Financial Sarcasm Roundup for 02/10/16

Today is Ash Wednesday in the Roman Catholic Church. I am no longer a member of any religion so I don't need to attend church services. My sarcasm never went over well during prayers anyway.

Europe wants the G20 to target growth. Got it. One continent's finance people want the world's leading finance people to decouple global growth from China as quickly as possible. Panic is not yet in the air. The real panic comes when the world's bifurcated economies - one for financial flows, one for real goods - trend down together. The rest of the world (ROW, in money manager parlance) can't get China off its balance sheet fast enough.

Coal power plant cleanliness gets a breather, so to speak. The charred, hard carbon miners have taken a beating for years thanks to the world's zeal for lower emissions. I don't see how the world can substitute for metallurgical coal and coke in making steel. China's crashing demand has put the lid on steel demand anyway, so even coal's industrial use faces dark days. It would take a lot more backyard barbecues for charcoal demand to make up for declining coal power.

Gold prices respond positively to the Federal Reserve's interest rate hints. Gold traders and retail investors view the Fed's experiment as a mistake, proving they are a reactive audience. The Fed's "layer cake" message tastes bitter to gold bugs stuck in old views of monetary tightening. The new era of a ginormous Fed balance sheet that constricts traditional stimulus means gold traders missed the news about what normal interest rates now mean. A normal situation is where the FOMC makes any change, in any direction other to zero.

Tesla Motors lost money again but its shares kept rising. The more cars they sell, the more money they lose. Investors are really stupid to think that a money-losing car company will be worth more. There is something very wrong with Tesla's inability to control both its fixed costs and variable costs. Software entrepreneurs need a whole new set of skills before jumping over to hardware.

I would like to start a religion that celebrates Cash Wednesday. It would be an opportunity for me to stand up and wave cash around to the applause of my congregation.

The Haiku of Finance for 10/10/15

Ferrari public
Ten billion for all those cars
Rich Italian wheels

The Haiku of Finance for 09/24/15

Volkswagen trouble
Fake emissions test data
Diesel not so clean

The Haiku of Finance for 12/06/13

Bitcoin for Tesla
Two bubbles combine in one
Electric phantoms

Fisker Automotive, the DeLorean of the Green Car Era

Fisker Automotive is probably out of gas, even though its cars aren't supposed to use much gas.  It laid off almost all of its workforce except for a skeleton crew of office staff who will try to sell the company or wind it down in bankruptcy.  What went wrong with this company?

The Fisker Karma is a nice-looking sports car, but just try fitting inside.  The EPA rates it as a subcompact because the interior is so small.  I've never heard of a car marketed as a luxury sedan that was actually determined to be a subcompact according to its structure.  Oh, let's not forget that the first ones out the door were recalled due to a risk of battery fire.  The battery maker, A123 Systems, went bankrupt in 2012 and was bought by a Chinese company.  The car broke down on Consumer Reports' track before it even got started with a road test, earning it a failing grade.  The thousands of suckers who pre-ordered a Karma will probably never get one; I wonder if they had to pay cash up front.

This reminds me a little of the infamous DeLorean Motor Company from the 1980s.  Its singular product, the DMC-12, was as overpriced and unimpressive as the Fisker Karma.  The DeLorean legacy only exists today as a spare parts repository and kit car builder for a handful of enthusiasts.  Fisker fans can hope for a better outcome, but hope is not a method.  The federal government may end up owning Fisker's assets if it can't repay a DOE loan.  Good luck getting those parts and tools out of a government warehouse.  I have an image in my head of the last scene from Raiders of the Lost Ark, where the U.S. government sticks the Ark of the Covenant into a warehouse where it is presumably lost forever.  That Ark was really a superpowered energy source that destroyed whoever tried to use it.  Well, the Fisker line of cars was supposed to be pretty powerful but the business ended up destroying a lot of capital.  Thus ends my convoluted analysis for today.  I hope you were entertained, but hope is not a method.

Full disclosure:  I do not own any Fisker products, nor did I ever consider buying such a car.  I drive a gas-guzzling Ford Mustang that hums better than any wimpy electric car.  

The Haiku of Finance for 11/21/12

Buying back Ally
Expensive way to boost sales
Cheap car loan bailout

Financial Sarcasm Roundup for 07/16/12

It's Monday.  That means it's time to bust out of your workday boredom and pay attention to my bitterness.

