Sunday, December 14, 2008

Bailout Bounces...

This seems to be a pretty effective strategy if you are trying to stabilize the markets. Hint that you'll complete an auto bailout, let the markets rally, hint again, rally more, rinse, repeat.....

The markets seem to be reacting to the news that the US is going to tap the TARP to provide immediate liquidity to the car makers. This is likely to get the Big 3 through January, but I can't imagine a scenario under which the business prospects improve for the Big 3 by the end of January. In fact, I think you can argue that the auto industry might be in worse shape come January. This feels very much like a punt from one President to a President-elect.

The markets seem to love this idea, but I'll reiterate that business throughout the US - Retail, Pharma, Tech, Software, etc - continues to weaken by the day. The big short funds are licking their chops.

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Jim Rogers is one of the smartest investors of our time. I think my style is very similar to his - we occasionally get the timing wrong, but the trends or themes we identify usually turn out to be right. That being said Mr. Rogers has been way wrong on China over the last year.

Mr. Rogers made some waves over the weekend when he claimed that most major US banks are essentially bankrupt.

" Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

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Thank you to the writers of The Office for the opening scene this week. For anyone that didn't see the episode, look for it on NBC.com. It's gold, Jerry, gold.

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