The saying goes; with every dark cloud is a silver lining. And so too, with the demise of one of the world’s largest corporations will come unprecedented opportunities for its former competitors.
President Obama has given General Motors 60 days to submit a new business plan and Chrysler 30 days to finalize its alliance with Fiat. Failure to do so will see Washington “walk away” from the companies and allow them to enter bankruptcy. Regulators in Washington have said they would prefer a structured bankruptcy where the best assets of the firms will be split up and sold to a new company. GM was the world’s leading automobile manufacturer for 77 years, and its assets are sure to attract attention were they to go on the chopping block. The same can be said for Chrysler.
While investors would be foolish to invest in either company, investments in the efficient Asian automakers that have out-competed both companies will bear fruit should they successfully purchase GM or Chrysler’s profitable assets. Even those that don’t choose to buy GM’s legacy assets will benefit from a less competitive landscape and better brand perception amongst consumers. Consumers are less likely to purchase a car from a manufacturer in bankruptcy protection. Shares in Asian auto manufacturers already rose on Wednesday when news leaked that President Obama favored letting both companies go bankrupt.
Related Posts
- Asian Corporations Pick Up Distressed Western Assets (02/27/09)
- My Seven “Must Own” Asian Dynamos … (09/26/08)
- Asian Stocks Offer High Yields (02/27/09)
- Optimism strikes Asian markets (02/09/09)
- Asian economies still cooking! (07/22/08)
{ 16 comments… read them below or add one }
why let companies that offer us jobs fail when we are wasting millions on banks that won’t even lend money? seems like obama has it backward.
Larry Edelson Reply:
April 8th, 2009 at 12:28 pm
In many respects, yes, you are right!
Hi Larry,
Read your work n they are indeed very enlightning. I have one question though which i hope you could really help me out here.
After reading Robert Pretcher’s Conquer the Crash, basically he was a bit too early with his elliot waves prediction in 2002 but all that he mentioned is coming true right now. The crucial event that is happening is deflation which they cant seem to stop. My key question is; he shows data relating to gold suffering in a deflation as well, so in a devastating deflationary environment which assets fall quicker than any joint deliberate depreciation of the currencies, would gold still be able to shine??
The few months of liquidation from hedge funds shows exactly the retreat of assets even gold when it came down from a high of about $1000 to $700 recently, and US dollar didnt look like the best investment choice then but yet it was when people choose safety. This is the issue i have been pondering about for the past few days and would really need an expert like you to evaluate this issue.
Larry Edelson Reply:
April 8th, 2009 at 12:30 pm
Gold has outperformed the dollar in both instances of massive deflationary pressures. In 1933, the dollar lost 60% of its purchasing power overnight. So far this year, gold has outperformed cash by a wide margin. And historically, gold has outperformed the dollar by as much as 44 to 1.
Seems maybe gold ought to be traded from mid 800 to mid 900s as there seems to be more powerful concerted efforts to keep the prices in this range than the bullish forces to take it 1000
Larry Edelson Reply:
April 20th, 2009 at 8:59 pm
For the time being, yes
Hi Larry
Whats the deal with gold, do I off load my stocks in Gold corp, barrick, kinross and market vectors gold miners etf which are down 9 to 13%, or do i lower my stops if gold goes lower and sit tight for the bounce back to new highs as predicted a week or so ago. I am a little confused you say one thing sean says another ?
looking forward to your reply Adrian Gosling ( real wealth subscriber )
Larry Edelson Reply:
April 20th, 2009 at 9:00 pm
Never lower your stops. If stopped out, wait for my next signals.
What else will the Chinese do with their money. There’s nothing left for them to buy in their own country so they will come here and buy whatever they want and have seen on TV…
Larry Edelson Reply:
April 20th, 2009 at 9:02 pm
And oil, gold, copper, wheat, corn, tin, aluminum, etc.
Hi Larry,
Silver moved nicely above its 200 day moving average today! That, combined with the fact that $gold and the $HUI seem to be finding support at their 200 day moving averages while the Dollar plunged today makes me think the corrective phase in precious metals may finally be ending. Regarding the broader market, if the Dow Transport is a reliable leading indicator, I think this 5-week bull market rally might be running out of steam. It seems to have been driven largely by short-covering, especially in the retail sector.
Larry Edelson Reply:
April 20th, 2009 at 9:02 pm
For the Dow, my indicators point higher.
RSI of $Natgas is showing a bullish divergence. $WTIC seems to be finding support at its 50 day moving average. The major averages seem to be losing strength and poised to roll over here. RSI of the $VIX shows a bullish divergence that would imply lower stock prices. $USD could rally to 88 before finally heading lower. Just my opinion.
Larry Edelson Reply:
April 27th, 2009 at 8:28 pm
Thank you!
Larry,
Regarding your comment on the Great Depression today in M&M, I think you’re incorrect. Looking at the federal and state budgets during the thirties, they spent on huge spending stimulus like there was no tomorrow, starting with Hoover then FDR put it on steroids. Also, Hoover and his administration were brow-beating companies to NOT reduce staff but, rather, encouraged companies to “spread the work around” and not lower wages, leaving those still employed with increased buying power as prices dropped.
Many economists, particularly the Keynesian school which is what you studied I’m sure, want to paint a picture that is exactly the opposite of the truth. Murray Rothbard’s book “America’s Great Depression” documents the history at an extremely detailed level. It’s available for free on Mises.org.
Honest money restrains governments from engaging in the inflationist policies you recommend and limits depressions. There is a reason that no one talks about the deep depression of the early 20’s; it was brief as prices and wages quickly adjusted and provided a basis for renewed growth. Unrestrained government spending can, indeed, delay consequences but, in fact, only makes the eventual reckoning much more painful in the end.
