Sunday, November 02, 2008

Weekend Wrap-up

There are a number of interesting stories out there this weekend, but most of them will be lost in the midst of all of the breathless election coverage -- can we please lose the countdown to the election clocks?

1) This story is a little disingenuous, but it could become an issue given the politically charged nature of the bailout.

Goldman to handout $14billion in Bonuses after taking $12 billion from the bailout.

"Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses - despite asking the U.S. government for an emergency bail-out.

The struggling Wall Street bank has set aside $14billion for salaries and 2008 year-end bonuses, it emerged yesterday.

Each of the firm's 443 partners is on course to pocket an average Christmas bonus of more than $6million.

The size of the pay pool comfortably dwarfs the $12billion lifeline which the U.S. government is throwing to Goldman."

I'll play devils advocate. The greatest asset of these Wall Street firms are their people. If they feel slighted these people will flee like Cowboy fans jumping off the bandwagon. So, in theory it is important pay them enough to keep your employees happy. However, the reason that Wall Street is paid so well that they are in the risk business. If you are good at what you do you get paid, if you are not good, you shouldn't get paid. On the surface it appears as though that Wall Street has continued to pay itself as a risk taking venture without taking any risk.

2) US Car companies apparently are working with a long-term plan that is about 24 hours long.

Governors from across the US are asking for more Federal help for the Auto Industry and looking for the government to speed up the release of the $25 billion that we've authorized to help the big 3 retool their factories for small car production.

Unfortunately, in the interim gas prices are plummeting and......I couldn't believe this when I read it....... Ford Rethinks Truck Pullback.

Ford Motor Co. cut truck production too deeply this summer in reaction to rising gasoline prices, the company's top sales analyst conceded, a move that is likely to contribute to a substantial loss expected for the third quarter.

Ford, General Motors Corp., Chrysler LLC and Toyota Motor Corp. each slashed production of full-size pickup trucks in the summer after gas prices shot up to $4 a gallon and truck sales plunged.

Some truck plants were idle for almost the entire third quarter, as auto makers feared that truck sales would remain low and would be outpaced by passenger car demand. Instead, truck sales have bounced back a bit and car sales have eased in the last three months.

Ford sales analyst George Pipas said on Friday that the company could have kept its truck output at a higher level. "It was an overcorrection," he said.

Truck production and sales can have a sharp impact on the auto maker's profit. In general, each truck sold generates about $8,000 in pretax profits. Ford is expected to report third-quarter results Nov. 7. In the second quarter, it lost $8.7 billion.

So gas prices dip and Ford, GM and Chrysler are ready to flood the market with more trucks getting 14 miles per gallon. In three years, when the US dollar has been cut in half by runaway inflation and oil is trading at $130 again, I want to personally go to Detroit and turnout the lights on these companies.

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