Federal prosecutors are supposedly making a criminal case against bankers over Libor.  I don't believe for a minute that DOJ is serious about prosecuting bankers who fudged Libor.  This is the same DOJ that could find no criminal wrongdoing in the financial crisis of 2008 or bankers' extortion of municipalities though interest rate swaps.  They haven't even indicted John Corzine for his theft of billions from MF Global clients.  Puh-lease.  Let's get real.  Government prosecutors won't prosecute the heads of banks who will employ them in the future for corporate legal work.  Expect a few eight-figure settlements later this year and nothing at all afterwards.  Only smaller players get caught and punished, like the CEO of now-busted Peregrine Financial Group.

I was embarrassed when the U.S. government elected to keep GM and Chrysler alive with pre-packaged bankruptcies and bailouts.  The government still hasn't been made whole on those deals.  Now France is heading down pretty much the same road if it decides to save Peugeot.  Automaking gravitates to lower-cost locales, which now even includes the non-unionized southern states of the U.S.  Keeping high-cost producers alive keeps their products priced artificially high, ensuring an endless cycle of government bailouts and business failure.  Unionized automakers will continue in this zombie pattern until the taxpayer has had enough and allows them to fail.

It's funny that we Americans think we have the right to criticize other countries' restrictions on foreign investment.  The U.S. has placed so many reporting requirements on foreign-domiciled banks that they are refusing to open accounts for American citizens who want to do business overseas.  The U.S. has also declined to adopt international accounting standards that would enable investors to compare financial results across national borders.  I remember the debate about U.S. GAAP versus international standards from my MBA studies a decade ago, and back then the switch to international standards seemed imminent.  I can only shake my head at the wrong turns the U.S. has taken since then, with SarBox and other stuff.  Doing the right thing used to be so easy.

The defense bubble I've been warning about for years is about to pop.  Wall Street is finally pricing in the likelihood that forced budget cuts will hurt the earnings of major federal contractors.  This is good news for cheap analysts like yours truly, because there are some decent defense stocks I'd like to pick up at a discount.  It's bad news for all of the Pentagon watchers and players who are still in denial about the inevitable end of major contingency operations.  I've known plenty of people on active duty who were counting on jobs with contractors as second careers.  They really need to switch gears now and make other plans.

I've had enough for one Monday.  

Financial Sarcasm Roundup for 06/04/12

Another Monday brings another bucket load of sarcasm about business news items.  This is my first roundup using an iGoogle gadget feed to generate the news headlines instead of my previous method of culling news from emailed alerts.  Let's see what's in the bag.

MF Global's bankruptcy trustee has determined that the firm's former CEO may be liable for breach of fiduciary duty.  Well, that sure took long enough to officially figure out.  Plenty of other analysts, including yours truly, knew that from the start of the debacle.  The trustee's lawyers needed to justify their fees and provide rationale for keeping the gravy train chugging along with more lawsuits.

Chrysler doesn't want to reduce its pension obligations with buyouts.  They may regret that decision in 2013 when the full force of the trans-Atlantic Great Recession 2.0 hits their net income.  The time to prepare for trouble is before trouble hits.  Chrysler's private equity fans are in for disappointment, at some point.

S+P says Greece has about a 33.33% chance of leaving the euro.  I think the odds are a lot higher.  I won't describe the chain of posterior probabilities S&P used to estimate the chance of an anti-austerity election victory, a rejection of austerity, and a German-led expulsion of Greece.  Suffice it to say that a lot of posteriors are on the line now.

AIG appears to be on the mend.  That's good news for Goldman Sachs; they can use AIG as their cut-out once more to offload any European sovereign credit risk still stuck to their investments.  I knew people back in 2008-2009 who day traded AIG and thought they were geniuses.  I'd hate to see them try that trick again.

Some former Deutsche Bank guy says Germany will pull out all the stops to save the eurozone.  You've got to be kidding me.  Post-WWII Germans have been taught all about how the Weimar hyperinflation laid the path to hyper-nationalism, militarism, and ultimate disaster.  No way are the volks going to tolerate a German push for ECB hyperinflation just to save Greece and other deadbeats.  That's why the Fed is going to do the inflationary heavy lifting for Europe.  Angela Merkel's comments in favor of fiscal union are just rhetoric to calm the capital markets.  The train for a fiscal union left the station last year and no one boarded.

Full disclosure:  No positions in any companies mentioned.  

The Non-Resurgent U.S. Auto Industry

Claims that the U.S. automobile industry is somehow "resurgent" need to be reexamined.  Chrysler and GM have not moved away from product lines that emphasize oversized, fuel-inefficient SUVs.  They may be experiencing a temporary competitive reprieve since the Japanese tsunami wiped out several months' worth of production for Toyota et al.  Once Japanese automakers reestablish their supply chains, U.S. automakers can forget about recovering their market leadership. 