Larry Edelson Reply:
April 27th, 2009 at 8:30 pm
The policies in the Great Depression were deflationist and an abysmal failure.
Hi Larry, thanks for your great analysis and insight. I read them and value them highly.
I’m suprised by how much attention is placed upon “Asian” automakers when in fact its all about Japanese, Korean, and Chinese automakers but little about India’s Tata Motors, and others, which are growing fast and becoming global in scope and reach. Tata bought Jaguar from Ford and is a potential buyer of any makes that go on the auction block from GM & Chrysler.
What are your thoughts on Tata Motors (TTM)? I’ve owned it for some time now and held it while it was down and its going up recently. I’m going to keep it because I expect it to grow much more.
Who among your peer group is covering India?
Thanks again for your terrific stuff!
Cheers, Jay
Larry Edelson Reply:
April 27th, 2009 at 8:30 pm
I agree on Tata, for the long term. I cover India and will be updating my views on the country soon.
Larry,
Thanks for all you bring to your readers. I have gotten so much out of your Real Wealth Report. It is one of the best tools available to investors. I highly recommend it. It is a very small fee to pay for so much information. Thanks again for that service.
I am confused about one area of your market analysis. It is in the number that you are expecting the Dow to reach (10K) before the next leg down. Can you explain in a little more detail how you arrive at that number. I am an average investor who looks at the fundamentals and reads a lot. I am not a chart guy at all. If you could explain it in layman’s terms that would be appreciated.
Here are my reason why I am under the assumption that we are almost at the end. Again only my thoughts so I would appreciate your input.
1. Volume on up days has been low.
2. Volume on down days has been higher.
3. From what I have read we have reached an important 200 day resistance level on indexes.
4. Unemployment will most likely continue to the negative considering the car companies troubles.
5. This has been one of the strongest stock rebounds in the history of the stock market. So doesn’t it have to correct from here.
6. I am assuming that there has been some government manipulation in the market prices being driven upwards. (PPT?) I have read that in order for the market to get pushed much higher it is going to take the money that is sitting on the sidelines to start jumping in.
7. America’s on the verge of losing it’s AAA rating.
***Sorry this is so long, but I really value your opinion as a Real Wealth subscriber. I have just not found where you have laid out why you think we will see 10k Dow. If I missed it in one of your other writings, would you please provide the link.
Thanks,
Stacy
Larry Edelson Reply:
June 29th, 2009 at 3:07 pm
My projections are based on proprietary tools, which would take too long to discuss on this blog. However, do note that as for items 1 through 3 above in your post, those are standard technical tools that do NOT offer much guidance in these kinds of markets, in my opinion.
As for number 4, unemployment is a lagging economic indicator, and has almost zero forecasting value when it comes to the market. #5 – just because it’s one of the strongest rallies ever doesn’t mean it has to pullback just yet. #6: There is no doubt manipulation. As far as money on the sidelines, yes, for a longer-term rally. But there is money going in now too! #7. The U.S. is already losing its AAA rating in the eyes of overseas investors. The damage will have been done WAY BEFORE any ratings agency actually makes a cut. Ratings agencies, as we have seen repeatedly, are always behind the 8-ball.
Hi Larry,
As a relative new subscriber to Real Wealth Report I have a question. What is wrong with CEF and GDX for my precious metal and mining company holdings? Should I be selling those and purchasing GLD and the mining companies that you are recommending?
Thanks
Larry Edelson Reply:
June 29th, 2009 at 3:08 pm
Those are fine too, for long-term core holdings.
Larry, Your cycles show a top in the Hang Seng June 25th. I assume you will alert selling China long plays? Diito US markets; your cycles show top in August, but your RECOS still carry long plays.
Please confirm how we are to treat the longs in the next few weeks. Thanks.
Larry Edelson Reply:
June 29th, 2009 at 3:08 pm
I monitor the markets every day. So when the tops are confirmed, rest assured I will alert you. It is also entirely possible that these rallies will continue. So it’s too early to say.
Larry, Looking for a way to ask this question of you. Why does 1% pullback of US markets cause a 5-7% pullback is Gold stocks? This bothers me when we like to think commodities in general and Gold in particular are a hedge against fall of equity markets.
Larry Edelson Reply:
June 29th, 2009 at 3:09 pm
Basically, because we are in a period of extreme swings. Note that the converse occurs as well, a 1% rally in stocks can lead to a 5% – 7% rally in gold shares.
Larry, I really like your comments, especially since I am very interested in China. I bought some BYD about a month ago and wondered if you had any thoughts about it. I think if their electric car does half as good as they indicate, the potential is unlimited.
On your video this morning you mentioned several areas where your recommendations had done well. You mentioned the names of the ETF’s but only gave they symbol on one. I can write fast enough to put down the ETF symbols but not their names. I’d appreciate it if when you talk about an ETF that you also give the symbol so I know specifically what you are talking about.
Thanks Bill
Larry Edelson Reply:
June 29th, 2009 at 3:10 pm
Will do. Thank you! As for BYDDF, I cannot comment on stocks I do not officially follow in my publications.
Hi Larry
Are you of the same opinion as Martin that the market is heading for a major crash in the very near future as I haven’t seen that in your coverage.
Larry Edelson Reply:
June 29th, 2009 at 3:11 pm
A retest of the lows is possible. But I have no confirming signals yet.
my father too was a navigator and also a flight engineer on the B-24 and flew 40 missons including both times over the ploesti oil fields. the stories he told of about the ploesti raids were hair raising. that generation had something inside of them i will never have!
Larry Edelson Reply:
June 30th, 2009 at 10:12 am
Agreed!