First Cars, then Condos…ok, Cancel Christmas

First it was the catatonic car industry, and now it’s the collapsing condo market.  And now I hear rumors out of Asia, where Japan is giving new meaning to the word recession, that world leaders are considering canceling Christmas.

Just kidding.

But when RBC needs to go to the market to raise money, it’s hardly a laughing matter.

No joking either when it comes to the amounts of money the auto-makers are likely going to get from Congress soon.  Unless you’ve been under a rock or been accused as a ‘threat to freedom’ and locked away at Guantanamo Bay for the past week, you’re well aware that Ford, GM and Chrysler are all on their knees in Washington begging for 25 billion to keep them afloat.  They’re likely to get 15 billion from the democrats in Congress despite the cool reception the deal is getting from the White House.  And despite the childish behavior of our enlightened leaders in Ottawa, Ontario’s auto-sector is likely to get some substantial aide as well.

Personally, I’ve got very mixed feelings about the entire bail-out plan.  I appreciate how inextricably linked the Big 3 Automakers are to the American economy.  The disappearance of only one of them will affect an entire food chain of related industries from suppliers, to servicers, to neighbourhood dealerships.  Say you picked yourself up a Ford, or a GM last year, and next they’re gone.  Take a guess at the rise in price of servicing a car that no longer has a warranty on it, and that no one makes parts for anymore.

But all that said, the average American auto-worker, if you include all of his benefits, makes approx $77 dollars an hour.  The comparable Toyota worker, around $45.

This of course is not to mention that that Detroit gang has failed to meet the market with any type of vehicle that takes into account energy supply/efficiency/economy.

I’m all for saving an industry that makes up a serious percentage of the GDP, but if the GDP were a body, and the Automakers were a part, right now I’d compare them to love-handles.  You need a healthy hip, but with as little fat as possible.

The question over whether or not they will get the money is moot.  They’re getting it, so I (and others) will just have to get over it.  And it’s a good thing given the nightmare we’re already living in credit markets.  But I just can’t sleep soundly at night knowing that, in all likely-hood, the money is going to prop up a faulty business model  that is twenty years behind the curse, and corporations that are getting used and abused by a union that has grown as drunk on excess as Wall Street had.

If the Big 3 don’t change, the next Detroit Auto-Makers are going to be Tonka, Match Box, and Hot Wheels.

What this all means for the American economy, long-term, will have to be determined by the steps taken by Ford et al in the weeks ahead.  But I still wouldn’t even think about touching them, even if the options trading is tempting.  My options on US Steel and Peabody Coal are doing just fine, and it’s move today, along with others is just a taste of things to come under Obama and the Great American Build Up.

Gold did encounter Backwardation today, which it’s never done, and which I’m going to be looking into with much interest.  I’ll post if I have any thoughts worth posting (as if any of my thoughts are worth posting in the first place).  But either the COMEX is short, or the future demand for gold looks bleaker than I anticipate.  Naw.  If that’s the case, why does the U.S. have a 8000+ tonne Gold reserve?

Needless to Say, Interesting Times.