wealthiest lobbyist groups in Washington . And to go up against these guys would end one's chances of reelection. At last count, this army of thugs totaled three for every member of Congress. These are the same guys who waited until CSPAN went off the air, and got Congress to meet until 6am, after having paid off several Congressmen with 7-figure “consulting” jobs to fight tooth and nail to get Medicare Part D passed under terms most favorable to the drug industry – under the condition that Medicare forfeited all rights to negotiate drug prices.

Granted, as I've mentioned many times in the past, free trade and healthcare have certainly contributed to the Big 3's demise. But the biggest liability of the Big 3 has been managerial incompetence and consumer neglect. In fact, free trade isn't really much of a factor for the Big 3 since they pay their workers almost 70% higher in total compensation than U.S.-based Toyota employees. As far as healthcare, the UAW has one of the most generous medical plans in corporate America . The fact is that the UAW has secured wages and compensation not seen in American manufacturing since the 1950s – America 's truly great economic period. The only problem is that America has become a Wal-Mart nation, with jobs as cheap as the goods they sell.

You better believe the Big 3 will get a bailout. But it won't be to save auto jobs. The real reason they'll get a bailout is because it will allow Washington to sweep America's two biggest problems under the political rug – the healthcare crisis and unfair trade policies - the primary forces causing the extinction of the middle class while increasing the power of corporate America.

Self-Serving Bums

Let's see how much the Three Stooges are willing to beg Washington for a bailout if they're canned prior to any negotiations. Let's see how many more lies and scare tactics the UAW can drum up after their wages are cut in half, the jobs bank is terminated and they're benefits are cut to match other companies. The fact is these guys are all begging Washington to support their excessive compensation using empty promises and the same scare tactics that led us into Iraq – the same theme used to pass the banking bailout.

GE is Already Lining Up

The facts show the Big 3 are better than everyone in only one category; losing money. They realize no one with a brain would put their own money into these companies. But they've seen how easily trillions of dollars have been handed over to other companies so why not take the plunge, right? I can already see General Electric on deck. Mark my words. GE will get bailed out as well because without one, they don't stand much of a chance. What about hundreds of other companies that will fail over the next few years? I'd like to know who the designated authority is in Washington that determines which companies are “too big to fail.”

Folks, this is the real deal. This is the behind the scenes coverage you aren't ever going to get from the media. All of the guys that cover these stories are simply too dense to understand how things really work. More important, even if you were to tell them the real deal, there's no way they'd discuss it on air because it would upset their sponsors; namely the Big 3, the banking cartel and of course the White House, which has a direct line to media executives. This is precisely why the mainstream media continues to ignore me. But they all know who I am.

Where do these bailouts end? Is every state going to get a bailout too? What kid of an idiot thinks you can cheat the system by printing astronomical sums of money out of thin air without severe economic consequences? In closing, when this bailout is approved, it could be the tipping point that sends many over the edge, due to emotional exhaustion from seeing bailout after bailout going to companies headed by irresponsible management who have destroyed the economy and taken their money. If that doesn't lead to public outcry, the inevitable hyperinflation certainly will. Therefore, I recommend President Bush bring more troops back from Iraq sooner than planned in order to prepare for what could trigger riots in some parts of the nation, especially in areas hit hard by layoffs and foreclosures.

By Mike Stathis

Copyright © 2008. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher. These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

Requests to the Publisher for permission or further information should be sent to

Books Published
"America's Financial Apocalypse" (Condensed Version)

"Cashing in on the Real Estate Bubble"

"The Startup Company Bible for Entrepreneurs"

Disclaimer: All investment commentaries and recommendations herein have been presented for educational purposes, are generic and not meant to serve as individual investment advice, and should not be taken as such. Readers should consult their registered financial representative to determine the suitability of all investment strategies discussed. Without a consideration of each investor's financial profile. The investment strategies herein do not apply to 401(k), IRA or any other tax-deferred retirement accounts due to the limitations of these investment vehicles.

Mike Stathis Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules