Brother, Can You Spare a Dime?
Research for Online Investors

6/10/09

The handouts never end, or at least the line of companies that argue they should get to suck on the teat.   Auto supplier companies to GM and Chrysler met with the Treasury Auto Task Force today, asking for $8 to $10 billion in loan guarantees.    The suppliers argue they do not have the capital to ramp up production for the “new” Chrysler and the “new” GM.

When asked about the potential for a government bailout, Soleil’s Michael Ward said, “Why not?   They are giving aid to everybody else.”

I would not worry too much about ramping up production.   Who would buy one of their cars?   I love GM pickups, Camaros, and Corvettes, but never again.   Ford makes a nice truck and they are not trying to pick my pocket when I am not in their showroom.

Mortgage rates spiked today as Treasury sold $19 billion in 10-year notes.   Rates at today’s auction settled at 4.00%, up from 3.9% quote yesterday.    The highest since October of 2008

The oil play is getting crowded as crude trades over $70 per barrel.   The dollar showed some strength today.   The Fed did not force down interest rates at the auction.   Crude inventories are down more than expected but oil has primarily moved inverse to the dollar.   Oil is a world commodity, priced in U.S. dollars.   When the dollar goes down in value, it takes more of them to buy a barrel of crude.

The EIA released their weekly report today on petroleum this morning.   Inventory dropped almost five million barrels, this was more than anticipated.    Last week the inventory had built by half that much, so the inventory is continuing the decline that started on May 1.   While the inventory is going down (which is bullish), we are still approximately 70 million barrels above year ago levels.   Unless the dollar reverses its decline, oil should continue to climb higher, if inventories decline further.

The dollar strengthening is the wild card.   If the Fed does not push down interest rates, this may be a signal that the value of the dollar is more important to Bernanke.   He may use higher interest rates to signal Congress and the White House that deficits “do matter”.   The Federal Open Market Committee meets again in two weeks.   The coup de grace will be raising interest rates at that time, or at least setting the Fed Funds rate at 0.25%   Currently, the Fed’s rate is a range of 0.00 to 0.25%

Bank of America’s CEO Ken Lewis will testify before Congress tomorrow about the bank’s acquisition of Merrill Lynch last fall.   Lewis has publicly stated that the Fed and Treasury officials pressured him and the bank’s Board of Directors to complete the deal or be replaced.   This should be interesting.   E-mails from the Fed and Treasury have been leaked today that would back up Mr. Lewis’s claims.

As we said before, “Mr. Lewis had a John Galt moment!”   When you deal with pigs, you are going to get dirty.   When you deal with bureaucrats, you are going to dance their tune.   All for the greater good!

Well, I asked for customer feedback:

F#?k you.

  -----------   A. R.

Was it something I said?

If you have anything to say on the market, or my commentary let me have it at feedback@galtstock.com

John Dalt

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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