Gas prices are still high.  SUVs can't win as long as pump prices stay high.  BTW, Detroit is still headed for urban contraction thanks to irreversible population loss. 

Full disclosure:  No positions in any automakers at this time. 

The Limerick of Finance for 03/27/11

The Japanese shutdown drags on
More plants idle with each passing dawn
With parts hard to get
The worst hasn't hit yet
Sales for automakers are gone

Japan Plant Closures And U.S. Ripple Effects For Automakers

China isn't the only manufacturing nation hurt by indefinite plant closures in Japan.  One GM plant in the U.S. anticipates a shutdown due to parts shortages.  If it's any consolation to GM shareholders, Honda and other Japanese competitors face much larger uncertainties over resuming full-scale production. 

Solving global supply crunches requires more space than what's available in a blog post.  Try simpler designs with fewer moving parts that are available from common materials and multiple sources.  That means far fewer amenities in cars.  Automakers can afford to do away with cup holders, back seat video screens, power windows, molded seats, multiple temperature controls, and other luxuries.  Spoiled American road hogs can get used to driving the way their grandparents did in the 1950s when seat belts and a radio were all you needed. 

Remember this the next time someone on CNBC touts an automaker as a great investment because it just came out from under TARP.  Oh, BTW, higher oil prices mean gas-guzzling SUVs are less attractive products. 

Full disclosure:  No position in any automakers at this time.

Margin Compression Soon To Hit All Producers

Commodity price explosions aren't just igniting Middle Eastern protests against the rising cost of food staples.  They're now impacting the margins of producers in the earliest links of the global supply chain.  Witness the margin compression at PPG Industries over copper prices.  Its market dominance in specialty coatings means it can afford to pass price increases to its customers.  That's good for PPG's bottom line and bad for every single industrial user of its coatings. 

Companies in competitive industries are in for a rough ride.  The big U.S. automakers will face a very difficult climb back to health in the face of rising material costs.  Indian car and bike makers are feeling the pinch from input prices.  Companies at the very end of most value chains (that is, retailers and their servicers) will be in the worst possible position in 2011. Expect more stories of companies facing hard choices between raising prices for end customers or reporting lower earnings. 

GM Undead

GM has returned from its near death experience.  Without buying into all the Wall Street hoopla aimed at retail investors, I'll apply some common sense before I call it a night tonight.

I wouldn't buy the stock of a formerly bankrupt company that sells a high-cost product in a mature industry.  I wouldn't buy stock in a company whose every operational decision will be subject to veto by the federal government and labor unions. 

Enough said.  That's a wrap for tonight.

Nota bene:  No position in the "new" GM.

The Limerick of Finance for 10/24/10

Visteon readies its IPO
To investors, the proceeds will go
It went in the hole
Now it has been made whole
Ford's reaction is what I'd like to know

Automobile Sales Headed For Junkyard

If you're in the market for a new car, the sounds your hear in the dealer's lot may include the rustling of blowing tumbleweeds and the lonely chirps of crickets.  There's not much else going on in those lots, certainly not sales:

U.S. auto sales in August probably were the slowest for the month in 28 years as model-year closeout deals failed to entice consumers concerned the economy is worsening and they may lose their jobs.

Heading over the peak of a non-recovery into a double-dip recession is no fun at all, certainly not like the rush of going over a peak on a roller-coaster.  The market for cars in the U.S. is mature and will decline as gasoline gradually becomes priced out of reach for the poor and working class American.  Natural gas finds all over the world are certainly increasing but the energy industry will need years to convert those supplies to deliverable vehicle fuels available to Joe Six Pack.

There may be a silver lining in these auto numbers.  Americans who can't afford cars anymore may have to move to places where work commutes are serviced by mass transit.  I sincerely hope that buses and trains become the preferred mode of transit for most Americans.

Full disclosure:  No positions in makers of cars, trains, or buses at this time.  I do drive a blue 2003 Ford Mustang but I also take BART and SF Muni as much as possible. 

Stupid Choices Abound In The Markets

Many investment professionals want you to do stupid things with your money.  Some analysts tracking IPOs will probably give bullish ratings to the upcoming public offering of GM to their clients, and predictably enough the dumb money will stampede into an uncompetitive firm in a mature industry.  They'll forget that the government is still going to lose billions on that company; that's okay with them as long as you lose money too. 

Some advisors will tell their clients that bank stocks are a screaming buy, never mind that taxpayer guarantees of their capital structures are the only force keeping many banks in business.  Business prospects for banks remain so poor that they need to pole vault through every loophole in the recently passed financial reform law just to survive.  That ensures a return of the credit crunch and a repeat of megabank insolvency scares. 

