U.S. Economy Seen from a Far-Away Future

back-to-the-futureWell, there is no shortage of the mish mash news today, in a nice avalanche of disasters hitting the once largest economy in the world.

We at doitinvest.com were chatting – when we will look from the future to these days, how will they look like? How would look the $22 billion asked today by GM from the U.S. government as a further support to run its operations? How will the new Obama housing plan, unveiled soon today, appear to our eyes?

General Motors Corp and Chrysler LLC requested nearly $22 billion in additional U.S. government loans and said they had reached tentative deals with the United Auto Workers union to reduce labor costs. Of course they should do so, two days after they just received $3 billions which just saved their backs from bankrupcy. With $14 billion in debts to the bondholders, GM must look now more like a bank than an auto producer. Unfortunately, GM is now like an busted bank, since its debts far outweigh its profit potential, and this is bad for an investment.

The two automakers, which have so far received $17.4 billion in loans from the U.S. Treasury, also detailed plans to cut jobs and idle plants as part of sweeping restructuring plans submitted under the terms of their federal bailout. Bien sur, the mish mash would not be complete for a total confusion from those two nice companies. In fact they are asking money from the government to…restrict or even shut down their operations? Hey U.S. government, why don’t you pay us to close this loss-making investment blog we run here, on doitinvest.com? We would need just half a billio for that and you know, this is of course a technology company, so here lays the future of our workforce. Ha ha ha, with some tears behind…

These days the U.S. treasury seems to throw with money at every unprofitable operation. The reason is of course that their closures would make the U.S. economy unstable. Yet, what these failing companies foresee is a restriction of their activities, massive layoffs and asking for even more bailout money. Not for developing new products, but to burn cash further or to pay the bondholders. So why not buy some of these junk bonds from GM or Chrysler at which the U.S. government throws with billions? It’s a god investment tip / idea, isn’t it?

Fresh from signing into law a sweeping $787 billion fiscal stimulus package, Obama is turning his attention to the housing market, where foreclosures have continued to climb despite earlier initiatives aimed at halting that trend. The plan is already wort $50 billion, two times the help sought after by the car makers. So the mish mash is continuing, this time with another big confusion – the housing market is worth only twice the car market in the U.S. Which makes sense, if yoy think that the average U.S. citizen dreams to have 1 house and at least two cars 🙂 The Obama plan will foresee government subsidies for the mortgage owners who cannot afford their loan repayments and will push lenders to re-schedule the loans for those in distress. Therefore, if you are a good payer, no incentive for you, because you’ve been naughty enough to swim against the overal housing market. And if you canot afford a house, they will help you to buy one asap, to save the economy. This is a strange logic to me…

On Wall Street, continued worries about the global economy sent U.S. stock prices down toward their lows reached in November. The Dow Jones industrial average fell 297.81 points, or 3.8 percent to 7,552.60. Probably 6,000 is where it will stop, since none of these measures are new – they were throwing with money at us for quite a while, and no results.

So the story title for this would be “U.S. Mish Mash Continues – GM Needs another $22 Bln, Housing Market Plans from Obama”. And this story looks more like a mega billions U.S. lottery game than the traditional mega millions where folks put their money into a drawing game. The difference is that now the government plays with the taxpayers money in a hope to make them richer – it’s like you would buy most of the tickets at mega millions with your own money in a hope that you will help everybody win. Sad, sad…

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