site news and GM

sorry. i've been busy lately. which i guess is a good thing. but hopefully i'm back to writing.

lots has happened in the 6 weeks since i've written. maybe it's a modern day lazarus but no one ever talks about what happened to lazarus after he was resurrected. i'm pretty sure he died a second time. point being, GM died. here's my next prediction - it will reorganize and wait for it, wait for it... yes, it will die again. in 2020, there will be no GM.

so as i predicted on march 6, GM did in fact die. so now the natural question is, well, did i profit from this prediction? sadly, the answer is no.

i knew it would go bk, but the problem is timing. just like i know that newspapers will all go bk too. the NYT is worth almost a $1 billion in equity (another $1 billion in debt). clearly, NYT will be worth $0. smart money would short this thing. problem is 2-fold. first one is timing - it may be swift like GM, or it may take years and there's an opportunity cost to investing in something that may not pay off for a while. second major issue is i'm pretty gun shy in my personal portfolio. i play around, but generally, i'm super risk adverse especially when trying to trade in places that the government is interested in fooling with (as in, where did all the money from the original GM bailouts go? - so maddening. these people are stealing our money).

anyway, i'll make money off of my biggest conviction trades in the future. in the book stumbling on happiness i learned the things people are most sad about are the things they never tried, rather than the things they tried but failed at. so, next time, i'm investing. i'm not shorting NYT yet because i think it will be a while before it falters, but if you have 10 year capital, it makes sense to short both NYT and TWC.

AIG driving GM into bankruptcy

sorry for the bad pun.

continuing to prove that government intervention will only make problems worse, here's an article that explains how the 100% payment of AIG counterparties will lead directly to GM going bankrupt.

GM: Bankrupt, UNLESS....

basically, since a lot of the bond holders of GM (who have control over whether to ok a haircut or force GM into bankruptcy) also own a lot of CDS on GM (issued by AIG), it's in the bond holders' best interest for GM to go chapter 11. now, i know a get a lot of complaints (well, just one from Ivan but that's 12.5% of my regular readers) when i blame the leftist, interventionists like Geithner and Obama for making matters worse than they already were, but here seems to be a clear case example showing how the rescue of AIG resulted in the failure of GM. of course, GM would have failed earlier without government intervention. but now, the taxpayers are out of trillions AND GM is still going bankrupt AND AIG counterparties (like foreign banks) are made whole. certainly, this will result in fewer (if any) benefits to GM pensioners and a massive loss of jobs - which means a further burden on taxpaying americans. for those that disagree, please explain how the "best and brightest" that obama has supposedly brought in are actually making things better.

end of USPS, newspapers - things that should happen - part 2

three and half weeks ago i wrote about how GM should go bankrupt. now it seems like it's more likely to happen as the government rejected the automakers plan and forced out GM CEO. it's not quite an i told you so moment, but i think it will be in the coming months.

so here's another couple of things that should happen and so eventually will.

the US postal system will cut service (will soon be down to only 5 days a week) and in the next 20 years be phased out completely. likely, it will be replaced with some sort of government wide email system. packages will continue to be delivered by private companies (fedex, ups, dhl). when i graduated college, i got a permanent alumni email address that forwards to my current, main email (@yahoo.com). the alumni account has its own crude email interface but i prefer yahoo's. i believe that just like social security numbers, people will get an email account that they can forward. rain, sleet and snow may not hold back the post man, but budget cuts will. the problem of course is that the USPS currently employs nearly 800,000 americans. within 20 years, it's hard to imagine the USPS existing.

another thing that should happen is all print newspapers except for perhaps the WSJ, the NY Times, the USA Today and possibly a few gossip-like papers (eg ny post) will go out of business. the handwriting has been on the wall for a long time. i don't see why these money losing publications are even trying at this point. maybe they can survive as a web publication but the printing and distribution costs no longer make any economic sense except at massive scale. in a world where devices like the blackberry, iphone or kindle can provide real-time data at a fraction of the distribution cost, how do you justify a newspaper? i hear the argument about enjoying the experience of reading a paper newspaper, but it reminds me of the Luddites who refused to get or leave messages on answering machines. so farewell newspapers. i never figured out how to hold you on a plane without severely crumpling you or annoying my seat neighbor anyway.

lastly i want to send a shout out to one of my few readers tara. thanks for reading.

things that should happen eventually happen

this may seem obvious and perhaps it's simply a corollary to Occam's Razor, but things that logically should happen, almost always do happen.

when Obama said, "I believe the nation that invented the automobile cannot walk away from it," he was obviously wrong.  as has been pointed out numerous times, it was Karl Benz of Germany who invented the internal combustion engine and built the first automobile.  but more importantly, even if the US did invent the automobile, is there any reason to keep an auto industry alive in this country?

first of all, it's clear that cars as we've known them for the last 100 years will change dramatically in the next 10.  the internal combustion engine will be fazed out entirely except perhaps in super large trucks.  

the nation that also invented the typewriter (Christopher Sholes in 1865 in Wisconsin) walked away from it (typewriters are no longer manufactured in any quantity in the US).  and we will certainly walk away from the auto industry as we know it too.

the US also invented sneakers (or at least the waffle outsole that is standard on all athletic shoes) and yet almost all of nike's factories are overseas, in particular in asia.  the factories are there because it is economical to for them to be there.

if it is not economical for there to be a car factory in the US, then there will not be a car factory in the US.  the US government can delay the inevitable, but things that should happen eventually do happen.

so, GM will go bankrupt.  likely the company will continue to exist in some form but relatively quickly, if wages remain high the US (and i hope they do), all car manufacturing will be moved offshore.

and while we're at it, another thing that makes logical sense and so eventually will happen is GE will file chapter 11 and/or they will split the company up isolating the disastrous finance division.