Some people will tell you it's time to go all in on U.S. equities given anecdotal evidence of recovery.  Betting on the U.S. economy to grow has been a smart choice for the past two centuries, but the timing right now may not be right given the likelihood the economy will stagnate. 

It's very hard to tune out stupid advice and commentary.  Sometimes it's even hard for me to do so and I do this for a living.

The Haiku of Finance for 07/22/10

GM goes subprime
They must love going bankrupt
There they go again

Suburban Studies Herald The Onset Of Peak Cheap Oil

I can't make this stuff up.  Folks in Shawnee, Kansas want a national museum to study suburbs as a way of life and cultural phenomenon:

Enough, say the Johnson County civic leaders planning a National Museum of Suburban History. Their contention: With more than 50 percent of the country living in places like Shawnee, it's past time to take the suburbs seriously.

(snip)

In southern California, the Center for Sustainable Suburban Development at UC-Riverside was formed in 2003 to promote economic research and examine regional planning as well as the political, cultural and environmental impact of suburbia.

In Long Island, New York — home to Levittown, the epicenter of the mid-20th Century suburban boom — Hofstra University's National Center for Suburban Studies also aims to advance the public conversation about modern American life beyond cheap laughs, or pulp fiction melodrama.

I think it's hilarious that these "suburban study institutes" are located in suburban enclaves themselves.  Apparently nobody told these folks that the onset of Peak Cheap Oil is going to render much of suburbia unlivable, let alone unworthy of study.  Flight from suburbia will begin in earnest as McMansions are foreclosed and municipal services are shut down (check out Detroit!).  This will leave these study centers high and dry.  The last person to leave the institutes at Hofstra and UC Riverside should turn the lights out, but they won't have to if the lights are out all over their neighborhood anyway. 

Let me save them all some work.  It's what I do as a public service.  Suburbs are a temporary phenomenon enabled by a confluence of factors, including the wide availability of cheap petroleum in the United States after World War II, the federal highway program, and the successful lobbying from automakers that convinced municipalities to replace local trains and trolleys with roads and freeway easements.  All of it was based on cheap gasoline.  All of it has now begun to contract in size and vitality. 

Why study something that's about to disappear?  Americans can't seem to come to grips with the reality of declining national power and a resource base constricted by scarcity and lack of future investment.  Suburbophiles are longing for the good old days, but the trouble is we've left those days behind.  This kind of pining can easily lead to a sense of loss and betrayal when the double-dip recession is finally recognized.  The national zeitgeist can turn ugly if Americans have to be pried from suburbs.

I'd short suburbs if they were a security in the financial markets. 

More Auto Losses For You To Absorb With Your Taxes

Did you think automotive companies had paid back their bailout bucks?  They pulled off that trick with new bailout loans.  Good news got the early press, but the bad news can never be avoided.  Automakers just aren't a good investment for Uncle Sam:

The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009. Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.

This story was published at 9:25PM EDT, after market hours.  The MSM seems to be pretty determined to keep things like this out of the headlines, in the hope that the incumbent party won't be hurt in November's elections.  Much of the money that you (the taxpayer!) are funneling into this debacle goes right to the Teamsters for their get-out-the-vote campaign.  I'm pretty sure that I predicted back in late 2008 on this blog that capital allocation in America would be very politically bent from now on. 

I am cynical and brilliant.  Thank you very much for noticing. 

Full disclosure:  No position in any automaker's stock. 

GM Has Learned Nothing About Financing

There's dumb, and then there's dumber.  Dumb was allowing automobile financing in the first place as it encouraged auto companies to cannibalize next year's sales to meet the next quarter's earnings forecasts.  Dumber is reinstating such lending after it contributed to the bankruptcy of an auto manufacturer:

General Motors Co. executives want their own auto-financing arm so they can offer more competitive lease and loan deals, according to a person briefed on their plans. 

The executives want to buy back the auto financing business from the former GMAC Financial Services or start their own operations, said the person, who asked not to be identified because the plans have not been made public.

 
GM must be angling for a return trip to bankruptcy court.  Maybe the unions want to force out other shareholders (including the government?!) by making them so sick of losses that they throw in the towel.  That way the unions can own the rest of the company.  With unlimited lending from Uncle Sam's next TARP (remember, this administration is very union-friendly), they can finance even more uncompetitively priced cars at 0% just to avoid further pension and health plan givebacks. 

My scenario isn't all that fanciful.  Are America's corporate executives and union leaders really this dumb?  I'm afraid so, readers. 

Full disclosure:  No position in GM, GMAC notes, or anything else from these people, thankfully.