Obama, the new CEO of GM?
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

   Other

    A look at the future of the credit rating of U.S. Treasuries:
    http://www.american.com/archive/2009/march-2009/full-faith-and-overextended-credit

Politics

  Domestic

    The latest on global warming from the NY Times no less:
    http://www.clubforgrowth.org/2009/03/the_civil_heretic_a_must_read.php

  International War Against Radical Islam

The Market
    
    Technical

    Despite a rough day, the S&P (787) closed yesterday above its October to present declining resistance line; however, the DJIA (7522) fell back to below its downtrend line.  Volume was anemic, which is good news;   The volatility index spiked dramatically reinforcing my comments yesterday that any thoughts of a new bull market are wishful thinking and that we most likely are in a trading range.

    Unless we get a big rebound today, yesterday’s pin action also suggests that for the moment we have to look at DJIA 7949, S&P 834 as the near term top of the trading range.  However, I don’t think that these levels will ultimately define the longer term trading range that I envision.
 
    On the downside, I am watching the S&P 741 level for support.  If that doesn’t hold, we may be faced with a test of the early March low (S&P 666).

    One final note, a review of the charts of the companies in our Universes last night, revealed that, unlike the DJIA, virtually none of those stocks that had broken above their October to present downtrend line traded back down below that trend line.  Indeed, all but a very few of those stocks that have established an easily identifiable short term up trend off the March lows broke below their uptrend line.  In other words, as acid producing as yesterday’s pin action was, technically almost no damage was done. 

   Fundamental
    
    The GM/Waggoner firing dominated the news yesterday.  I have to admit that I am a bit conflicted on the issue.  I have no problem with Waggoner losing his job--GM is a mess and he bears at least part of the responsibility.  And I agree with the howling from the free market crowd that bankruptcy not the government should have been the force behind his removal.  And I agree that Obama’s speech implies a move toward a European style industrial model--something I believe Americans will come to regret if it does occur (government management of the auto industry will most likely result in the manufacture of a lot ‘green’ cars that no one wants to buy and everyone has to subsidize).

    On the other hand, there may be a huge lesson to be learned here.  When you make a deal with the devil (government), in the end you pay dearly (ask Faust).  While I have never been in favor of a government bail out versus bankruptcy, historically, when companies have come to the government for a hand out, the government offered financial help, stayed out of the management of the recovery and gotten out of its ownership/lending status as soon as possible.  It ain’t happening this time; and it looks like the citizenry is about to witness just how ineffective the politicians/bureaucrats are in making economic decisions and managing an enterprise for, you know, a profit.  So my bottom line is US industry this time around asked the wrong crowd for help (leftish ideologues) and is reaping what it sowed--which hopefully will have the unintended consequence of proving now and forever more that government shouldn’t be involved in bailing out poorly run businesses.

    Here are the thoughts of several pundits on this subject:
   
          Larry Kudlow on Waggoner’s dismissal:
    http://article.nationalreview.com/?q=ZWE0MzM5ZmZlMjA2MjU4YTliOGYxNjViN2VkMDVmNzI=

    Another opinion:
    http://www.powerlineblog.com/archives/2009/03/023204.php

    A review of Obama’s speech on the auto industry (this is a bit longer but very instructive):
    http://www.cafehayek.com/hayek/2009/03/the-presidents-speech-on-the-auto-industry.html#more





Posted 03-31-2009 8:37 AM by Steve Cook